Under the Prevention of Money Laundering Act, a lending institution that detects a suspicious transaction must file a Suspicious Transaction Report with FIU-IND within 7 working days of becoming aware of the suspicion. The institution that relies on its compliance team to detect suspicious transactions manually, draft the STR, obtain approval, and file it is the institution that files late, files incompletely, or — most dangerously — fails to file at all because the transaction's suspicious nature was not recognised in time.
What Makes a Transaction Suspicious — and Why the Definition Is Broader Than Most Teams Realise
Most compliance teams focus STR detection on the most visible indicators: large cash transactions above the ₹10 lakh threshold, wire transfers to high-risk jurisdictions, and customers on watchlists. These are important — but they represent only the most obvious fraction of the suspicious transaction universe that PMLA and the FIU-IND reporting framework expects institutions to monitor.
Structuring — where transactions are deliberately kept below reporting thresholds — is harder to detect than large single transactions but more indicative of deliberate money laundering. Loan proceeds that are immediately withdrawn and transferred to multiple accounts rather than used for the stated purpose are suspicious regardless of the transaction size. A borrower whose repayment source suddenly changes from consistent salary credits to irregular cash deposits should be reviewed. A business loan repaid in full within 90 days when no business income source justifies that cash availability warrants examination. The KYC/AML AI monitors for all of these patterns simultaneously, for every customer, every day.
The 6 Alert Rule Categories the AI Monitors
Transactions deliberately structured to remain below the ₹10 lakh cash reporting threshold. Multiple cash deposits of ₹9.5–9.9 lakh across consecutive days, or across multiple branches or accounts, indicating deliberate avoidance of reporting obligations.
Trigger: 3+ transactions in 10 days totalling >₹15L with each below ₹10LLoan proceeds transferred to multiple third-party accounts within 48 hours of disbursement, particularly where the stated loan purpose (property purchase, business expansion) does not match the actual fund flow pattern.
Trigger: >40% of disbursed funds transferred out to 3+ accounts within 48 hoursA borrower whose established repayment source (salary, business income) is replaced by irregular cash deposits of similar amount. May indicate that third-party funds are being used to service a loan, suggesting the original borrower is not the true economic owner.
Trigger: 2+ consecutive EMIs funded by cash deposits where prior repayments were from salaryA loan repaid in full significantly ahead of schedule where no legitimate income event — property sale, investment maturity, business transaction — can be identified from account data. May indicate that the loan was used as a placement vehicle.
Trigger: Full prepayment within 90 days where account data shows no income event justifying cash availabilityPolitically Exposed Persons require enhanced transaction monitoring beyond standard AML rules. Any transaction above ₹5 lakh from a PEP-linked account is reviewed. Round-figure transactions, transfers to family members, or purchases of high-value assets prompt automatic STR review.
Trigger: Any PEP-linked transaction >₹5L not consistent with declared income sourceIncoming remittances from FATF high-risk or monitored jurisdictions, or outgoing transfers to same, that are not consistent with the customer's documented business activity or personal profile. Triggers enhanced due diligence even if transaction size is below threshold.
Trigger: Any transaction from/to FATF grey/black list jurisdiction >₹1LThe Automated STR: What the AI Drafts and Files
When an alert triggers a confirmed suspicious transaction determination, the KYC/AML AI drafts the complete STR for MLRO review and approval before FIU-IND submission. The draft includes every mandatory field in the FIU-IND STR format — customer identity, account details, transaction specifics, the basis of suspicion with supporting evidence, and the recommended classification. The MLRO's role is to review the draft, confirm or modify the suspicion narrative, and authorise submission. The filing itself is executed by the AI directly through the FIU-IND's reporting portal.
Late STR Filing Is Not a Technical Violation — It Is Evidence of a Failed AML Programme
When the FIU-IND evaluates an institution's AML compliance, it does not look only at whether STRs were filed. It looks at whether they were filed within the statutory window, whether the suspicion narrative demonstrates genuine analytical engagement with the transaction, and whether the institution's monitoring systems detected the pattern in time to file promptly. An AI-drafted STR that is filed on day 3 of a 7-day window, with a complete transaction analysis and network finding embedded in the narrative, demonstrates a compliance programme that takes its PMLA obligations seriously. That demonstration has regulatory value that far exceeds the individual filing.