Know Your Transaction (KYT) – A Rewarding Strategy For Banks To Curb/Reduce Money Laundering

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Know Your Transaction (KYT) is assisting multiple sectors indebted to comply with AML and KYC compliance since the regulation has been imposed.

The aim of KYT (Know Your Transactions) is to identify potentially risky transactions to detect money laundering, corruption, and fraud. Data is very important to the KYT exercise. Examples of such data are contracts, customs documents, invoices, and so on. Besides, Geo data and IP addresses of devices used for the online banking transactions is sufficient to provide information on where a transaction originated from. Though there have been some progress in detecting the authenticity of transactions, data protection and technical obstacles are still bottlenecks.

Technological evolutions are assisting banks and financial sectors to reduce the rise in the number of frauds and money laundering activities. Know your transaction (KYT) plays a valuable role in tackling the trending fraudulent activities that come with new technology e.g. data breaches, identity thefts, and illegal transactions.

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Compliance processes are usually tiring. Corporates go through drastic changes in terms of low to non-existent regulations. Data breaches, theft imposters, fraud activities can all be managed through KYT regulations. In the wake of compliance, professional regulation experts have apprehended know your transaction services generally for financial institutes to diminish financial frauds. 

Know Your Transaction vs. Know Your Customer  

KYC is the process of identifying the identity of the client/customer before onboarding them.  

KYT is the detection of risky transactions and unforeseen behavior. It helps identify, detect, and monitor every trade executed by the client when they are risky customers. This assists the banks to identify questionable transactions made by the customers/clients and conduct an additional check. KYT authentication is deemed necessary to verify the client’s name, their birth country, the kinds of transactions, and their habitual activities. 

Know Your Transaction – The Change of the Financial World

Know Your Customer (KYC) means verifying the customer’s real identity, which the corporates are adopting as a security check. Even though KYC is the legal requirement for companies to adopt into their financial systems to prevent fraudsters from entering into their businesses, several corporations have ignored the importance of it. Other organizations face immense challenges in complying with the law due to a lack of awareness.

For example, some companies can just adopt KYC checks as a security system and be happy about compliance. But, on the contrary, financial businesses have to run extra verification checks to fulfill the identity verification checks of their customers. 

Financial businesses, for instance, banks, are involved in numerous fund transfer transactions and need to implement KYT verification services as soon as possible. Other than KYC, businesses are obligated to observe and monitor the clients’ transactions to make sure whether their clients are eligible and whether they can become a potential threat to their business.  

Manual Vs. Digital KYT Checks 

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In the past, businesses have had to employ additional staff to complete KYC and KYT verification manually. Manual verification has numerous drawbacks. For instance, when KYC banking is performed, there aren’t going to be follow-ups on the client’s activity. These derogatory KYC verification checks raised the number of frauds attached to businesses. Regulatory authorities then adopted KYT regulations to fight off the risk of fraud and to monitor activities effectively. 

However, digital KYT checks are programmed automatically to always monitor subsequent customers’ transactions and promptly flag transactions that are suspicious.

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KYT (Know Your Transactions) and AML (Anti-Money Laundering)

KYT is the necessity of the financial world. Banks that are involved in managing funds of the client previously are facing a rise in criminals wanting to channel money through illegal means. These activities can no longer go unnoticed. Money laundering is a global financial issue.  Human and drug trafficking and corruption are some of the significant problems in the financial world. Being able to launder money is the main disaster of all the terrible activities, which uprise when fraudulent transactions go unnoticed.   

Transaction monitoring makes sure that all the funds are being transferred through legislative channels and there are no imposter shell companies associated. After identifying the clients by adopting Know your transaction services, banks are capable of deterring fraudulent activities and observing customers’ transactional activities. Therefore, companies can monitor and analyze transactions that are not complying with the clients’ everyday transactions and then conduct additional investigations. 

Know Your Transaction For Banks

Companies are being saved from money laundering activities by implementing know your transaction services and safeguarding the countries’ economies. Incorporating the right tools at the appropriate time helps businesses in provisioning the best customer experience by not allowing fraudsters access to banks’ sanctity and their securities. 

KYT Limitations

Know your transaction limitations arise when banks do not adopt sufficient transactions that restrict illegal transactions. They also prevail due to the time wastage of banks on legal transactions.

Conclusion

Financial institutes must rely on KYC services and look through KYT solution providers to make their business processes robust, error and fraud-free. That said, KYT verification is the ultimate rewarding strategy that banks must adopt to evade money laundering. 

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