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Transaction monitoring

You must document how you monitor customer transactions for Part A of your AML/CTF program. Your transaction monitoring program must be based on your risk assessment of your business or organisation.

The transaction monitoring program must define the processes you follow to identify suspicious customer transactions, including:

  • unusually large transactions
  • complex transactions
  • unexpected patterns of transactions that don’t seem to have a legitimate purpose.

The program must outline the risk-based systems and controls you use to monitor customer transactions.

How you monitor transactions and develop your program depends on the size of your business or organisation and your level of money laundering/terrorism financing risk.

What your transaction monitoring program should include

You must have an appropriate risk-based monitoring program in place to help your employees identify suspicious transactions and take steps to protect your business or organisation. Below are examples of what you might include.

  • How to recognise different forms of money laundering and the types of transactions customers might use to conceal it. For example, your program should alert you when customers make large deposits of cash into one account and then transfer it electronically to other unrelated accounts.
  • How you monitor customers who behave suspiciously when conducting transactions or whose transactions suggest suspicious behaviour.
  • Systems for tracking a customer’s transaction history so it’s easier to spot and flag any unusual activity.
  • Systems that compare the ongoing transaction activities of customers to certain risky types of transactions or patterns of transactions.

How to monitor transactions

Depending on the type, size and complexity of your business or organisation, your transaction monitoring program can be manual or automated.

Suspicious transactions

You must make sure your monitoring system alerts you to unusual, large or complex transactions or patterns of transactions. This can be by your employees being aware and vigilant, or you can use automated systems.

What makes a transaction large or unusual will depend on the size of your business or organisation and the services you offer. It will also depend on the types of customers and transaction activities you normally deal with.

Transaction monitoring should alert you when:

  • a customer makes transactions that are much larger or more frequent than usual
  • account balances or account activity for a customer are much higher or more frequent than usual
  • the size or nature of the transaction triggers your internal reporting policy
  • transactions are sent to or come from a high-risk country or region
  • payments are sent to or come from a person or organisation on a sanctions list
  • other unexpected account activity from a customer may indicate money laundering or terrorism financing.

There are many other customer transactions that raise a red flag about the possibility your business or organisation is being exploited for the purposes of money laundering, terrorism financing or other serious crime. Below are some specific ‘indicators’ of when a customer may be trying to use your business or organisation to launder money or finance terrorism.

  • Gambling proceeds being deposited into foreign bank accounts.
  • Buying casino chips and cashing them out with no gaming activity.
  • Associations having multiple accounts under multiple names.
  • Transactions that don’t match the customer profile.
  • High volumes of transactions being made in a short period of time.
  • Depositing large amounts of cash into company accounts.
  • Depositing multiple cheques into one bank account.
  • Purchasing expensive assets, such as property, cars, diamond jewellery and bullion.
  • Using third parties to make wire transfers.
  • Using an accountant or lawyer to make transactions.
  • Using cash to buy large amounts of gold.
  • Regularly selling large amounts of jewellery, gold or precious metals.
  • Storing large amounts of cash in a safety deposit box.
  • Cashing bank drafts for foreign currency.
  • Exchanging large amounts of currency for traveller’s cheques.
  • Withdrawing large amounts of cash.
  • Making multiple transactions on the same day from different locations.
  • Using false or stolen identities to open bank accounts.
  • Repaying loan balances early or in cash.
  • Describing frequent transfers of funds as loans from relatives.
  • Moving funds through different accounts.
  • Closing insurance policies and requesting payment to a third party.
  • Sending investment funds to ‘interesting’ countries.
  • Reducing (structuring) the amount of cash deposits or withdrawals to avoid triggering transaction reporting rules.

You can also read case studies to see what indicators of criminal activity businesses recognised and reported to AUSTRAC.

What to do if you are suspicious about a transaction

If your monitoring program identifies suspicious customer transactions or behaviour, you must apply your enhanced customer due diligence and consider making a suspicious matter report (SMR) to AUSTRAC.

The content on this website is general and is not legal advice. Before you make a decision or take a particular action based on the content on this website, you should check its accuracy, completeness, currency and relevance for your purposes. You may wish to seek independent professional advice.

Last updated: 19 Jul 2019
Page ID: 135

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