Know Your Transaction (KYT)

What is Know Your Transaction (KYT) in crypto compliance?

Know Your Transaction (KYT) refers to the process of monitoring, analyzing, and evaluating  cryptocurrency transactions to detect suspicious activity, assess risk exposure, and ensure compliance with anti-money laundering (AML), sanctions, and counter-terrorism financing (CTF) (also known as countering the financing of terrorism, or CFT) requirements.

Unlike Know Your Customer (KYC), which focuses on identifying individuals and entities, KYT focuses on the movement of funds across blockchain networks.

KYT is sometimes referred to as “crypto transaction monitoring” or “blockchain transaction risk monitoring.” Compliance teams use KYT as a framework to assess the legitimacy and risk level of crypto asset transactions. KYT tools enable real-time and retrospective analysis of blockchain activity to flag high-risk behavior, identify illicit patterns, and support regulatory reporting requirements.

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Why is KYT important for crypto compliance and risk management?

As illicit actors continue to exploit the pseudonymity of the blockchain and crypto transactions, KYT serves as a critical control for detecting and preventing financial crime. For regulated institutions, it enables adherence to AML/CTF rules. KYT also helps reduce false positives in transaction monitoring, enhancing operational efficiency and reducing regulatory risk.

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How does KYT work in blockchain transaction monitoring?

KYT solutions like TRM Transaction Monitoring ingest on-chain data and apply proprietary heuristics, behavioral analytics, threat intelligence, and transaction monitoring rule design to assign a risk score or risk category to transactions. These systems:

• Screen transactions against known wallets linked to illicit activity (e.g. darknet markets and sanctioned entities)
• Detect patterns such as structuring, layering, or high-velocity movements
• Use machine learning to improve detection over time
• Generate alerts for compliance teams to review

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How do compliance professionals and regulators use KYT?

Compliance teams

KYT allows compliance teams at financial institutions, crypto businesses, and virtual asset service providers (VASPs) to monitor incoming and outgoing transactions in real time, flag unusual activity, and satisfy regulatory obligations around suspicious transaction reporting (STRs/SARs). It helps reduce exposure to high-risk counterparties and provides audit-ready records.

Regulators and policymakers

KYT aligns with global AML/CFT standards, including FATF recommendations. Its adoption by VASPs and financial institutions supports risk-based supervision and enforcement. Policymakers view KYT as a foundational pillar in the crypto compliance architecture.

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What are the biggest KYT challenges for compliance teams?

Obfuscation techniques are evolving

Threat actors use mixers, cross-chain bridges, and privacy tools to conceal fund flows — making it harder to assess origin and risk with traditional KYT systems.

How TRM helps: TRM applies behavioral intelligence and advanced heuristics to detect typologies like layering, mixing, and cross-chain obfuscation — surfacing suspicious patterns even when actors attempt to conceal origin or intent.

Inconsistent regulatory expectations

Monitoring standards differ by jurisdiction, creating operational friction and uncertainty for teams managing compliance across multiple regions.

How TRM helps: TRM Transaction Monitoring supports a risk-based compliance framework that aligns with FATF guidance and is adaptable to local regulatory requirements, helping teams standardize workflows across jurisdictions.

High false positive volumes

Overly rigid rule-based KYT systems often flag benign activity, creating alert fatigue and forcing teams to triage large volumes of irrelevant alerts.

How TRM helps: TRM reduces alert fatigue by leveraging entity-level intelligence and contextual data to prioritize true risk, improving signal-to-noise ratios. TRM also allows compliance teams to customize the categories and risk severity levels they want to monitor to reduce false positives and help them focus on what matters most.

Scaling across blockchains and volumes

Monitoring high-throughput blockchains (e.g. TRON, BSC) in real time is resource-intensive, especially without scalable infrastructure or automation.

How TRM helps: TRM natively monitors 50+ blockchains with real-time performance at scale, enabling high-throughput screening for large volumes of transactions without sacrificing accuracy or speed.

Gaps in wallet attribution and labeling

Incomplete or outdated entity labeling can lead to missed risk signals or misclassification of counterparties — reducing trust in alert accuracy.

How TRM helps: TRM’s threat intelligence teams continuously hunt for new intelligence to inform wallet and entity attribution. This combined open-source, third-party, and TRM-labeled data ensure the KYT engine reflects current risk realities.

Limited cross-chain and protocol visibility

Many KYT tools are siloed, limiting the ability to follow funds as they move across chains, swap protocols, or stablecoins during obfuscation.

How TRM helps: With multi-asset and cross-chain tracing built into its platform, TRM connects risk signals across protocols, chains, and tokens — helping compliance teams detect full laundering paths.

Lack of integration with investigative workflows

KYT alerts that don’t connect to downstream tools (e.g. case management or suspicious activity report (SAR) filing systems) slow compliance operations and increase audit risk.

How TRM helps: TRM integrates KYT directly with case management tools, alert review workflows, and suspicious transaction reporting (STR) and SAR pipelines, reducing manual lift and improving audit readiness.

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How does TRM support KYT for VASPs and financial institutions?

TRM offers advanced KYT capabilities through TRM Transaction Monitoring. Our solution:

• Monitors on-chain activity across 50+ blockchains
• Applies behavioral intelligence to detect high-risk typologies
• Enables real-time and retrospective risk scoring
• Integrates seamlessly with case management workflows
• Reduces false positives while surfacing true threats

Whether you’re screening customer withdrawals or onboarding a new VASP, TRM Transaction Monitoring ensures each transaction is understood in context — not just flagged in isolation.

Know Your Transaction (KYT) is a cornerstone of modern crypto compliance. As transaction patterns grow more complex and move across chains, real-time visibility and behavioral intelligence are essential. TRM equips compliance teams with the tools to detect risk earlier, reduce manual triage, and strengthen trust in digital assets.

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Frequently asked questions (FAQs)

1. What is Know Your Transaction (KYT) in crypto?

KYT refers to the process of monitoring and assessing individual blockchain transactions to detect suspicious activity, manage risk, and ensure AML/CTF compliance.

2. How is KYT different from KYC?

KYC identifies and verifies the identity of a user or entity, while KYT monitors the actual movement of funds on-chain to flag high-risk or illicit transactions.

3. Why do compliance teams need KYT?

KYT enables real-time transaction screening, helps reduce exposure to high-risk counterparties, supports suspicious activity reporting, and ensures regulatory compliance.

4. How does KYT work in blockchain environments?

KYT tools ingest on-chain data, apply behavioral analytics and heuristics, assign risk scores to transactions, and generate alerts based on suspicious patterns or known associations.

5. What types of activity can KYT detect?

KYT can surface typologies such as structuring, layering, mixer usage, cross-chain obfuscation, sanctions evasion, and interactions with darknet marketplaces.

6. How does TRM support KYT for compliance teams?

TRM provides real-time monitoring across 50+ blockchains, behavioral intelligence to reduce noise, and direct integrations with case management and STR/SAR workflows.

7. Is KYT required by regulators?

Yes. KYT aligns with FATF Recommendation 15 and is a core expectation for virtual asset service providers (VASPs) operating under global AML/CFT frameworks.

8. Can KYT help with law enforcement investigations?

Absolutely. KYT data helps trace illicit flows, attribute wallets, and build evidentiary chains—especially in cases involving ransomware, fraud, or sanctions violations.