KYT compliance brings accuracy and precision to the verification process by extracting concrete information about transaction velocity, and location.
Know Your Customer Transaction, also known as KYT, is a process that is carried out by the financial institutions and in the banking sector as well. This process is concentrated on monitoring the transactions of merchants, especially the ones trading on e-commerce websites. It can be said that KYT is an extended version of KYC which is intended to draw attention to those aspects of money laundering that are disguised and do not get caught through AML compliance. The problem is not in the legal framework, it is the scammers that are getting evilly smart day by day. They have dug out ways to fool the verification authorities that can not be noticed in the day-to-day authentication processes. This is why KYT is introduced.
Why Need KYT Verification?
Just like money laundering, criminals that are involved in prohibited e-commerce businesses need a cover to overshadow their illegal activities from the governing bodies. There are fraudsters out there who sell legal products and services by demonstrating them as legal. Here is how they do it. These scammers design fake websites that appear to be normal and verified. They sell products and services like child pornography and gambling services that are forbidden in some regions of the world. What they do is that they sell these products through fake websites and then move these products to the normal website to make it look like a legal transaction. That is the reason why legal authorities don’t even doubt these entities.
KYT verification is required to monitor these monetary transactions that appear to be suspicious and might bring harm to the clients that get engaged with such kinds of fake merchants.
Benefits of KYT Verification
Unveils the Suspicious websites
The biggest advantage of KYT compliance is that it focuses not broadly on the business but on the detail of transactions that have been performed in various activities. This helps the verification authorities to analyze any crucial element that needs to be inquired about. KYT compliance helps to track the hidden websites that are unable to be detected otherwise. Because, when the transactions will be analyzed in detail, it will automatically come to light which websites have been visited and why.
Provides Accurate Insights
Knowing the Customer’s transactions allows the verification authorities to analyze the data both quantitatively and qualitatively. This process provides concrete information to the verification authorities and thereby also assists the business entities to determine if they are onboarding the right suppliers for their business or not. Data-driven conclusions help to establish meaningful frameworks to combat these risks of fraud and scams.
Monitors Transaction Velocity and Location
The practice of introducing a KYT framework for effective transaction management also benefits the verification process by providing useful information regarding transaction patterns. For instance, if a business entity is to perform financial transactions at a location that appears to be suspicious or dangerous to a country’s safety, there would be an alarming situation for the authentication authorities to stop these transactions as soon as possible. Thus, transaction monitoring is also a vital tool to ensure national safety.
Second, comes the frequency or velocity of transactions that occur on a website. It is usually observed with factual justifications that normal websites demonstrate the track record of the transactions taking place on their platform in real-time. These entities do this to ensure the credibility of their business operations in front of the ID verification service providers and the verification authorities. In comparison to that, the fake or fraudulent websites would appear to have less or even no transactions in the majority time perf a day and suddenly would have bursting traffic on their websites in less than say two hours. Thus, KYT compliance helps to identify fake websites and scams with proficiency and effective results.
How does KYT Work?
Know The Customer
At the very first stage, it is essential for the business entities to analyze their clients with reference to the risk assessment frameworks and CDD measures. Once the business relationship is established, the verification process should be carried out continuously with a little gap in time intervals.
Calibrating The System
The business entities need to make sure that their transaction monitoring system is working properly. For the said purpose, it is suggested that the businesses should run backend testing, that is, analyzing historical data to make it certain that the system is producing accurate results. Also, before exposing the monitoring system to the live environment, the system needs to be configured according to the required criteria. So that, the system detects the right transactions needed to be investigated, and also it will allow the businesses and verification authorities to mitigate the risks of any contingent abnormalities in the functionality of the system.
Robust Implementation
The KYT compliance framework needs to be implemented with proven accuracy and precision. The effective functioning of the transaction monitoring system also depends upon the people w responsible to handle its working mechanism. Thus, it is essential that the business entities train their employees with up-to-date knowledge about the system and keep in view the best possible practical implementation of the monitoring system having little or no error rate.
Final Thoughts
The transaction monitoring system is a sophisticated latest technology that has helped the authenticating authorities to track down illegitimate businesses carried out on e-commerce platforms and has proved to be helpful for the business entities as well to keep an eye on the transactions of their merchants so that safety of the business and the accuracy of information regarding transactions remains uncompromise.
