What does "transaction monitoring" refer to?

Transaction monitoring refers to the ongoing process of reviewing customer transactions to identify suspicious or unusual patterns. This practice is essential in the context of the Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance, as it helps financial institutions detect and prevent fraudulent activity, money laundering, and other financial crimes.

Through transaction monitoring, institutions are able to analyze various transaction types, amounts, and frequencies against established benchmarks or customer profiles. Unusual patterns that deviate from expected behavior can trigger alerts, prompting further investigation. This proactive scrutiny is vital for maintaining the integrity of financial systems and ensuring compliance with regulatory obligations.

The other choices do not accurately describe the purpose or methodology associated with transaction monitoring. Approving transactions within set limits does not encompass the broader aspect of identifying suspicious activities. Methods for decreasing transaction fees and enhancing customer service relate to operational efficiency rather than compliance monitoring and do not address the critical need for vigilance against financial crimes.