What does transaction monitoring involve?

Transaction monitoring involves the continuous analysis of transaction data to detect suspicious activities. This process is essential in the realm of financial services and payments risk management as it allows organizations to identify potential fraudulent behavior, money laundering, and other forms of financial misconduct in real-time.

By constantly scrutinizing transactions for anomalies, patterns, or deviations from expected behavior, companies can proactively manage risk and comply with regulatory requirements. This method ensures that any irregularities, such as unusually large transactions, rapid movement of funds among accounts, or transactions occurring in high-risk countries, are flagged for further investigation.

The other choices do not accurately describe the comprehensive and systematic nature of transaction monitoring. Randomly selecting transactions for audit represents a more sporadic, rather than continuous, approach to oversight. Issuing refunds based on customer feedback pertains to customer service and not to the ongoing assessment of transaction activity for risk assessment. Reducing transaction limits for high-risk users can be a part of a risk management strategy but does not encapsulate the broader activity of continuously monitoring transaction data for suspicious actions.