Efficient Transaction Monitoring for Your MSB

Transaction monitoring is the ongoing process of reviewing customer activity to detect transactions that are unusual, inconsistent, or potentially indicative of money laundering or other financial crimes. For MSBs, it serves as the backbone of an effective Anti-Money Laundering (AML) program and is required under the Bank Secrecy Act (BSA) and FinCEN regulations.

A well-designed monitoring program allows an MSB to identify patterns across multiple transactions, spot early warning signs of suspicious behavior, and take timely action before regulatory or reputational issues arise. It’s not just a compliance checkbox, it’s the system that protects both your business and your banking relationships.

Regulators expect to see a documented, risk-based approach that reflects the size, type, and transaction volume of your business. They want to confirm that your program:

• Uses criteria based on your customer base, geography, and transaction types.
• Identifies and investigates activity that falls outside expected norms.
• Maintains documentation of reviews, decisions, and outcomes.
• Includes periodic testing or independent review to verify effectiveness.

A static or automated-only system that operates without meaningful human oversight will raise concerns. Regulators expect active engagement and periodic adjustment to reflect evolving risk.

Suspicious transactions/activity are those transactions or business activity that appear to have no legal business purpose.

Common red flags for suspicious activity include:

• Transactions that occur just below reporting thresholds on a repeated basis.
• Frequent cash transactions inconsistent with a customer’s stated business activity.
• Multiple checks from unrelated entities or customers using the same address.
• Customers unwilling to provide identification or business information.
• Sudden changes in transaction volume or frequency without a reasonable explanation.

Each of these indicators on its own may be harmless, but when patterns develop, they often signal elevated risk that requires investigation.

Suspicious activity is defined by context. A transaction that appears unusual for one customer may be completely normal for another. Effective monitoring depends on knowing your customers, how they operate, what their transaction volumes look like, and what’s typical for their line of business.

This is where Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) come into play. By understanding your customer’s baseline behavior, you can distinguish between legitimate growth, seasonal fluctuations, or red flags that warrant escalation or a Suspicious Activity Report (SAR).

Daily monitoring is considered best practice, particularly for high-volume MSBs. Smaller operators may conduct reviews weekly, but regulators expect evidence that monitoring is consistent, timely, and well- documented.

Reviews should include not only current transactions but also trend analysis over time, this should be weekly, monthly, quarterly and annually. This helps detect structuring or layered activity that may not be obvious in a single day’s review.

Monitoring systems range from manual spreadsheet reviews to sophisticated automated platforms that flag transactions based on risk rules. Automation improves speed and consistency, but human judgment is essential for interpretation.

The most effective MSBs use a hybrid approach: automated alerts backed by experienced compliance staff who review, validate, and document decisions. This combination satisfies the “risk-based” standard regulators look for.

Failure to maintain an effective monitoring program can result in civil penalties, regulatory enforcement actions, or loss of licensing. Even if no suspicious transactions are proven, regulators can cite an MSB for “failure to monitor,” which they treat as a major compliance breakdown.

Beyond penalties, weak monitoring can damage your reputation with banks and make it harder to maintain or open accounts, since banks rely heavily on their MSB clients’ ability to self-police activity.

Transaction monitoring is the operational core that ties all AML components together. It relies on information gathered through Customer Due Diligence, informs training by showing staff what to look for, and supports internal controls and audits by demonstrating that the MSB is actively managing risk. When an issue is detected, monitoring provides the evidence and documentation needed to decide whether a SAR filing or enhanced review is necessary.

ComplyCheck’s monitoring platform continuously analyzes transaction data to identify structuring, unusual cash flow, and out-of-pattern behavior. Our compliance analysts review each alert to determine whether further action is required and provide clear recommendations for documentation or escalation. All reviews are logged, time-stamped, and exportable for regulators, making exam preparation significantly easier. The system adapts to your transaction volume and risk profile, ensuring the monitoring process fits your specific business model.

Most off-the-shelf monitoring systems are designed for banks, not MSBs. ComplyCheck’s platform is built specifically for check cashers and money transmitters, incorporating red flags unique to these industries such as repetitive payroll checks, third-party transactions, and customer concentration risk. We also provide ongoing oversight, data tuning, and compliance feedback so that your monitoring evolves with your business and regulatory expectations—rather than sitting static after setup.