Transaction Monitoring — A Smart Way to Restrict Money laundering

Candice Spencer
Shufti Pro
Published in
4 min readMar 8


As companies progress towards digitisation, cybercriminals become increasingly adept at exploiting businesses to achieve their nefarious goals. In 2022, money laundering fines increased by 50%, highlighting the urgency of robust financial crime prevention measures. The prevalence of alarming statistics has made transaction monitoring a necessary standard in the financial sector. Moreover, the transaction monitoring software market is anticipated to attain a global value of $29.53 billion by 2027.

Digging Deeper into Transaction Monitoring

By employing Know Your Transaction (KYT), businesses can actively spot and react to suspicious financial transactions, including payments & business arrangements, and subject them to manual review.

Payment Transaction monitoring has become necessary for firms that transfer funds on behalf of clients and businesses. It helps them to enhance their financial security and reputation by preventing money laundering, terrorist financing, and other crimes that threaten safety worldwide.

Who Needs KYT Verification?

  • Money Service Providers
  • Traditional Banks
  • Financial Services
  • FinTechs
  • Lending Companies
  • Exchanges
  • Cryptocurrencies
  • Brokerages
  • Insurance Companies

What’s at Risk when Businesses Ignore Transaction Monitoring in their Dealings?

Businesses that ignore transaction monitoring in their dealings put themselves at risk of several serious consequences, including:

  • Anti-Money Laundering Fines

The danger of failing to comply with anti-money laundering regulations can rise if those threats are not tested and countered thoroughly. However, it is because federal regulatory agencies are cracking down on violations of anti-money laundering laws by issuing hefty fines for non-compliance. Moreover, in 2021, two hefty fines caught the financial world’s attention, one being a BSA/AML-related penalty worth $390 million, and the other one was a $100 million fine, indicating the severity of the offences committed.

The National Law Review revealed that, In 2021, AML compliance would continue to be a priority for regulators and law enforcement. Moreover, the AML Act provides new tools for enforcement, and non-banking entities can expect increased monitoring and higher financial penalties.

  • Organisational Profitability

Inadequate fraud risk management can have a detrimental effect on the firm’s financial performance. PwC’s Global Economic Crime and Fraud Survey revealed that over 24 months, just 5,000 companies experienced a staggering $42 billion in fraud losses. It includes the amount of money stolen and other expenses incurred due to the fraudulent activity.

The additional personnel required to analyse warnings resulting from a high rate of false positives represents an unnecessary fraud-related cost for institutions. Moreover, another expense is reissuing credentials to all customers after a data breach if the transaction monitoring system cannot identify the affected customer.

  • Staff Productivity and Motivation

Fraud prevention employees burn out when analysing a backlog of false-positive alarms instead of examining fraud cases. As a result, they look for better opportunities somewhere, usually with other companies that may offer them more salaries.

How can Organisations Overcome Transaction Monitoring Challengings?

Modern fraud situations demand sophisticated transaction monitoring systems, which have been developed to meet these challenges. However, organisations can fulfil their business demands by integrating a transaction monitoring system that includes the following functionality:

  • System Integration

Having an easily-accessible, comprehensive view of clients is essential for the success of the anti-money laundering compliance framework. It includes collecting consumer data stored across its many platforms, such as the client’s name, address, IP address, login, purchase location, and transfer activity. Thus, the transaction monitoring system should be perfectly compliant and integrated with all relevant services to access data from these sources.

  • Behavioural Analytics

This information is translated into millions of data points, even for smaller entities. The human eye can spot massive fraud but cannot detect suspicious activities or relationships, utilising several data points for every transaction. For this reason, machine learning-based transaction monitoring systems may quickly and correctly analyse such links across massive client data and money transfers to prevent fraud.

  • Real-time Processing

Several financial institutions use batch processing for transaction monitoring. However, real-time screening helps prevent fraud and reduce client inconvenience. Institutions claim staff shortage to analyse signals as their main reason for not adopting real-time transaction monitoring. Thus, businesses can outsource their AML compliance needs to a reputable service with skilled workers available 24/7.

  • Time-To-Detection

The most efficient transaction monitoring systems enable the institution to choose a real-time option and transfer the alert to an internal or outsourced employee for analysis, response, or enforcement within a certain amount of time.

  • Risk Mitigation

Risk mitigation is a critical component in overcoming transaction monitoring challenges. Strong regulations, comprehensive KYC & due diligence, and modern technology may help organisations detect and mitigate risk. Thus, it helps ensure compliance and protect against reputational and financial harm, ultimately contributing to long-term success and sustainability.

To Sum it Up

Organisations can now better protect their financial data with proper transaction monitoring. Nonetheless, the rising use of digital payment methods has brought the risk of financial crimes like money laundering for businesses. Companies must implement the most recent AML rules to safeguard themselves from fraud and money laundering. As a result, it promotes economic growth and assists in better decision-making within businesses.



Candice Spencer
Shufti Pro

Researcher, Fraud Preventer, Traveller, Reader, Writer, Thinker :)