When Michael, the AML compliance officer, observes unusual activity, what is the next appropriate step?

The appropriate next step after observing unusual activity is to conduct further investigation. This step is crucial because it allows the compliance officer to gather more information and assess the situation before taking more formal actions. By investigating the unusual activity, Michael can determine whether it is indicative of potential money laundering or other illicit activities. This process may involve reviewing transaction details, customer history, and any other relevant information that could clarify the nature of the observed behavior.

Taking the time to conduct a thorough investigation ensures that any subsequent decisions, such as filing a Suspicious Activity Report (SAR) or notifying law enforcement, are based on a solid understanding of the facts. This step prevents premature actions that could lead to unnecessary complications or legal issues, ensuring compliance with regulatory requirements while safeguarding the integrity of the financial institution.