KYT Verification – Exploring the Significance of Transaction Monitoring

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Digitization has proliferated in all global sectors and industries. Developed nations have widely embraced technological changes and introduced digital solutions to everyday problems. The finance sector has adopted automation to enhance the overall performance of banks, insurance companies, and virtual asset platforms.

Banks, in particular, have shifted to technologically optimized monitoring of transactions. They perform KYT verification to ensure secure and transparent transactional activities. It is critical for guaranteed compliance with anti-money laundering counter-terrorism financing regulatory laws.

KYT for Transaction Screening

Know-your-transaction has become a buzzword in the banking sector due to the numerous automated options provided by fintech. KYT involves the monitoring of all financial transactions flowing through a bank. As the name indicates, it is similar to KYC and KYB but focuses solely on transactional activity in financial institutes, specifically banks.

Customers or businesses must undergo rigid screening for every monetary transfer via banking channels. It is crucial because it allows the identification of any misleading client. Furthermore, it detects traces of laundered funds and links to criminal networks. Therefore, KYT verification enables banks to identify suspicious transactions and customer accounts. 

KYT Compliance & Digital Banking

As per a report, about 95 per cent of global transactions flow via the digital banking system, highlighting the transformation in international banking. It is expected to grow to a figure of USD 1,610 billion by the year 2027. This indicates the significance of stringent security measures in this sector to enhance the general safety of financial transactions and customers’ data.

This is how KYT verification appears as a savior. Know-your-transaction compliance refers to the standards adopted for monitoring suspicious transactions and customer accounts during the due diligence procedure. KYT verification in banking is indispensable for adherence to anti-money laundering and counter-terrorism financing regulatory laws. 

Business Enterprises & KYT Verification

Customer identification is directly linked to transaction monitoring and AML/CFT compliance. Likewise, businesses are also attached to banks and other financial institutions, a phenomenon known as know-your-business (KYB) or business verification. KYB means the affiliation of companies with banks for their economic activities, including the transactions they make.

KYB involves performing due diligence checks on every company onboarded with banks. Like KYC is conducted for the identity verification of customers, KYB scrutinizes businesses, their money trails, sources of income, legitimacy, authenticity of tax statements, and their ultimate beneficial owners. KYT verification is crucial for identifying suspicious activities and illicit funds transfers at the hands of organizations. 

KYT Transaction & EDD

KYT monitoring is a vital component of enhanced due diligence because the latter revolves around screening the clients against specific watchlists. Transaction monitoring allows banks to implement enhanced due diligence.

EDD is a procedure that checks customers and businesses against global lists, such as those including politically exposed persons (PEPs), adverse media reports, and, most significantly, the black and grey lists of the Financial Action Task Force. Consequently, it allows financial institutions to know if the customer or business organization faces any sanctions or is in such geographical jurisdictions. Likewise, it enables them to be aware of high-risk clients at the initial stages, should any transactional anomaly be detected.

Therefore it is essential for AML compliance. Another significant feature of KYT verification is that it averts the hefty financial penalties on banks that fail to catch suspicious clients timely. They face losses because of being guilty of non-compliance with the AML/CFT regulations. 

SaaS Company: KYT Solution Provider

The software-as-as-service providing companies offer revolutionary software tools in the fintech industry. Their services boost the overall performance of financial organizations. KYT solutions cater to the needs of organizations and grant access to tailor-made tools. For example, banks seek such solutions for
KYT verification to enhance their security apparatus and immediately notice any deviations in regular financial activities.

Furthermore, they grant versatile tools that serve as one-stop solutions for merging international databases and specified application programming interfaces. This indicates that KYT solution providers assist banks in transaction monitoring and abiding by anti-money laundering laws. Hence, banks and other financial institutions must seek services from reliable and authentic KYT verification solution providers to ensure security and efficient transaction screening.

In a Nutshell

Simply put, KYT verification is the equivalent of KYC and KYB, solely aimed at screening financial transactions. It aids banks in vigilantly surveilling the clients’ money trails and sources of wealth. Moreover, transaction monitoring is critical for detecting illegitimate funds linked to offshore accounts or financing criminal and terrorist networks. Hence, KYT solutions are essential for securing financial organizations and their databases to avoid AML/CFT compliance failures.