KYT (Know Your Transaction) – What Is It?
Financial institutions nowadays need to deal with many different critical issues like how KYC (know your customer) is handled, attribute lacks, and integration problems. In order to deal with such situations, brand new solutions are being developed. Such solutions are meant to assist the banks and other financial institutions with conducting due diligence, screening, and client onboarding.
When talking about financial institutes, we also need to know how the financial transaction carries out information chunks. This is oftentimes very difficult to track. Financial messages that have to be considered include invoices, clearances, and regulatory documents. These messages have to be properly tracked and then be used for AML or investigation purposes.
In many cases, compliance processes are cumbersome, challenging, and tedious. Because of the possibility of having to deal with complications related to data retrieval and the existence of weak measures in regards to insufficient monitoring for transactions, financial institutions need to do something else. This is why KYT (Know Your Transaction) appeared.
KYT is done in order to monitor and verify customer transactions. Major financial transactions that are linked with a customer account can include card transactions, cash transactions, inward remittances, outward remittances, cross border transactions, trade finance transactions, and cross border transactions.
Financial institutions and banks need to know all details regarding transactions. This is especially the case when referring to third parties being involved. Details provide important insights into nature and purpose of a transaction. Such data is checked in order to perform extra analysis and detect suspicious behavior. In order to seamlessly achieve such a goal, institutions create different data models based on parameters like transaction patterns, customer name, transaction type, country of origin, and originating bank.
KYT solutions are practical ways in which banks monitor and then drill down transactions in order to find fraudulent transactions or suspicious activities, all while transaction analysis is done. Such an analysis would be performed by the financial institution and always aims to find transactions that are fraudulent. After the transactions are analyzed, the institution gets solid evidence about many things, which allows financial institutions to be safeguarded from regulatory and fraud penalties.
Know Your Customer Is Not Enough
The fact that the financial institution knows the customer is not enough to guarantee that something bad does not happen. KYC requirements are very stringent and are built based on global regulators. Guidelines do show uniformity but what if transactions are illegal and done in a way to break the law, even if the customer is 100% legit?
Knowing the customer is simply not enough to deter financial frauds. Businesses have to know every single transaction. In future regulations, this will be a mandatory component. Businesses have to be prepared for everything.
Remember that every single transaction holds important information about the funds, the parties involved, and a whole lot more. Without knowing these details, the financial institutions are faced with the possibility of processing transactions for clients that are known and that are involved in something illegal. KYC is just not enough.