Increased Money Transfers in Ramadan: How to Detect Suspicious Transactions

Increased Money Transfers in Ramadan

Introduction

Ramadan is a period of increased financial activity, with a significant rise in money transfers. Many people send remittances, business payments, and charitable donations during this time. However, this surge creates opportunities for financial crime, including money laundering and fraud.

Financial institutions must enhance their Anti-Money Laundering (AML) measures to detect and prevent suspicious transactions. This article outlines key AML risks during Ramadan and best practices for identifying fraudulent activities.

Visit FTI Audit for expert AML compliance solutions.

Why Money Transfer Fraud Increases During Ramadan

The increase in financial transactions during Ramadan makes it easier for criminals to hide illegal activities. Fraudsters take advantage of higher remittance volumes, business transactions, and anonymous donations to launder money.

Common Risks in Money Transfers During Ramadan

  • Unverified Charities – Criminals may set up fake charities to collect illicit funds.
  • Smurfing Techniques – Large sums of money are broken into smaller transactions to avoid detection.
  • Unusual Cross-Border Transfers – Criminals use Ramadan remittances to move illicit funds internationally.
  • High-Cash Transactions – Increased cash deposits and withdrawals can be linked to money laundering.

To mitigate these risks, financial institutions must closely monitor transactions and implement strict AML measures.

Best Practices to Detect Suspicious Transactions

1. Strengthening Know Your Customer (KYC) and Customer Due Diligence (CDD)

KYC and CDD procedures help financial institutions identify legitimate customers and detect fraudulent activities.

Key Steps to Strengthen KYC:

  • Verify customer identities before processing large transactions.
  • Conduct Enhanced Due Diligence (EDD) for high-risk individuals and businesses.
  • Monitor new account openings with unusual transaction patterns.

A strong KYC framework ensures that only legitimate individuals and organizations conduct financial transactions.

2. Monitoring Large and Unusual Transactions

A sudden spike in transactions during Ramadan may indicate money laundering or fraud. Financial institutions should:

  • Track high-value transfers that exceed normal thresholds.
  • Detect frequent small transactions that collectively amount to large sums.
  • Analyze cash-intensive businesses for suspicious deposit and withdrawal patterns.

Using AI-powered transaction monitoring tools can help identify abnormal trends in real time.

3. Identifying Suspicious Cross-Border Transfers

International remittances increase during Ramadan as people send money to families and charities. However, criminals may use this trend to move illicit funds.

Red Flags in Cross-Border Transfers:

  • Unusual transactions from high-risk countries with weak AML regulations.
  • Large donations to charities not registered with government agencies.
  • Money sent to multiple recipients who do not appear connected.

Financial institutions must use real-time tracking to monitor international money transfers and ensure compliance.

Visit FTI Audit for AML compliance solutions.

4. Scrutinizing Anonymous Donations and Large Charity Payments

Many charities collect significant funds during Ramadan. However, fraudsters may exploit this trend to launder money or finance terrorism.

How to Ensure Charity Compliance:

  • Verify that charities receiving large sums are registered and legitimate.
  • Track frequent high-value donations from anonymous sources.
  • Flag charity payments linked to high-risk individuals or organizations.

Financial institutions should implement sanctions screening to detect blacklisted entities.

5. Enhancing Employee Training on AML Risks During Ramadan

Staff members play a crucial role in detecting suspicious transactions. Financial institutions should:

  • Provide specialized AML training for Ramadan-specific risks.
  • Educate employees on new fraud techniques and money laundering trends.
  • Encourage quick reporting of suspicious activities.

A well-trained workforce helps prevent financial crimes and strengthens compliance frameworks.

6. Using AI and Machine Learning for Fraud Detection

AI-driven tools can identify suspicious transaction patterns that humans may overlook. These systems:

  • Analyze millions of transactions in real time.
  • Detect unusual transaction behaviors linked to fraud.
  • Improve AML compliance by automating risk assessment.

Integrating AI with traditional transaction monitoring enhances financial crime prevention.

Reporting Suspicious Transactions During Ramadan

If a financial institution detects suspicious activity, it must:

  1. File a Suspicious Activity Report (SAR) with regulatory authorities.
  2. Flag high-risk transactions for further investigation.
  3. Cooperate with law enforcement agencies to prevent financial crimes.

Strict reporting ensures compliance and prevents the misuse of financial services during Ramadan.

Conclusion

Ramadan brings an increase in remittances, business transactions, and charitable donations, making it a target for financial crime. Financial institutions must strengthen KYC procedures, monitor transactions, and use AI-driven tools to detect suspicious activities.

By implementing strong AML measures, financial institutions can protect the integrity of financial systems and ensure compliance with regulations.

For expert AML compliance solutions, visit FTI Audit.