Know Your Transaction (KYT)

Know Your Transaction, or KYT is a phrase used in the financial sector to describe the process of evaluating financial transactions for fraudulent or suspicious activity, such as money laundering. As cryptocurrency use grows, it is critical for institutions to be able to drill deep into crypto transactions for evidence of financial crimes.

It is critical for financial institutions to understand how financial transactions carry bits of information with them that are frequently difficult to follow. Clearances, invoices, and even regulatory paperwork are examples of financial signals. Such messages must be carefully tracked with their relevant record, which is later utilized for auditing, either for investigation or AML reasons.

Compliance procedures are frequently time-consuming, complex, and inconvenient. Financial institutions face difficult situations due to increasing complexities in data retrieval, limited due diligence mechanisms, and insufficient systems for transaction monitoring. Considering these issues, experts developed the notion of Know Your Transaction (KYT), which is simply about financial institutions dealing with more exact, complete, and granular data sets specific to transactions.

What Exactly is KYT?

Know Your Transaction (KYT) is described as a program that provides critical analysis for businesses to detect and identify suspicious fraudulent transactions conducted by consumers based on their accounts and profiles.

Integrating customer profiles into their personal transactions, an efficient KYT system enables financial institutions (FIs) to detect suspicious activities by integrating customer profiles into their transactions. One such model is the Know Your Transaction solution, which assists banks in monitoring and drilling down on transactions to identify suspicious behaviors or fraudulent transactions as part of the transaction analysis process. Internally, this analysis is done on bank data to detect fraudulent transactions. The process outcomes serve as reliable proof, assisting institutions in protecting themselves against fraud and regulatory fines.

Why Do Companies Need KYT?

The largest and most important application of KYT allows businesses to monitor their consumers' financial transactions.

Know Your Customer (KYC) is a widespread practice among financial institutions and businesses. It is an essential tool in the client onboarding process, but it is not sufficient. It is the procedure that assures that clients do not violate any restrictions. However, this is insufficient to provide organizations with more excellent knowledge of their consumers and their transactions. As a result, KYT comes into play, allowing businesses to monitor transactions as well as extra facts and insights into client transactions.

The focus of cryptocurrencies and blockchain technology is not on the individual but on the entity or transaction, its historical attributions, and the linkages to that transaction. It is not possible to monitor a client using blockchain, but it is possible to watch the movement of funds through an address in order to determine the authenticity and legality of that transaction.

As a result, as banks and financial institutions become more involved with digital assets, whether directly as a service provider or indirectly as a digital asset account manager, they will need to start thinking about understanding more about transactions and fund flows on the blockchain, as well as supplementing KYC due diligence with KYT compliance procedures.

Comply with Sanction Scanner's Transaction Monitoring Tool

KYT has the capacity to observe transactional patterns using an analytical technique. The most efficient method to integrate Know Your Transaction protocols with standard KYC for transaction monitoring is to use a compliance software solution that discovers and evaluates transactions on the blockchain safely and effectively. Sanction Scanner enables bank and FI compliance personnel to monitor transactions automatically, ensuring asset flows remain compliant with current FATF and 5AMLD  risk assessment criteria. The KYT feature of Sanction Scanner is a cutting-edge technological system that can analyze various transaction patterns and track red flags. If you want to learn about our transaction monitoring AML solution, you may contact us and request a demo. 

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