KYC

Global Regulatory Expectations And India’s AML Requirements

Across the world, regulators have grown increasingly alert to the fluid nature of financial crime. The mechanisms through which money is laundered no longer operate in slow, traceable cycles. They move quickly, quietly and across borders. This shift has pushed global and Indian regulators to place continuous monitoring at the heart of AML frameworks.

Internationally, the gold standard for AML regulation comes from the Financial Action Task Force (FATF). FATF sets the global recommendations that countries are expected to follow, including the requirement for institutions to observe customer activity throughout the relationship, not merely at the outset. FATF stresses that risk profiles must be “kept up to date”, and that institutions must understand whether customer behaviour remains consistent with their declared purpose and background. Many national regulators in Europe, the United States, the Middle East and Southeast Asia have built their rules on these principles.

In the United States, for instance, the Financial Crimes Enforcement Network (FinCEN) requires banks and financial companies to maintain ongoing due diligence and to report suspicious activity swiftly. European authorities, through directives such as the EU’s AMLDs, have made ongoing monitoring a legal obligation, especially for politically exposed persons (PEPs), complex corporate structures, cross-border transfers and high-risk geographies.

India follows the same broad expectations but applies them to a much larger and more diverse financial system. The Prevention of Money Laundering Act (PMLA) is the backbone of India’s AML framework. Under PMLA, every entity classified as a “reporting entity”, including banks, NBFCs, payment companies, mutual fund distributors, brokers, insurers and even some fintechs, must perform continuous due diligence. This involves reviewing transactions, verifying changes in customer information, and updating risk profiles as required.

Financial Intelligence Unit – India (FIU-IND) plays a central role by receiving and analysing reports submitted by institutions. Two reports are central to continuous monitoring:

• STR (Suspicious Transaction Report) — filed when behaviour indicates possible wrongdoing, even if no crime is confirmed. 
• CTR (Cash Transaction Report) — tracking cash transactions above specified thresholds. 

Institutions cannot file these reports accurately without robust, ongoing surveillance of customer activity.

The Reserve Bank of India (RBI) has detailed expectations for banks and NBFCs. RBI’s KYC Master Directions mandate periodic KYC updates, enhanced due diligence where required, and scrutiny of aberrant behaviour. Banks must also ensure that customers flagged as high-risk receive more frequent monitoring. Payment companies and digital wallets must combine ongoing monitoring and transaction-pattern analysis.

SEBI, overseeing the securities market, requires brokers, wealth managers, mutual funds and investment platforms to track unusual market activity, suspicious investment patterns, and transactions that do not align with known customer profiles. Given the speed at which securities trades occur, continuous monitoring becomes essential to detect insider trading, market manipulation or fund movements tied to illicit activity.

The insurance sector, regulated by IRDAI, must also maintain ongoing oversight. Insurers need to review premium patterns, early policy surrenders, irregular claim behaviour and unusual refunds, all of which can signal attempts to launder money using insurance products.

What Exactly Gets Monitored In AML?

To understand continuous monitoring properly, it helps to look closely at what is actually being observed. Monitoring is not limited to tracking money moving from one account to another. It is a far wider exercise that brings together behavioural patterns, identity signals, business activities, public information and regulatory lists. Each of these elements reveals a different part of the risk story.

• Transaction Monitoring

For most people, transaction monitoring is what first comes to mind when thinking about AML. It involves examining transfers, withdrawals, deposits and payments to identify behaviour that does not fit expected patterns. Banks and financial institutions use a mix of rule-based systems and machine learning to detect unusual activity, such as:

• sudden spikes in transaction volume 
• repeated small deposits just below reporting thresholds (a tactic known as structuring) 
• rapid movement of funds between multiple accounts (often called layering) 
• transfers to or from jurisdictions known for weak controls 
• activity inconsistent with the customer’s income or profile 

Institutions do not wait for a crime to occur; the aim is to spot signals that suggest something may be wrong. A retail customer who normally sends small, predictable payments suddenly shifting large sums to unfamiliar locations would warrant closer examination.

• Behavioural Monitoring

Financial behaviour often reveals risk long before transactions alone do. Behavioural monitoring looks at how a customer interacts with financial products over time. This could involve:

• using new channels that do not match past habits 
• sudden use of products previously never explored 
• activity taking place at odd hours or in unusual sequences 
• connections with new counterparties who themselves display suspicious traits 

For example, a business that consistently works with a small set of vendors suddenly begins making payments to multiple unrelated entities across different states. Even if the amounts are modest, the deviation from its historic pattern may indicate something worth reviewing.

• Identity Monitoring

Identity-related risk has grown significantly with the rise of instant digital onboarding. Fraudsters increasingly rely on:

• synthetic identities 
• duplicate profiles 
• stolen documents 
• fabricated combinations of PAN, Aadhaar or mobile numbers 

Continuous monitoring means watching for signs that an identity may have been compromised or misused. Some of these signals include:

• repeated attempts to open accounts using similar information 
• mismatched identity details across different financial journeys 
• sudden appearance of a customer in a negative database 
• login patterns suggesting account takeover 

Identity monitoring ensures that the person who was originally verified remains the same person engaging with the system.

• Corporate And Beneficial Ownership Monitoring

When businesses are involved, the complexity is even greater. A company’s risk profile can shift dramatically if:

• directors change 
• beneficial ownership structures are altered 
• the company is struck off or defaults on filings 
• it appears in litigation related to financial misconduct 

Shell companies and related-party networks often use layers of legitimate-looking entities to move money quietly. Monitoring corporate data over time helps institutions detect when business structures begin to shift in ways that do not align with genuine commercial needs.

• Sanctions, PEP And Watchlist Monitoring

Sanctions lists identify individuals, companies and organisations that are barred from receiving financial services due to their involvement in suspicious, illegal or politically sensitive activities. Politically Exposed Persons (PEPs) — individuals with high political influence — are not illegal to serve, but they require stronger monitoring due to higher risk of corruption.

Watchlist monitoring involves screening customers against:

• global sanctions lists such as OFAC, UN, EU 
• domestic watchlists 
• PEP databases 
• regulatory blacklists 
• internal risk lists 

Because these lists change frequently, institutions cannot rely on one-time checks. Continuous screening is essential to ensure that a customer who was considered safe at onboarding has not been added to a risk list later.

• Digital Footprint And Adverse Media Monitoring

Adverse media refers to publicly available, credible news reports that link individuals or businesses to allegations of fraud, corruption, financial misconduct, regulatory violations or criminal activity. It serves as an early-warning system.

For instance:

• an executive charged with embezzlement 
• a company named in a tax-evasion investigation 
• a director linked to a ponzi scheme 
• a business flagged for circular trading 

Such information rarely appears in formal documents at the outset but emerges through media coverage. Continuous monitoring ensures that institutions do not miss these developments and can adjust risk ratings quickly and responsibly.

Tools, Technologies And Data Used For Continuous AML Monitoring

Continuous monitoring depends as much on technology and high-quality data as it does on human judgement. The sheer scale of transactions, customer interactions and corporate activities today makes manual monitoring impossible. Institutions need systems capable of identifying subtle patterns, responding to real-time changes and capturing risks that would otherwise stay hidden. Several technologies now underpin modern AML monitoring frameworks, each contributing to a different part of the risk-detection puzzle.

• Artificial Intelligence And Machine Learning

Artificial Intelligence (AI) and Machine Learning (ML) sit at the heart of contemporary AML systems. Unlike traditional rule-based systems, which often flag predictable patterns, ML models learn from historical data, recognise behavioural nuances and adapt to evolving typologies of financial crime. These models can:

• classify transactions based on risk 
• detect anomalies that deviate from statistical norms 
• cluster similar activities to expose hidden relationships 
• predict which accounts are more likely to engage in suspicious behaviour 

Because ML can analyse thousands of variables simultaneously, it is especially useful in spotting sophisticated laundering methods that mimic legitimate transactions. For example, a series of micro-transactions moving through apparently unrelated accounts may be invisible to rule-based engines but evident to a trained ML model.

• Graph Analytics And Network Detection

Money laundering rarely happens in isolation. It often involves networks of accounts, businesses, intermediaries or digital identities acting in coordinated patterns. Graph analytics allows institutions to examine relationships between entities — who is sending money to whom, how frequently, in what amounts, and through which channels.

Visualising these links helps expose:

• mule networks 
• shell-company chains 
• related-party transactions 
• circular trading 
• cross-border laundering clusters 

• Risk Scoring Engines And Dynamic Profiles

Continuous monitoring works best when customer risk is not treated as a fixed label but as a dynamic attribute. Risk-scoring engines assign a numerical or categorical risk level to each customer based on their activity, identity, geography, financial behaviour and external events. As new information flows in — such as a sudden change in transaction volume, an adverse news mention or a shift in ownership — the score updates automatically.

Dynamic profiling ensures that high-risk customers receive more frequent or thorough monitoring and that low-risk customers are not overburdened with unnecessary checks, improving compliance efficiency.

• Case Management And Alert Handling Systems

Generating alerts is only half of the process; reviewing them is just as important. Case management systems centralise alerts, documentation, analyst observations and investigation histories. A well-designed system:

• prioritises high-risk alerts 
• reduces false positives 
• maintains audit trails 
• integrates seamlessly with core banking or platform systems 
• supports collaboration between analysts, supervisors and compliance officers 

These systems allow institutions to respond swiftly to suspicious activity, generate reports for regulators and maintain transparency in their decision-making.

• API-Based Integrations And Real-Time Data Flows

Continuous monitoring depends on the flow of fresh information. Modern institutions use APIs (Application Programming Interfaces) to integrate with:

• sanctions lists 
• PEP databases 
• corporate registries 
• identity-verification systems 
• negative news sources 
• payment networks 
• fraud-risk engines 

API-driven frameworks ensure that the latest updates — whether a change in a company’s director list, a sanctions update, or a new fraud pattern — immediately influence monitoring outcomes.

• High-Quality Data Sources

Technology is only as strong as the data it analyses. Continuous monitoring relies on accurate, timely and comprehensive datasets, including:

• transaction logs 
• customer identification data 
• corporate filings 
• beneficial ownership records 
• litigation and court data 
• adverse media 
• sanctions and watchlists 
• device and behavioural signals 

Institutions that invest in reliable, large-scale data sources are significantly more successful at detecting money laundering early.

Key Challenges In Implementing Continuous Monitoring In AML

While continuous monitoring is central to modern AML frameworks, it is far from simple to implement. Institutions often find that the ideas look straightforward on paper but become complicated once they interact with real customers, legacy systems and fast-moving digital behaviours. The challenges are technical, operational and, at times, cultural. Understanding them makes it easier to appreciate why continuous monitoring requires sustained investment and thoughtful design rather than a single, quick solution.

High Volumes And Velocity Of Data

Today’s financial systems generate staggering amounts of data. In India, the volume of digital transactions — driven by UPI, IMPS, mobile wallets and instant lending apps — has grown to a point where millions of events can take place in a single hour. Monitoring every one of them for risk is not trivial. Institutions must ensure that systems can process data at high speed without slowing down customer experience or missing critical alerts.

The challenge is twofold: scaling the infrastructure and ensuring that the models remain precise despite the enormous data load. Without the right architecture, institutions either overlook suspicious cases or drown in noise.

False Positives And Alert Fatigue

One of the biggest obstacles in AML monitoring is the volume of alerts that are technically “suspicious” but not actually harmful. These false positives consume the time of analysts, slow down investigations and inflate compliance costs. Excessive false alarms also create the risk that genuinely suspicious patterns get lost in the clutter.

Reducing false positives demands better rule calibration, cleaner data, stronger behavioural models and continuous tuning. Institutions with outdated engines or incomplete datasets often struggle with alert fatigue, where teams become overwhelmed by the sheer number of cases requiring manual review.

Fragmented Data Across Multiple Systems

Many organisations store customer, transaction and behavioural data in separate systems that do not naturally communicate with one another. This fragmentation makes it difficult to build a complete view of customer risk. For example, identity data may sit in one repository, transactional logs in another, and adverse media checks in a third.

Continuous monitoring works best when systems are integrated and data flows freely with context. When that does not happen, risk signals appear diluted, delayed or inconsistent.

Evolving Fraud And Laundering Techniques

Criminals rarely stick to the same methods for long. As monitoring systems become more sophisticated, fraud networks innovate to escape detection. In recent years, India has seen:

• coordinated mule-account operations 
• fraud rings using synthetic identities 
• cross-border crypto flows 
• layering through small digital-wallet transfers 
• shell companies using complex ownership structures 

A static monitoring framework cannot keep pace with this evolution. Institutions must regularly upgrade rules, enhance ML models and incorporate new data sources to stay ahead.

Shortage Of Skilled AML Analysts

AML is a specialised domain, requiring analysts who can interpret patterns, understand regulations, and distinguish between unusual behaviour and genuinely suspicious activity. The demand for such talent has grown faster than the supply. Smaller fintechs and NBFCs, especially, find it difficult to build teams large enough to handle complex monitoring requirements.

Operational And Regulatory Pressure

Continuous monitoring requires not just technology but robust governance. Institutions must:

• document their methodologies 
• justify every risk decision 
• maintain audit trails 
• respond quickly to regulatory notices 
• update policies in line with new laws 

For many organisations, especially high-growth digital players, these obligations can feel overwhelming. A monitoring lapse not only weakens internal controls but also exposes the company to penalties, reputational damage and loss of customer trust.

Comparing Traditional vs AI-Enabled Continuous Monitoring

A concise comparison highlights why modern institutions are shifting towards AI-driven systems:

Best Practices For Building An Effective Continuous Monitoring Framework

Building a reliable continuous monitoring framework is not a matter of installing a system and waiting for it to work. It is a strategic exercise that blends technology, governance, data quality and human judgement. Institutions that succeed usually follow a set of disciplined practices, refined over time, that help them detect risk early while keeping compliance processes manageable and efficient.

Start With A Clear, Risk-Based Approach

At the core of every effective AML programme lies the principle of risk-based monitoring. Not all customers pose the same level of risk, and not all products carry the same exposure. A retail savings account, a cross-border remittance channel and a high-frequency trading account do not require identical levels of scrutiny.

A risk-based approach involves:

• identifying categories of customers based on risk 
• determining appropriate monitoring intensity for each segment 
• reviewing risk ratings periodically 
• applying enhanced controls to high-risk profiles 

This approach ensures resources are directed where they matter most, rather than treating every customer as a potential threat.

Integrate Data So The Full Picture Is Visible

Fragmented data is the enemy of effective monitoring. Institutions must aim for an integrated view that brings together:

• identity details 
• transactional histories 
• behavioural signals 
• device and location information 
• company data 
• adverse news 
• sanctions and PEP outcomes 

When these elements are analysed together, patterns become clearer. A transaction that looks normal in isolation may be suspicious when seen in context with adverse media, unusual login patterns or changes in beneficial ownership.

Integration also allows institutions to move away from reactive compliance and towards proactive risk management.

Tune Rules And Models Regularly

Rules that remain unchanged for years quickly become ineffective. Financial crime trends shift, new laundering methods emerge, and customer behaviour evolves. Institutions must continuously refine:

• rule thresholds 
• anomaly detection settings 
• ML model parameters 
• typology libraries 
• network-detection logic 

This tuning process prevents both false positives and blind spots. It also ensures that monitoring systems remain aligned with the institution’s risk appetite and regulatory expectations.

Combine Automation With Expert Review

While advanced systems can identify suspicious behaviour, human judgement remains crucial. Analysts interpret context, understand customer history, and make informed decisions that algorithms cannot fully replicate.

A balanced framework typically includes:

• automated detection of anomalies 
• prioritisation of alerts based on severity 
• queueing of cases for analysts 
• structured investigation workflows 
• escalation mechanisms for high-risk cases 

Automation ensures speed; human review ensures accuracy.

Maintain Strong Governance And Documentation

Regulators expect institutions to demonstrate not only that they monitor continuously but also how they do it. Governance is essential for transparency and accountability.

Key practices include:

• documenting monitoring rules 
• maintaining version histories 
• recording investigation outcomes 
• preserving audit trails 
• ensuring policy alignment with regulations 

Strong governance also helps institutions respond confidently during audits or regulatory reviews, avoiding penalties linked to inadequate monitoring controls.

Cultivate A Skilled AML Workforce

No monitoring system is effective without people who understand how to interpret its outputs. Institutions benefit from investing in training that covers:

• evolving typologies 
• regulatory requirements 
• investigative techniques 
• suspicious transaction reporting 
• system usage and data interpretation 

A knowledgeable workforce reduces errors and improves response times, strengthening the institution’s overall compliance posture.

Stay Updated With Regulatory Developments

AML standards undergo frequent updates. Whether it is a change in sanctions lists, a new FATF recommendation or adjustments to India’s PMLA rules, institutions must keep pace.

Regular policy reviews, compliance audits and cross-border regulatory tracking help ensure that the monitoring framework does not lag behind evolving expectations.

Continuous Monitoring In India: Sector-Wise Breakdown

The need for continuous monitoring becomes even clearer when we examine how different parts of India’s financial ecosystem operate. Each sector carries its own risk profile, servicing patterns and customer behaviours. What qualifies as “suspicious” in a retail bank may look entirely normal in a payments company or a stockbroking platform. Understanding these differences helps illustrate why continuous monitoring cannot be built as a one-size-fits-all model.

Banks And Scheduled Commercial Institutions

Banks sit at the centre of India’s formal financial system, handling everything from savings accounts and business loans to foreign remittances and large-value transfers. They therefore carry the broadest AML responsibilities. Continuous monitoring in banks focuses on:

• unusual activity across savings and current accounts 
• structured deposits aimed at avoiding reporting thresholds 
• misuse of remittance corridors 
• sudden changes in business turnover 
• large cash withdrawals inconsistent with historical behaviour 

Banks also monitor international flows more closely because India is a high-remittance market, both inbound and outbound. Any unusual patterns in cross-border payments require careful scrutiny, especially when involving jurisdictions known for weak regulatory oversight.

Non-Banking Financial Companies (NBFCs)

India’s NBFC sector has grown rapidly, offering loans, leasing products, gold finance, microfinance and other credit-led services. Many customers of NBFCs operate outside the traditional banking ecosystem, which brings unique risks. Continuous monitoring focuses on:

• rapid loan take-ups and early closures 
• inconsistent repayment behaviour 
• unusual borrower-lender networks 
• repeated use of similar identity documents across multiple applications 
• changes in business activity for SME customers 

For NBFCs offering unsecured or high-velocity credit products, the absence of continuous monitoring can significantly increase exposure to fraud rings and synthetic identity misuse.

Fintechs And Digital Lending Platforms

Fintechs move faster than any other financial segment. In a matter of minutes, a customer can apply for credit, undergo digital KYC, receive disbursement and begin repayment. This speed is both a benefit and a vulnerability.

Continuous monitoring in fintechs typically covers:

• device-based risk indicators 
• behavioural patterns on apps 
• mismatches between declared income and repayment behaviour 
• coordinated attempts by fraud networks to exploit instant approvals 
• unusual activity across linked wallets, UPI handles or virtual accounts 

Given the scrutiny on digital lending in India, especially after several regulatory interventions, fintechs cannot afford monitoring lapses.

Payments And Wallet Companies

The rapid growth of UPI, IMPS and mobile wallets has redefined India’s payments infrastructure. While these platforms push convenience, they also attract high-velocity fraud.

Continuous monitoring focuses on:

• micro-transaction bursts 
• mule-account activity 
• repeated peer-to-peer transfers with no economic purpose 
• transfers to suspicious merchants 
• velocity spikes around certain dates or times 
• geographical anomalies (transactions originating far from usual locations) 

Payments companies rely heavily on behavioural and pattern-based analytics because traditional AML indicators are often too slow for real-time environments.

Insurance Providers

Insurance is often used as a secondary channel for money laundering, particularly through:

• early policy surrenders 
• frequent changes in beneficiaries 
• irregular premium payments 
• overpayments followed by refunds 
• single-premium policies with large ticket sizes 

Continuous monitoring helps insurers ensure that premium behaviour aligns with customer profiles and that policy movements do not hide illicit funds.

Stockbrokers, Mutual Funds And Securities Platforms

The securities market introduces different kinds of risks. Some laundering techniques involve:

• high-volume trades designed to mask flows 
• entry and exit within short time spans 
• circular trading within related entities 
• using investment accounts linked to shell companies 
• suspicious cross-holdings in demat accounts 

Continuous monitoring helps detect behaviour inconsistent with investor risk profiles or typical market participation patterns.

Crypto Exchanges And Virtual Asset Platforms

Although still evolving in India’s regulatory landscape, virtual asset service providers (VASPs) face some of the highest AML risks. Monitoring in this sector requires:

• blockchain-analytics integration 
• tracing wallet-to-wallet flows 
• identifying mixers and tumblers 
• spotting unusually large stablecoin movements 
• detecting wallet clusters tied to international fraud rings 

As global norms tighten, monitoring in the crypto space continues to become more sophisticated.

How AuthBridge Supports Continuous AML Monitoring

Continuous monitoring may sound like a purely technological challenge, but in practice it is a data challenge just as much. Institutions can only detect suspicious behaviour if they have access to reliable identity intelligence, accurate corporate information, up-to-date watchlists, and ongoing signals that reveal changes in risk. This is where AuthBridge’s core strengths become relevant. Although widely known for background verification and digital KYC, several of its services operate directly at the heart of lifecycle AML monitoring.

Identity Intelligence That Strengthens Ongoing Due Diligence

One of the biggest risks in AML is identity inconsistency — when the customer who was verified during onboarding is no longer the person interacting with the system. AuthBridge’s identity stack supports this layer of monitoring in several ways:

• Aadhaar and PAN validation to ensure that documents remain genuine and unaltered 
• Face verification and liveness detection to reduce impersonation or account takeover 
• Device-level risk signals to identify unusual login behaviour 
• Cross-journey identity matching that detects repeated use of the same identity patterns across different applications 

These capabilities help institutions maintain confidence that the person using the service is the same person who was originally verified — a fundamental requirement for continuous AML oversight.

Corporate Intelligence For Monitoring Businesses Over Time

AML risks are heightened when organisations deal with businesses that undergo structural changes. A company may alter its beneficial ownership, change directors, be struck off, or appear in litigation long after its onboarding. AuthBridge’s corporate intelligence suite helps institutions detect these shifts by tracking:

• Ministry of Corporate Affairs (MCA) filings 
• changes in directorship and beneficial ownership 
• business status updates 
• compliance defaults 
• adverse litigation patterns 

This is especially valuable for banks, NBFCs, payment aggregators, enterprise buyers and lending platforms that serve SMEs or large vendor networks. Monitoring corporate evolution is central to preventing shell companies and related-party structures from misusing financial products.

Watchlist, Sanctions And PEP Screening That Keeps Risk Profiles Current

Since sanctions and watchlists are updated frequently, institutions cannot rely on one-time screening. AuthBridge’s capabilities in this space support ongoing monitoring by providing:

• updated PEP data 
• global and domestic sanctions lists 
• politically exposed profiles 
• enforcement and regulatory actions 
• negative media indicators 

This ensures that a customer who was safe at the start of the relationship does not go unnoticed if added to a risk list later. In modern AML, this “second line of sight” is essential.

Negative Database And Court-Record Monitoring For Emerging Red Flags

Criminal proceedings, FIRs, court filings and investigative reports often surface risks far earlier than formal regulatory actions. AuthBridge maintains large negative databases and court-linked intelligence sources that help institutions identify:

• individuals newly named in financial-crime cases 
• businesses involved in fraud or misappropriation 
• directors facing litigation linked to economic offences 
• entities with repeated dispute histories 

These signals support early-warning mechanisms for continuous monitoring.

API-Driven Re-Screening For Lifecycle Monitoring

True continuous monitoring requires not only data but the ability to re-screen customers seamlessly. AuthBridge’s API-led infrastructure enables institutions to:

• run periodic monitoring cycles automatically 
• trigger event-based re-checks (e.g., unusual transaction bursts) 
• keep risk scores updated 
• integrate monitoring into onboarding, underwriting, or vendor management workflows 

This aligns with global expectations under FATF and domestic requirements under PMLA, where institutions must demonstrate that customer profiles remain up to date.

Conclusion

Continuous monitoring has become the backbone of modern AML practice, not because regulations demand it, but because the financial world no longer stands still. Identities shift, businesses evolve, and transactions move at a pace that leaves no margin for outdated, one-time checks. Institutions that monitor continuously are better equipped to detect subtle risks, respond early and safeguard customer trust in a landscape increasingly shaped by digital speed and sophisticated fraud. As India’s financial ecosystem grows in scale and complexity, the need for reliable identity intelligence, corporate transparency and ongoing risk signals becomes indispensable. By enabling these layers of insight, AuthBridge strengthens the foundation on which effective AML frameworks are built, helping institutions stay vigilant, compliant and resilient in a system where vigilance is not optional but essential.