AML Transaction Monitoring – Examples and Tips;

Wondering how to monitor transactions to remain compliant with AML laws? This article should clear any confusion on the topic.

What Is Anti-Money Laundering Transaction Monitoring?

Anti-money laundering (AML) transaction monitoring is a monitoring process designed to ensure companies do not help launder money.

By monitoring transactions over a certain amount, you should be able to raise red flags before you accidentally help launder money.

Transaction monitoring is a key part of the anti-money laundering process. Government bodies set the thresholds over which a transaction must be checked for AML, but you can also implement your own monitoring at all times and/or for all transactions as well.

Why Is AML Transaction Monitoring Important?

Transaction monitoring is one of the key anti-money laundering processes. Any business at risk of helping money laundering must ensure it meets the legal requirements imposed by authorities.

When it comes to the thresholds at which transactions must be monitored, they are set by various national regulators, but the goals are always the same:

Last but not least, AML is paramount for organizations that want to:

  • avoid helping money launderers
  • maintain a good business reputation
  • avoid high AML compliance fines

How to Choose an AML Transaction Monitoring Solution

There are several key features that drive functionality and efficiency in AML transaction monitoring. Some of these include:

  • Real-time monitoring and alerts: One of the most important features of AML transaction monitoring is the ability to move fast. Notice something suspicious? Don’t wait months to create your reports – you should be alerted straight away.
  • Custom rules: While AML regulations are pretty clear-cut, you still want flexibility in how you implement your transaction monitoring checks. Make sure your system supports custom risk rules.
  • Data capture and logs: You will need to show your data for AML reporting. Your system should be able to capture it at scale while meeting data protection requirements.
  • Velocity rules: Put simply, velocity rules are risk rules that look at certain user actions in time, including frequency and reoccurrence. They’re particularly helpful when you want to learn about user behavior in order to spot suspicious activity. 

Examples of AML Transaction Monitoring Setups

Let’s now look at what an AML transaction monitoring system can do.

We’re using the SEON platform for these examples, but any good AML tool should offer you more or less the same features. 

Setting Up a Rule for High-Risk Countries

One universal AML rule is that you should know which countries you’re doing business with.

  1. Let’s start by defining which countries are considered high risk. Note that different vendors will have different options, but in the SEON platform, we can do this simply by creating a custom list called “High Risk Countries”.

2. For this list, we are looking at IP addresses, so let’s fill the data field IP country and add those found on the international sanctions list. Notice that the country code is using the two-character ISO 3166-1 format.

As you can see above, we are now filtering countries such as Burkina Faso (BF), Pakistan (PAK), and Yemen (YE).

3. Next, we’ll create the rule and call it “IP country is AML HIGH RISK”. It will look like this:

AML high risk country rule

The rule checks if a user’s IP is on the list of high-risk countries and creates a REVIEW alert if so. You can also choose to automatically APPROVE or DECLINE the user’s transaction based on your risk appetite.

If it’s sent for REVIEW, your AML compliance team can check the details of the transaction for more information – or log the details to submit an AML SAR report. 

Below is the triggered rule. You can see that our user connected using an ISP linked to Pakistan, which is on our high-risk country list. The profile was therefore flagged for review.

Note that this also added 10 points to our fraud score. You can set this yourself, choosing to have this add more or fewer points.

AML high risk country list rule

Setting Up a Rule for AML Transaction Threshold

This second rule will tackle an important feature of AML: ensuring transactions over a certain threshold are logged and monitored.

This is a very easy rule to set up, using the “compare” parameter, and the operator “greater or equal to”.

We’ll set the value at $3000 to meet the latest US banking AML requirements.

Here is what the triggered rule looks like after our fictional user, Ivan, spent $3600.

Note that you can manage the currencies in the settings, and change them at the rule level.

The high-value transaction alone would have triggered a review. In this particular case, it also comes from a high-risk IP, which should make you more confident that extra checks are required.

Setting Up a Velocity Rule for Suspicious Transaction Behavior

Velocity rules are more complex but equally easy to set up. Here’s one designed to alert your AML team when a user suddenly increases their weekly transaction volume.

This velocity rule:

  • aggregates the amount of all transactions over a 24-hour period.
  • looks for a sharp increase in spending (over 200%)
AML risk rule 200% increase in 24 hours

We’ve chosen to have the system add +20 to the person’s fraud score if this rule is triggered.

You can, of course, set your own scores for each triggered rule for more control over your AML strategy. 

Here is what it looks like on the Dashboard once the rule has been triggered. 

You can see that the transaction has been sent for REVIEW due to its fraud score.
The system added 20 points due to the high volume of transaction, as well as 6.6 points due to another rule.

AML Transaction Monitoring: Key Takeaways

AML transaction monitoring appears pretty set in stone. You need to follow legal requirements to the letter and submit any suspicious data you find in due time.

However, with tools like SEON, you can take control of your AML strategy. By exposing hundreds of data points relating to user identity and transactions, you can create customized, flexible, and powerful rules that let you mitigate AML risk and stay safe from other types of fraud in the process.

We’ve looked at three examples of these rules earlier, but the sky’s the limit. In terms of functionality, you could also:

  • connect identity data with external sanctions of PEP lists to compare the results
  • create Zapier integrations to receive alerts via Slack or Microsoft 365
  • and much, much more

Best of all, all the data remains available at your fingertips if you need to submit SARs to the authorities, giving you full peace of mind when it comes to AML compliance. 

AML Transaction Monitoring FAQ

Why do businesses need AML transaction monitoring?

AML transaction monitoring is a key part of national and international anti-money laundering strategy, which forces companies to examine transactions over a certain threshold. The transactions must be linked to someone’s identity to reduce the risk of money laundering.

What should I look for in AML transaction monitoring?

AML transaction monitoring needs to work in real-time and to alert your business of transactions above a certain threshold. The thresholds vary from one country to another, so it is important to ensure you are aware of the AML rules for every country in which you do business. 

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Author avatar
Gergo Varga
Gergo Varga is the Senior Content Manager / Product Evangelist at SEON. He uses his decade worth of industry knowledge to keep marketing sharp and support what's happening on the frontlines of fraud detection.

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