Transaction Monitoring and Suspicious Activity Reporting
Detection and disclosure
Transaction monitoring is the ongoing surveillance of customer activity against expected behaviour. Candidates must understand scenario-based rules (thresholds, structuring patterns, rapid movement of funds, unusual geographies), behavioural analytics, and the role of customer risk profiles in setting expected activity.
Know the alert lifecycle: alert generation, triage, investigation, escalation or closure, and documentation of the rationale. Understand false positives and the tuning process - excessive false positives erode effectiveness.
Suspicious activity reporting is the output. Know the concepts: suspicion (a subjective threshold, lower than proof), reasonable grounds to suspect, the financial intelligence unit (FIU) as recipient, and the tipping-off prohibition (you must not tell the customer a report has been made). Know defensive reporting (filing to protect oneself without genuine suspicion) as a poor practice.
Understand record-keeping obligations and the no-tipping-off rule. Know that reports should be timely, factual, and include the who, what, when, where, and why of the suspicion.
Traps and rule of thumb
Traps: believing you need proof before reporting (you need suspicion); thinking a report discharges the obligation to monitor or to exit the relationship; confusing internal escalation with external reporting; and assuming the FIU will respond to every report (usually it will not). Another trap is that reporting suspicion of terrorist financing may have different timing rules in some jurisdictions.
Rule of thumb: if you would be uncomfortable explaining the activity to a regulator, or if it does not fit the customer's profile, escalate. Document the reasoning either way.
Worked example: A customer's account receives multiple small inbound transfers from unrelated third parties and is emptied within hours, repeatedly. This rapid pass-through pattern should generate an alert, be investigated against the customer's expected profile, and if unexplained, be escalated to the FIU with the pattern documented.