What should institutions monitor to detect potential money laundering?

Monitoring unusual or suspicious transactions and patterns is crucial for institutions to detect potential money laundering activities. Money laundering often involves transactions that may not align with a customer's typical behavior or financial profile. Therefore, identifying deviations from normal transaction patterns—such as sudden large withdrawals, frequent transactions to high-risk jurisdictions, or complex transaction structures—enables institutions to flag potentially illicit activities for further investigation.

By focusing on transactional behavior rather than arbitrary thresholds or unrelated factors, institutions can effectively identify red flags that warrant additional scrutiny. This approach aligns with regulatory expectations that emphasize the importance of understanding clients' typical activities and recognizing when something is out of the ordinary.

In contrast, monitoring standard banking hours and transaction volumes does not provide specific insights into the nature of the transactions themselves, while credit scores of clients are generally not indicative of money laundering risk. Additionally, focusing solely on high-value transactions over $10,000 ignores smaller transactions that could cumulatively involve large amounts of illicit money and might otherwise go undetected. Therefore, the most effective strategy involves monitoring for unusual or suspicious behavior in transactions.