Mastering Transaction Monitoring in 2025: 5 Best Practices

As financial crime continues to evolve in sophistication and scale, transaction monitoring has become a central pillar of effective Anti-Money Laundering (AML) and counter-terrorist financing (CTF) compliance programmes. In 2025, it's not just about having monitoring tools in place — it’s about having the right strategy, technology, and governance to keep up with regulatory expectations and ever-changing criminal tactics.

For fintechs, banks, crypto platforms, and other regulated entities, transaction monitoring serves as the eyes and ears of your compliance function. It allows you to detect suspicious activity in real time, protect your business from abuse, and ensure ongoing compliance with laws such as the UK’s Money Laundering Regulations, the EU’s 6AMLD, and guidance from the Financial Action Task Force (FATF).

Here are five best practices for mastering transaction monitoring in 2025.

1. Adopt a Risk-Based Monitoring Approach

In 2025, regulators expect transaction monitoring systems to be tailored to the specific risks of a business. A one-size-fits-all approach is no longer acceptable. Adopting a risk-based approach means that your monitoring rules and alert thresholds are designed around the nature of your customers, products, delivery channels, and geographies.

Start by conducting a detailed business-wide risk assessment, then map those risks to your monitoring controls. For example, you might apply tighter thresholds and more frequent monitoring to customers based in high-risk jurisdictions or those with complex transaction patterns. Meanwhile, lower-risk customers might warrant simpler, less intensive monitoring.

This targeted approach reduces false positives, enhances detection quality, and demonstrates to regulators that you’re allocating resources proportionately — a key element of compliance in 2025.

{{snippets-guide}}

2. Use Machine Learning and Behavioural Analytics

Legacy rule-based systems still have their place, but tech-savvy compliance teams are increasingly embracing machine learning (ML) and behavioural analytics to identify anomalies that traditional methods might miss. These tools analyse massive amounts of data to detect subtle behavioural patterns, trends, and outliers over time.

For instance, rather than flagging a single transaction over £10,000, ML-based systems can detect when a customer’s activity suddenly deviates from their usual behaviour, even if the transactions themselves appear small or routine. This context-aware detection increases the chances of identifying truly suspicious activity while reducing alert fatigue.

By 2025, ML-powered solutions are becoming standard in competitive compliance environments. Importantly, teams must still understand how these tools make decisions (the "explainability" factor), particularly as regulators become more inquisitive about AI use in compliance functions.

3. Build Strong Alert Management Workflows

A strong transaction monitoring system is only as good as the workflows that support it. Once an alert is generated, it needs to be triaged, investigated, documented, and, if necessary, escalated for suspicious activity reporting (SAR). In 2025, regulators expect firms to have clear, efficient, and auditable alert-handling processes.

Best practices include:

• Assigning alerts to appropriate case managers based on risk and complexity
  
  
• Ensuring investigators have access to relevant contextual data (e.g., customer history, previous alerts, KYC records)
  
  
• Setting response timeframes for resolving alerts and filing SARs
  
  
• Maintaining a full audit trail of investigation steps and decision rationale
  
  

Workflow automation tools can speed up investigations and reduce bottlenecks, but human oversight remains essential — especially in high-risk or ambiguous cases.

4. Conduct Ongoing Model Tuning and Testing

Transaction monitoring systems are not “set and forget.” To stay effective, they require regular tuning, calibration, and testing. Over time, changes in customer behaviour, emerging typologies, or business expansion into new markets can render existing monitoring rules less effective.

In 2025, regulators expect firms to test their transaction monitoring systems at least annually, though many high-risk businesses are doing it more frequently. Testing can include:

• Threshold reviews: Are your alert volumes and false positives within an acceptable range?
  
  
• Back-testing: Do historical suspicious transactions trigger alerts today?
  
  
• Scenario testing: Can the system detect known money laundering patterns?
  
  

Engage second-line compliance or external auditors to validate these findings, and document any changes you make to ensure transparency and traceability.

5. Integrate Monitoring with Broader AML and Fraud Defences

Effective transaction monitoring doesn’t exist in isolation. In 2025, leading compliance programmes integrate transaction monitoring with other tools and data sources across the AML ecosystem. This holistic approach enhances detection and investigation capabilities.

Examples of integration include:

• Linking transaction monitoring with KYC/CDD systems for enriched risk profiles
  
  
• Correlating with adverse media and sanctions screening to spot potential threats
  
  
• Collaborating with fraud teams to identify overlaps between financial crime typologies
  
  
• Using graph analytics to detect linked entities or hidden networks
  
  

This unified view helps teams identify complex, multi-channel laundering schemes and improves response time when red flags emerge.

{{snippets-case}}

Conclusion

Transaction monitoring in 2025 is more than just compliance — it’s a strategic advantage. With the right mix of risk-based thinking, smart technology, human oversight, and continuous improvement, organisations can not only detect and prevent financial crime but also stay ahead of regulatory scrutiny and protect their reputation.

As criminals grow more agile, so too must compliance teams. Mastering transaction monitoring isn’t a destination — it’s an evolving journey. But with these five best practices, you're well on your way to building a monitoring framework that’s ready for the future.

sanctions.io is a highly reliable and cost-effective solution for real-time screening. AI-powered and with an enterprise-grade API with 99.99% uptime are reasons why customers globally trust us with their compliance efforts and sanctions screening needs.

‍

To learn more about how our sanctions, PEP, and criminal watchlist screening service can support your organisation's compliance program: Book a free Discovery Call.

‍

We also encourage you to take advantage of our free 7-day trial to get started with your sanctions and AML screening (no credit card is required).

‍