🔹 Definition
An Unusual Transaction is a financial activity that deviates from a customer’s expected behavior or known risk profile, or appears inconsistent with their declared source of income, occupation, or business operations. While not inherently illegal, unusual transactions may trigger suspicion and require further investigation under AML/CFT compliance frameworks, potentially leading to the filing of a Suspicious Transaction Report (STR).
Identifying unusual transactions is a key objective of transaction monitoring programs, helping institutions detect early signs of money laundering, terrorist financing, or fraud.
🔹 Frequently Asked Questions (FAQs)
Q1: What are examples of unusual transactions?
- A sudden spike in transaction volume for a dormant or low-activity account
- Large cash deposits inconsistent with a customer’s occupation (e.g., student, salaried employee)
- Frequent transfers to high-risk or sanctioned countries
- Transactions just below reporting thresholds (possible structuring)
- Use of third-party accounts or complex routing without explanation
- Payments to or from shell companies or crypto exchanges by high-risk customers
Q2: How do unusual transactions differ from suspicious transactions?
- Unusual transactions are red flags that deviate from normal patterns
- A transaction becomes suspicious when, based on further analysis, it presents reasonable grounds to suspect criminal activity
- Not all unusual transactions are suspicious, but they must be investigated and documented
Q3: What causes an unusual transaction alert in a monitoring system?
- Breach of automated risk rules or transaction thresholds
- Behavior inconsistent with customer risk rating or business type
- Name or address matches with sanctions/PEP/watchlists
- Velocity patterns (e.g., rapid fund movement within short intervals)
Q4: What should compliance teams do when an unusual transaction is flagged?
- Conduct a manual review using customer KYC records, transaction history, and external data
- Reach out to the customer for justification or supporting documents (if appropriate)
- Escalate to AML compliance officers for further analysis
- If suspicion is confirmed, file an STR to the local FIU
- Document all steps taken, even if no STR is filed (audit trail)
Q5: How can financial institutions reduce false positives?
- Refine customer segmentation and risk-based rules
- Apply behavioral analytics and machine learning models
- Regularly update and test monitoring scenarios and thresholds
- Combine alerts with KYC/CDD context to improve decision accuracy
