Know Your Transaction (KYT) or transaction monitoring refers to a series of processes that helps identify potentially suspicious activity in customers' transactions that might be indicative of money laundering or other financial crimes. 

KYT comes with so many benefits and is very essential for businesses today to satisfy compliance and protect their system from being exploited for criminal activities.


In this article, we will break down the basics, explaining the benefits of Know Your Transaction (KYT) and why it is important for your business. We will also share some tips for getting started and maximizing the benefits of KYT for your company. 


What Is Know Your Transaction (KYT)?

Know Your Transaction (KYT) is a government-mandated rule for financial organizations that requires them to monitor customers' transactions for suspicious activity.

KYT helps financial institutions detect financial crimes like money laundering and terrorist financing. To do this, they use different methods such as filtering out transactions that may be suspicious, alerting relevant departments when suspicious activities are detected, and more. 

This ensures that fraudulent activities are identified and reported quickly so that appropriate action can be taken. In short, KYT helps keep our finances secure by making sure that wrongdoers do not get away with their crimes. 

It also makes sure the safety of our funds is maintained by quickly detecting any suspicious transactions and taking the necessary steps to prevent them from being completed.


How Does KYT Compliance Help Combat Fraud in the Banking System?

You have probably heard of the phrase "Know Your Customer", or KYC, which is a critical part of compliant banking operations. KYT takes KYC one step further, as it adds monitoring and transaction analysis to the process. 

In other words, when banks use KYT in their compliance efforts, they are not only collecting customer data but also analyzing it to detect suspicious behaviours.

KYT can help prevent fraud and other financial crimes by parsing through large amounts of data and real-time transaction analysis. 

By keeping track of customers’ transactional data to detect any patterns that could indicate fraudulent activity or money laundering, banks will be able to quickly identify problems and take action before they become larger issues.

KYT compliance also helps ensure that banks are meeting all regulatory requirements and staying compliant with anti-money laundering laws. 

And ultimately creating a safe environment where customers feel comfortable conducting their banking activities without fear of being scammed.

What Are the Benefits of Know Your Transaction (KYT) Compliance?

So now that you know what KYT is and why it is necessary, let us get into the benefits of using KYT for your company's compliance.


a. Automated Process


The process of tracking and monitoring transactions can be very time-consuming, but with KYT, it stays automated. You will have the ability to keep an eye on every user transaction made in every system. This automation makes compliance checks faster and easier than ever before.


b. Real-Time Monitoring

KYT tools allow you to monitor transactions in real-time, rather than after the fact. This means that you can alert people if anything suspicious is going on with a transaction before it is completed, giving you more control over your company’s financial activities. 

With deeper insight into what is happening with users and their transactions, it is easier to catch any suspicious behaviour before it escalates into a bigger problem down the road. 


Recommended - Know Your Transaction (KYT) in Kenya: Emerging Technologies and Trends


How are Cryptocurrency Transactions Monitored Through KYT?

So, how do you monitor cryptocurrency transactions through KYT? In a nutshell, it comes down to a few key elements:


a. Comprehensive Data Gathering

KYT ensures that any organization monitoring crypto activity is accessing up-to-date, comprehensive data. It aggregates transaction-related information from multiple exchanges and public blockchains. This helps to identify high-risk transactions and take appropriate follow-up actions.


b. Automated Monitoring

KYT is designed to make life easier for compliance departments by automating the most time-consuming processes. Not only does it collect data from multiple sources — it also finds patterns in large amounts of data quickly and accurately. This makes it easier to flag suspicious activity more reliably and at scale.


c. Risk Scoring

KYT uses advanced algorithms to score each transaction's risk level so organizations have an added layer of protection against fraud. These scores are essential when it comes to making decisions about whether or not a transaction can be processed. 

On top of that, KYT can integrate with existing KYC systems to ensure each user has been authenticated properly before making any transactions.

What Can Businesses Do to Stay Compliant With KYT Regulations?

Knowing your transactions (KYT) is an anti-money laundering (AML) technology that helps businesses identify and control risks caused by money laundering, fraud, and other illicit activities. 

But what does this mean for businesses?

It is not enough to just be aware of KYT and how it works. You need to understand the regulations that come with it to stay compliant. 

Fortunately, staying compliant with KYT is not overly complicated and there are several steps you can take to ensure your business is meeting the requirements:

1. Perform Due Diligence

KYT regulations require businesses to perform due diligence on their customers to confirm they are legitimate and do not pose any financial risk. 

This includes collecting customer information such as identity documents and conducting screenings against global sanctions lists, watchlists, and politically exposed person lists.

2. Implement Automated Transaction Monitoring

Businesses must also have a system in place for ongoing monitoring of customers’ transaction activity. 

Automated transaction monitoring can help detect suspicious behaviour from customers or transactions that could be related to money laundering or terrorist financing activities.

3. Monitor Third-Party Onboarding Processes

In addition to gathering information on their customers, businesses must also consider the risk posed by their partners or third parties they work with – especially those located outside of the country. 

KYT regulations require organizations to monitor this relationship by thoroughly vetting third parties through investigations, contract reviews, and due diligence checks to ensure appropriate compliance standards are met.

By following these steps and continuing to keep up with ongoing KYT regulations, you can ensure your business meets regulatory requirements while keeping customer data secure from financial crimes.

Case Study: Examining KYT Compliance in Kenya


Perhaps the best way to understand the power of KYT is to look at an example. In this case study, we will examine how KYT compliance has been implemented in Kenya. KYT compliance in Kenya involves two primary components:


1. Technology solutions

This involves the use of sophisticated software solutions that are designed to automate, manage and monitor all transactions within a given business or organization. 

Some of these solutions include Artificial Intelligence (AI) powered algorithms that can detect suspicious activity and flag potential money laundering activities.

2. Regulatory compliance

The second component of KYT compliance in Kenya involves ensuring that all activities are compliant with the relevant regulations enacted by the Central Bank of Kenya. 

This includes having adequate anti-money laundering policies and procedures in place as well as having personnel who are knowledgeable about the relevant rules and regulations and able to implement them effectively.

These two components work together to ensure that all transactions within a given business or organization are monitored effectively so that any suspicious activities can be spotted and reported to the relevant authorities in a timely fashion. 

This helps to reduce the risk of financial crime occurring within Kenya, while also promoting greater transparency and trust in transactions undertaken within its borders.

Cryptocurrency and Transaction monitoring solution

When it comes to cryptocurrency, you need to know your transactions (KYT). KYT stands for "Know Your Transaction", and it is the process of monitoring and analyzing your transaction activities in the digital asset world.

KYT is a tool used by organizations and businesses to gain a better understanding of how their transactions are being used. It helps them track their transactions and detect suspicious activity. 

In addition to tracking transactions, KYT also can help organizations comply with various regulatory requirements. KYT solutions can be tailored to meet the needs of individual organizations. This includes analysing parameters such as:


  • Geolocations associated with transactions
  • Type of currency being exchanged
  • Transactions under a specific threshold
  • Time frames of transactions
  • Frequency of transactions and more

Through KYT solutions, companies can get real-time alerts when suspicious activity occurs, allowing them to take action quickly. Additionally, they can review past data from past events and use this data as part of their investigations into suspicious activity. 

This data is also useful in helping organizations meet their compliance measures around Anti Money Laundering (AML) rules and regulations.


Read Also - Transaction Monitoring Process in Banks - Everything You Need To Know


Bottom Line


Overall, KYT is a valuable tool for businesses looking to stay compliant with the ever-shifting regulations on cryptocurrency and transaction monitoring. 


It is important to be aware of the KYT benefits and how they can be used to reduce the risk of running afoul of the law. KYT is a powerful tool, not only for staying compliant with the law but also for increasing customer trust and satisfaction. 

With full visibility into customer transactions, businesses can quickly identify and address any suspicious activity, as well as streamline their compliance process. 


Youverify offers reliable know-your-transaction solutions to monitor customer transactions and spot financial crimes before they occur. Request a demo today to get started.