Know Your Transaction (KYT) or Transaction Monitoring has become a useful and compulsory tool for businesses in recent years, businesses have become more digitised, which means faster ways of doing business and transactions, but businesses can be much more vulnerable. Digital transactions are fast rising in Kenya, and so are digital businesses. Crypto and blockchain transactions are also gaining ground.
In 2019, bitcoins transactions were estimated to be worth over $ 1.5 m. Digital transactions are expected to reach US$11,830.00m by 2027.
Kenya is now being referred to as the Silicon Valley of Africa. However, for financial institutions to truly thrive, it needs to incorporate the use of efficient Know Your Transaction (KYT) tools. Hence the need for more businesses to adopt Know Your Transaction tools and mechanisms.
Every financial institution needs KYT; identifying customers' identities is no longer enough as they could be smartly bypassed through different means since the customer don't have to show up to the bank themselves.
With the advent and rise of crypto transactions and their anonymous nature, there is a pulsing need to continuously examine the onboarding clients' transaction activities. Rather than follow the identities behind a transaction, the provenance of the transaction is followed instead.
KYT has been dubbed as the future of KYC and is a possible essential solution to curbing money laundering, suspicious behaviours and fraudulent activities, which range from the mass proliferation of dangerous weapons or drug trafficking. KYT is gradually becoming the new KYC because it applies to both fiat and cryptocurrency, and the constant simultaneous existence of both forms is going to be present in the future.
What is Know Your Transaction (KYT)?
KYT (know your transaction) is gradually becoming a popular term in the banking and finance sector. It is a very important tool for banks, financial institutions and other organisations to help them comply with anti-money laundering regulations.
KYT is a process used by banks as well as financial institutions to identify suspicious transactions or activities that may be related to money laundering or terrorist financing. The goal of KYT is to make sure that transactions are legitimate and not being used for illegal activities like fraud and terrorism financing.
How Does Know Your Transaction (KYT) Work?
KYT is enabled by collecting data on transactions processed by financial firms. These data are processed to evaluate whether a transaction is legal and not related to any illegal activity, including money laundering.
Banks and financial institutions use various methods such as Customer Due Diligence (CDD), Enhanced Due Diligence (EDD), transaction monitoring systems, risk assessment tools, etcetera. These tools and systems allow for the detection of any suspicious activity or patterns that might be associated with money laundering activities. These tools can also be used for KYC and customer onboarding.
As mentioned earlier, KYT has been recognised as the new innovative key to tackling money laundering. However, there are other numerous benefits of KYT, and it can help protect businesses from potential losses that may be incurred due to fraudulent activities, it ensures compliance with anti-money laundering laws, reduces operational costs associated with manual reviews and strengthens the trust between customers and financial institutions by providing transparency into their finances.
Know Your Transaction is an essential tool for any business that deals with large amounts of money or funds frequently, whether it is a financial institution or a non-financial company like an online retailer because it allows them to stay compliant while also protecting themselves from potential losses that are caused through fraudulent activities.
This is why all businesses and financial institutions should implement transaction screening in their operations, especially in Kenya, where digital transactions involve huge amounts of funds daily.
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What Are The Emerging Technologies And Trends For Know Your Transactions (KYT) In Kenya?
Technology evolves every day in all sectors, from media to communication to transportation to governance; the finance sector is not spared, and Africa is not spared too. In Kenya, the silicon valley of Africa, KYT is an emerging trend that has been gaining traction over the years. It is now increasingly important because businesses now have more online presence, and digital payments and crypto payments, are fast becoming the new norm.
KYT involves collecting data on customers as well as the transactions they have made, these data are analysed for suspicious activities or patterns, and then actions are taken when irregularities are found. Because of this, digital companies and financial institutions should understand how KYT works and should also implement it.
With the emergence of new technologies and trends in Kenya, the future of KYT is likely to evolve to keep pace with these changes. Here are some emerging trends to explore:
a. Adoption Of Artificial Intelligence (AI)
AI-powered solutions can transform KYT in Kenya. AI improves the efficiency of KYT and allows financial institutions to focus better on investigating high-risk transactions. AI transactions automate transaction monitoring, flagging suspicious activity and reducing the false-positive rate. AI can also be used for predictive analytics, and it can help identify potential risks before they take place. This allows for preventative measures to be taken accordingly.
b. Blockchain Technology
Blockchain technology offers a secure method of storing transaction data that is tamper-proof and can help improve KYT. It is one of the most popular technologies used by Kenyan companies. It allows users to securely store transaction records on a distributed ledger that can be accessed by all parties involved in a transaction without having to rely on third-party intermediaries such as banks or payment processors.
Financial institutions should use blockchain-based KYT systems to track transactions across multiple parties, reducing fraud risk. This will enable companies to track customer information easily while ensuring privacy since no single entity controls the data stored on the blockchain network.
c. Expansion of Mobile Banking
Mobile banking is becoming increasingly popular all around Africa and in Kenya as well, which is one of the countries that is taking the lead alongside Ghana in mobile money payment. Mobile banking can be developed with new innovations to accommodate challenges such as SIM swapping and identity theft.
d. An Increased Collaboration Between Regulators and Financial Institutions
The Central bank of Kenya as well as other regulators and financial institutions should increase the oversight of financial institutions to prevent money laundering and other financial crimes. This collaboration increases KYT compliance.
e. The Use of Biometric Identification
Biometric identification, like facial recognition or fingerprint scanning, can improve KYT because it makes it more difficult for individuals with malicious or fraudulent intent to impersonate legitimate customers. Biometric data will be used to verify a customer's identity, thereby reducing the risk of identity theft. It is a key technology adopted by most companies in Kenya.
It is even more efficient because users are verified quickly and accurately due to the existence of facial recognition software and fingerprint scanning devices. It provides an extra layer of security when compared to traditional methods like passwords. This makes it a grader for malicious access and usage.
Achieving Know Your Transaction (KYT) with Youverify
Youverify KYT is an automated solution that helps organisations meet regulatory requirements by monitoring cross-border transactions and digital transactions to identify suspicious activity.
Youverify employs intelligent AI and advanced algorithms to analyse transactions in real-time and detects unusual patterns that could be an indication of money laundering or fraud. Businesses should adopt a software tool like Youverify that is innovative and African-oriented. It has been developed with various corporate African experiences in mind.
With all these emerging innovations and emerging trends, Kenyan business owners are better advantaged. They will be able to position themselves better when they need to adopt new solutions designed specifically to meet their unique needs. With proper implementation, these tools can go a long way towards helping organisations stay compliant. They can also protect customers or consumers from being affected by fraudulent activities by malicious actors.
See how 100+ leading companies use Youverify for KYT screening of customers for compliance and real-time risk detection. Request a demo today.