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Transaction Monitoring Scenario Specification Template (NYDFS Part 504, AML)

Typology and risk mapping, logic, parameters, segments, data lineage, ATL/BTL calibration and sample size, alert volumes, investigation, validation

ISO・コンプライアンスフル3 NYCRR Part 504; 31 CFR 1020.320; AMLR Art. 26 (from 2027-07-10); SR 26-2transactionmonitoringscenariospecmath

使い方: Use it when a financial crime analytics team documents, tunes or validates one transaction monitoring scenario. Fill the typology and risk assessment link first, then the logic and parameters, and set thresholds only from above- and below-the-line testing on your own data. The main pitfall is tuning to cut alert volume without below-the-line evidence or the staff to work the queue.

プレビュー

Transaction Monitoring Scenario Specification: [Scenario ID and name]

Specification for one transaction monitoring (TM) scenario: the typology it targets, how it maps to the AML/CFT risk assessment, its business logic, parameters and thresholds, data inputs and lineage, population and segmentation, threshold calibration with above-the-line and below-the-line testing, expected alert volumes, alert handling, validation, tuning history and approval. It supports the scenario documentation that New York 3 NYCRR Part 504 (section 504.3) requires of regulated institutions, the ongoing monitoring duty under current EU national law and, from 2027-07-10, Article 26 of Regulation (EU) 2024/1624 (AMLR), suspicious activity reporting under 31 CFR 1020.320, and model risk governance under SR 26-2 (2026-04-17). Replace every [bracketed] value and every row marked Example. Obtain the regulations for the normative text and check the consolidated versions. This is a document format, not legal, compliance or financial advice.

Document control

FieldValue
Document ID[TM-SPEC-014]
Scenario ID[TM-SCN-014]
Scenario name[Rapid movement of funds (pass-through)]
Monitoring system and version[System name, version]
Entities and branches in scope[List]
Version[2.0]
Status[Draft / In review / Approved / In production / Retired]
Owner[@head-of-fcc-analytics]
Approvers/reviewers[@mlro], [@bsa-officer-us-branch], [@model-risk-management], [@data-owner], [@internal-audit]
Model risk tier[Tier 1 / 2 / 3, per MRM policy]
Go-live date of this versionYYYY-MM-DD
Last updatedYYYY-MM-DD
Next scheduled tuning reviewYYYY-MM-DD
Classification[Confidential: restricted, scenario logic must not be disclosed outside need-to-know]

Approvals

RoleNameDecisionDate
MLRO (EU)[@name][Approve / Approve with conditions / Reject]YYYY-MM-DD
BSA/AML officer (US branch)[@name][Decision]YYYY-MM-DD
Model risk management (independent review)[@name][Validation outcome]YYYY-MM-DD
Head of financial crime operations (capacity sign-off)[@name][Decision]YYYY-MM-DD

Revision history

VersionDateAuthorChange
1.0YYYY-MM-DD[@name]Example: Scenario introduced for retail and SME segments
2.0YYYY-MM-DD[@name]Example: Retail credit threshold lowered from EUR 10,000 to EUR 9,000 after below-the-line testing (section 8.4)

Contents

1. Scenario summary and risk mapping

FieldValue
Scenario IDTM-SCN-014 (Example)
TypologyRapid movement of funds through an account (pass-through), typical of money mule accounts, funnel accounts and layering
Risk assessment linkExample: AML business risk assessment 2026, risks ML-R-07 (money mules in retail current accounts, residual High) and ML-R-11 (SME accounts used for layering, residual Medium)
Detection typeRule-based, post-execution, daily batch
SegmentsRetail personal current accounts; SME business accounts
Coverage gap it closesExample: Real-time fraud controls stop some authorised push payment fraud at the victim's bank, but do not detect the receiving mule account's pattern over several days
Related scenariosTM-SCN-009 (cash structuring), TM-SCN-021 (high-risk country flows)

TM-SCN-014 looks for accounts where money arrives from several sources and leaves again quickly, leaving little balance behind. That pattern is common in mule accounts used to receive proceeds of fraud, in accounts used to collect funds for a third party, and in layering through business accounts that have no matching trading activity. The scenario does not decide that the activity is suspicious; it selects accounts for a human investigator to review against the customer's profile.

2. Regulatory basis

JurisdictionRequirementReferenceStatus (as of 2026-10, check local law)
FATFOngoing due diligence on the business relationship; reporting of suspicious transactionsRecommendation 10; Recommendation 20 (names only)Standard
EU (current)Ongoing monitoring of the business relationship and transactions; reporting suspicions to the FIUDirective (EU) 2015/849 Articles 13(1)(d) and 33, as transposed in [Member State] lawIn force until replaced
EU (from 2027-07-10)Ongoing monitoring and transaction scrutiny; reporting of suspicions; prohibition of disclosureRegulation (EU) 2024/1624 Articles 26, 69 and 73Applies from 2027-07-10
US (federal)SAR filing within 30 calendar days of initial detection of facts that may constitute a basis for filing, that is, the determination after prompt review that activity may be suspicious (up to 60 days if no suspect is identified)31 CFR 1020.320(b)(3)In force
US (federal)AML programme with internal controls31 CFR 1020.210In force; FinCEN programme rule NPRM of 2026-04-07 is a proposal only
US (federal)SAR practice clarifications, including no requirement to document a decision not to file and no fixed continuing activity review cadenceFinCEN and agencies SAR FAQs, 2025-10-09Guidance
New YorkTransaction monitoring programme: risk-based scenarios with thresholds, end-to-end testing, documentation of assumptions, parameters and thresholds, alert protocols, ongoing analysis; data and governance elements; annual compliance finding by 15 April3 NYCRR 504.3(a), 504.3(c), 504.4In force since 2017-01-01
US (model risk)Revised Guidance on Model Risk Management; supersedes SR 11-7 and SR 21-8; OCC Bulletin 2026-13 also rescinds OCC Bulletin 2021-19 on model risk for BSA/AML systemsSR 26-2 (2026-04-17); OCC Bulletin 2026-13Guidance; TM tools are classified under the bank's own MRM policy

3. Typology and red flags

A pass-through account receives funds from people or businesses the account holder has no clear relationship with, and sends them on, often within hours, to other accounts, crypto-asset service providers, money remitters or cash withdrawals. Mules may be recruited through job adverts or social media, may be victims themselves, or may be complicit. In business accounts, the same pattern appears when a company receives and forwards funds without the purchases, payroll and supplier payments a real business would show.

Indicator IDIndicatorUsed in logicData source
IND-01 (Example)Credits from several unrelated originators in a short windowYes (P3)Payments, counterparty resolution
IND-02 (Example)Most credited funds debited again within the windowYes (P2)Payments, balances
IND-03 (Example)Short holding time between credit and debitYes (P4)Payments with timestamps
IND-04 (Example)Debits to crypto-asset service providers, remitters or cashScore upliftMerchant category, beneficiary type
IND-05 (Example)Activity far above the declared expected turnoverScore upliftKYC profile
IND-06 (Example)Recently opened account or recently changed contact detailsScore upliftAccount and CRM data
IND-07 (Example)Credits flagged by other banks as fraud recallsInvestigation stepRecall messages, fraud team

4. Business logic

For each account in scope, the scenario runs daily over a rolling window that ends on the run date. It sums the qualifying credits and debits in the window, counts distinct originators, computes the share of credits that left the account, and measures the value-weighted holding time. It raises an alert when all mandatory conditions are true, and adds a risk score that orders the alert queue.

FOR each account a IN population(segment s) ON run_date d:
  window      = [d - W(s) + 1, d]
  credits     = SUM(amount of qualifying credits to a in window)
  debits      = SUM(amount of qualifying debits from a in window)
  originators = COUNT DISTINCT(resolved originator of credits in window)
  out_ratio   = debits / credits            (only if credits > 0)
  hold_hours  = value-weighted mean hours between each credit and the
                debits that consume it (first in, first out)
  IF credits    >= P1(s)
  AND out_ratio >= P2(s)
  AND originators >= P3(s)
  AND hold_hours <= P4(s)
  AND NOT suppressed(a, d)
  THEN raise alert with score = base + uplifts(IND-04, IND-05, IND-06)

Qualifying credits and debits exclude transfers between accounts of the same customer, loan disbursements and repayments with the bank, reversals and returned payments, and salary credits from employers on the payroll whitelist. Debits include outgoing transfers, card payments to crypto-asset service providers and remitters, and cash withdrawals. Amounts are in EUR; non-EUR transactions are converted at the booking-date reference rate.

The holding time uses first in, first out matching: each debit consumes the oldest unconsumed credit. The value-weighted mean is the sum of matched amount times hours held, divided by the total matched amount. Suppression prevents a repeat alert on the same account within 30 days unless credits in the new window exceed those of the last alerted window by 50% or more.

5. Parameters and thresholds

ParameterMeaningRetail personalSME businessBasis
WRolling window (calendar days)77Example: Investigated cases show 80% of pass-through cycles complete within 7 days
P1Minimum qualifying credits (EUR)9,000 (was 10,000)50,000Example: Below-the-line test, section 8.4
P2Minimum out/in ratio0.800.85Example: SME accounts keep working balances; ratio raised to cut false positives
P3Minimum distinct originators35Example: Single-source salary or rent flows excluded
P4Maximum value-weighted holding time (hours)4872Example: Calibrated on 2025 confirmed mule cases
SuppressionDays before a repeat alert3030Avoid duplicates of an open case
Uplift IND-04Added to score+20+15Expert judgement, reviewed in tuning
Uplift IND-05Added to score when window credits exceed 3 times expected monthly turnover+15+15KYC data
Uplift IND-06Added to score when account is under 90 days old or contact details changed in the last 30 days+10+10Account data

Assumptions (Example): expected turnover in the KYC profile is current for at least 90% of accounts; originator resolution groups payments from the same IBAN and normalised name; reference rates are available for all booked currencies. If an assumption fails, record it in section 12 and assess the impact on coverage.

6. Population and segmentation

The population is every open retail personal current account and every SME business account (annual turnover below EUR 10 million) at Fernhollow Bank's EU entities. Corporate, correspondent and private banking accounts are covered by other scenarios. The New York branch runs the same scenario on its retail deposit accounts with USD parameters set by its own calibration.

Segment IDSegmentAccounts (Example)Monthly qualifying credits, median (EUR)Thresholds
SEG-R1Retail personal current accounts372,0002,650Retail column
SEG-S1SME business accounts9,60041,000SME column

The example segments sit within Fernhollow Bank's 412,000 customers (400,000 retail and 12,000 corporate, of which 11,200 SME and commercial, 500 non-profit organisations, trusts and other, and 300 financial institution respondents): 372,000 retail customers hold a personal current account, and 9,600 of the 11,200 SME and commercial customers are SMEs under the turnover limit, one business account each.

Segments are reviewed at each annual tuning. A new segment is needed when a group of customers behaves differently enough that a shared threshold either floods the queue or misses activity, for example student accounts or accounts of payment institutions using the bank for safeguarding.

Segment boundaries need the same care as thresholds. An SME customer recorded as a retail customer is tested against the retail thresholds and will alert on ordinary trading; a retail customer recorded as SME hides behind higher thresholds. Run a quarterly check that segment codes in the KYC system match the product held and the turnover band, and report mismatches as a data quality issue under section 7.

7. Data inputs and lineage

Data IDSource systemFieldsTransformationQuality check
DAT-01 (Example)Core banking postingsAccount, amount, currency, booking date, time, transaction codeMapping of transaction codes to credit and debit typesDaily count and sum reconciliation to the general ledger
DAT-02 (Example)Payments hub (ISO 20022 pacs.008, pacs.004)Debtor and creditor name and account, agent BIC, remittance textOriginator resolution (IBAN plus normalised name)Fill-rate check for debtor account above 99%
DAT-03 (Example)Card processingMerchant category code, merchant nameFlag crypto-asset service providers and remittersReference list review quarterly
DAT-04 (Example)KYC systemSegment, expected monthly turnover, account open date, contact change dateLatest values per accountStaleness report: turnover older than review cycle
DAT-05 (Example)Market dataEUR reference ratesConversion at booking dateMissing-rate alert
DAT-06 (Example)Payroll whitelistEmployer account identifiersExclusionQuarterly review by Compliance

A failed reconciliation stops the run for the affected data and opens a data incident. When the run resumes, the scenario reprocesses the missed days so no window is skipped. Every change to a source system that touches the fields above goes through the change control in section 13 before release.

8. Calibration and tuning

8.1 Definitions

A productive alert is an alert that an investigator escalated to a case for further investigation, whether or not a report followed. The productivity rate is the share of alerts that are productive.

Productivity rate=productive alertstotal alerts\text{Productivity rate} = \frac{\text{productive alerts}}{\text{total alerts}}

Report productivity alongside the report conversion rate (alerts that led to a suspicious activity or transaction report). Productivity is a measure of alert quality, not a target to maximise: a scenario with very high productivity may have thresholds set too high and be missing activity.

8.2 Above-the-line testing

Above-the-line (ATL) testing reviews alerts the scenario produced, by segment and by threshold band, to see where productive alerts concentrate. If almost all productive alerts sit in the highest bands, the threshold may be raised safely; if they spread evenly, keep it.

8.3 Below-the-line testing and sample size

Below-the-line (BTL) testing runs the scenario with lowered thresholds and has investigators review a sample of the extra events that would have alerted. Sample size uses a zero-failure acceptance approach: to be confident at level cc that the productive rate in a band is below pp if no productive events are found, review at least

n=⌈ln⁡(1−c)ln⁡(1−p)⌉n = \left\lceil \frac{\ln(1-c)}{\ln(1-p)} \right\rceil

events. With c=0.95c = 0.95 and p=0.02p = 0.02, n=⌈−2.9957/−0.0202⌉=149n = \lceil -2.9957 / -0.0202 \rceil = 149, rounded up to 150 (Example). When productive events are found, the productive count in the band is estimated as

k^band=Nband×kn\hat{k}_{\text{band}} = N_{\text{band}} \times \frac{k}{n}

where NbandN_{\text{band}} is the number of events in the band, kk the productive events found in the sample, and nn the sample size.

8.4 Worked example: retail segment, six months to 2026-06-30

ItemValue (Example)
ATL alerts at P1 = EUR 10,0001,240
ATL productive alerts93
ATL productivity rate93 / 1,240 = 7.5%
ATL alerts leading to a report21 (1.7%)
BTL band 1: credits EUR 9,000 to below 10,000, events1,050
Band 1 sample, productive found150 reviewed, 6 productive (4.0%)
Band 1 estimated productive events1,050 x 6 / 150 = 42
BTL band 2: credits EUR 8,000 to below 9,000, events1,380
Band 2 sample, productive found150 reviewed, 1 productive (0.67%)
Band 2 estimated productive events1,380 x 1 / 150 = 9.2

Decision rule (Example): lower the threshold to a band when its productive rate is at least half of the ATL productivity rate. Half of 7.5% is 3.75%. Band 1 (4.0%) meets the rule, so P1 moves from EUR 10,000 to EUR 9,000. Band 2 (0.67%) does not, so the threshold stops at EUR 9,000. The single productive event in band 2 was reviewed by the MLRO and is covered by scenario TM-SCN-021, so no coverage gap remains.

After the change, the expected alerts for six months are 1,240 + 1,050 = 2,290, with an expected 93 + 42 = 135 productive alerts, a productivity rate of 135 / 2,290 = 5.9%.

8.5 Tuning cycle

Tune each scenario at least every 12 months, and sooner after a change in the risk assessment, a new product, a material change in alert productivity, or a data incident that affected coverage. Each tuning exercise records the data period, the tests run, the results, the decision and the approval, and adds a row to section 13.

9. Expected alert volumes and capacity

ItemBefore (P1 = EUR 10,000)After (P1 = EUR 9,000)
Alerts per month (6-month average)1,240 / 6 = 206.72,290 / 6 = 381.7
Level 1 review time per alert (Example)25 minutes25 minutes
Level 1 hours per month206.7 x 25 / 60 = 86.1381.7 x 25 / 60 = 159.0
Analyst capacity at 150 productive hours per month0.57 FTE1.06 FTE

The head of financial crime operations confirms that 1.1 FTE is assigned to this scenario's queue from the go-live date, and that the level 1 service level of 10 business days from alert to disposition (Example) can be met.

10. Alert handling and investigation

The level 1 reviewer compares the window activity with the expected profile, looks at the originators and beneficiaries, checks recent fraud recalls against the account, and records a rationale that someone else could follow. Acceptable closure reasons are limited to a controlled list, such as documented change of employment or business, verified sale of a personal asset, or family support with evidence. A level 2 investigator reviews 12 months of activity, linked accounts and devices, and open-source information, and may ask the fraud team to contact originating banks.

When a report is filed, the case file follows the SAR/STR Narrative template (compliance/sar-str-narrative). Investigators must not tell the customer that an alert, case or report exists. In the US, the SAR must be filed within 30 calendar days of the date of initial detection of facts that may constitute a basis for filing (31 CFR 1020.320(b)(3); up to 60 days if no suspect is identified). The clock starts when the institution determines that the activity may be suspicious, not when the alert fires and not when the case is escalated. The institution records this as [the date the level 2 investigator, after a prompt review, concludes that the activity may be suspicious] (Example). Set a service level for the review itself (for example 30 days from alert to decision) and do not delay escalation or review to postpone the clock; record the date and the reviewer in the case.

11. Testing and validation

Pre-implementation testing confirms that the logic does what section 4 says: testers build known cases (alerting and non-alerting, edge values exactly at each threshold, excluded transaction types, currency conversion) and confirm results in a test environment that uses production-like data. Post-implementation testing confirms, in the first month, that production alert counts match the calibration forecast within a tolerance (for example plus or minus 20%) and that reconciliations pass every day.

Independent validation follows the institution's model risk policy (finance/model-risk-management-policy). Under SR 26-2 the bank decides whether a rule-based scenario is a model and which tier it sits in; OCC Bulletin 2026-13 rescinded the 2021 interagency statement on model risk for BSA/AML systems, so the general MRM policy governs. A validation covers conceptual soundness of the typology and logic, data integrity, implementation testing, outcome analysis (ATL and BTL results), and ongoing monitoring; record findings in the Model Validation Report (ai-data/model-validation-report).

Test IDTestWhenResult (Example)
TST-01Logic test with 64 constructed cases, including threshold edgesBefore go-live of v2.064 of 64 passed
TST-02Data lineage walk-through, source to alert, for 25 sampled alertsBefore go-liveAll fields traced
TST-03Reconciliation of record counts per runDaily0 breaks in first month
TST-04Post-implementation volume checkFirst month372 alerts vs forecast 381.7 (within 20%)
TST-05Independent validationBefore go-live, then per tier cycleApproved with one low finding

12. Performance monitoring

KPI IDIndicatorThreshold for review (Example)Frequency
KPI-01Alerts per month vs forecastOutside plus or minus 30%Monthly
KPI-02Productivity rateBelow 3% or above 20% for two monthsMonthly
KPI-03Report conversion rateTrend onlyQuarterly
KPI-04Alerts older than service levelAnyWeekly
KPI-05Data quality breaks affecting the scenarioAnyDaily
KPI-06Share of reports on this typology originating from other sources (referrals, law enforcement requests)Rising trendQuarterly

KPI-06 is a coverage signal: if many mule cases reach the bank through fraud recalls or law enforcement requests but not through this scenario, the scenario is missing activity and needs tuning even if its own productivity looks healthy. The fraud detection platform (system-design/design-fraud-detection) and this scenario should share confirmed mule outcomes so each improves the other.

13. Tuning history

Change IDDateChangeEvidenceApproved by
CHG-014-01 (Example)2025-03-01Scenario introduced, retail P1 EUR 10,000, SME P1 EUR 50,000Calibration report 2025-02MLRO
CHG-014-02 (Example)2025-11-15Payroll whitelist exclusion addedFalse positive analysis, 18% of alerts were payrollMLRO
CHG-014-03 (Example)2026-08-01Retail P1 lowered to EUR 9,000Section 8.4 BTL results; capacity sign-offMLRO, MRM

Keep the configuration export for each version alongside this table, so that the exact parameters in force on any date can be shown to an examiner or a court. Never delete a retired version: when a scenario is replaced, mark it Retired, record the successor scenario, and keep the specification for at least the record retention period that applies to the alerts it produced. Emergency changes (for example a temporary suppression after a data incident flooded the queue) need the same record, an expiry date and a follow-up review of any events the change suppressed.

14. Approval and certification evidence

The approval pack contains this specification, the calibration report, the test results, the validation report and the capacity sign-off. For the New York branch, the BSA officer files the pack with the Part 504 evidence for the year, and any area needing material improvement is recorded with its remediation plan, as 504.3(d) requires.

15. Traceability matrix

RequirementReferenceSectionEvidence
Based on the risk assessment3 NYCRR 504.3(a)(1); FATF R.11Risk IDs ML-R-07, ML-R-11
Detection scenarios with thresholds504.3(a)(4)4, 5Logic, parameter table
Documentation of assumptions, parameters, thresholds504.3(a)(6)5Parameter table, assumptions
End-to-end pre- and post-implementation testing504.3(a)(5)11TST-01 to TST-04
Alert investigation protocols504.3(a)(7)10Workflow, closure codes
Ongoing analysis of relevance504.3(a)(8)8, 12Tuning reports, KPIs
Data sources, integrity, extraction and loading504.3(c)(1) to (3)7Data table, reconciliations
Governance and change management504.3(c)(4)13, 14Tuning history, approvals
Ongoing monitoring of transactionsDirective (EU) 2015/849 Art. 13(1)(d); AMLR Art. 26 from 2027-07-104 to 10Scenario output
Suspicious activity reporting31 CFR 1020.320; Directive (EU) 2015/849 Art. 33; AMLR Art. 69 from 2027-07-1010Case files
Model risk governanceSR 26-2; OCC Bulletin 2026-1311Validation report

16. Glossary and references

TermMeaning
ScenarioA defined rule or model that selects activity for review
Above-the-line (ATL)Events that met the threshold and generated alerts
Below-the-line (BTL)Events just under the threshold, reviewed to test whether activity is missed
Productive alertAlert escalated to a case for investigation
Out/in ratioDebits divided by credits in the window
Holding timeTime between funds arriving and leaving, weighted by value
Money muleA person whose account is used to receive and move proceeds of crime
TuningReview and adjustment of logic, parameters or thresholds

References:

  • New York 3 NYCRR Part 504, Banking Division Transaction Monitoring and Filtering Program Requirements and Certifications (effective 2017-01-01), sections 504.2 to 504.4.
  • 31 CFR 1020.210 and 1020.320, ecfr.gov; FinCEN and federal banking agencies SAR FAQs (2025-10-09); FinCEN AML/CFT programme NPRM (2026-04-07, proposed).
  • Board of Governors of the Federal Reserve System, SR 26-2 Revised Guidance on Model Risk Management (2026-04-17); OCC Bulletin 2026-13.
  • FFIEC BSA/AML Examination Manual, suspicious activity monitoring and reporting sections.
  • Directive (EU) 2015/849 Articles 13 and 33; Regulation (EU) 2024/1624 Articles 26, 69 and 73, eur-lex.europa.eu.
  • FATF Recommendations 1, 10 and 20 (names only).

Standard and licence note

Based on New York 3 NYCRR Part 504, 31 CFR Chapter X, SR 26-2 and the FFIEC BSA/AML Examination Manual (US government works, public domain, or state regulations cited by section), and on Directive (EU) 2015/849 and Regulation (EU) 2024/1624 published on EUR-Lex (reuse under Commission Decision 2011/833/EU). FATF Recommendations are cited by number only. The scenario, logic, parameters, calibration method, worked example and text are original; no regulatory text or industry scenario library is reproduced. Fernhollow Bank and all figures are fictional. Check the current official version of each source and the national transposing law before use. Template licence: MIT.

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