Know your Transactions - One Step Further in KYC Compliance

Know your Transactions – One Step Further in KYC Compliance


Businesses dealing with customer funds have the highest risk of fraud and crimes. Criminals mostly target these businesses such as banks, investment corporations, and foreign exchange firms because their ultimate motive of stealing funds is fulfilled. 

Like the other jobs have modified and the use of online platforms has increased and scamming methods have also altered. Now, there are occasional cases of cash theft, instead, criminals use extended technologies to steal money. Most criminals attack digital payment transfer channels for this purpose. For example, acquiring someone’s bank account credentials through phishing and then transferring funds from it. Banks need to verify users and the transaction to control illegal activities like this.

Some fraudsters obtain credit card numbers and CVV numbers by bypassing the payment transfer channels of commerce sites. Then they start using this information for online bill payments. Credit card frauds have become more common and sophisticated in the post-pandemic period. The reason is people start using digital payment channels instead of physical and the sudden increase didn’t give any time to the payment gateway providers to apply security protocols.

Not only these but financial service providers are also illegally used for serious and internationally infamous crimes like money laundering. Further, we will discover how to secure transactions and control the illegal conversion of funds. In 2019, Americans experienced 650527 ID theft cases out of which 41% were related to credit card frauds. 

“We will later discuss how this can be prevented through KYT verification.”

Using Fake and Synthetic Identities for Financial Crimes

Identity theft frauds are committed by stealing users’ personal information or buying it from the dark web. Then online accounts are created using a mixture of that data. If the exact data is used for account sign-up it comes under identity theft and if blended details are utilized, it is known as synthetic identity. The second one is the smarter way of committing ID fraud as there is no direct victim, it can’t be reported by anyone giving more time to use it. 

Financial institutions, being the foremost target of identity fraud, have to protect their channels. Identity frauds not only stop at acquiring information but also take over accounts and steal funds. Customers are more sensitive towards their money and do not tolerate any issue. If a bank fails to protect its accounts and data, it will sue the bank. Through this, the bank has to go through the long prosecution procedure which can result in fines or sanctions. It will ultimately damage the reputation of the bank among common and corporate customers

Know Your Transaction KYT

Verifying a transaction requires the accurate data of the customer which is possible through KYC (Know Your Customer). Customers will have to undergo KYC and then KYT will be performed on them. For example, cryptocurrency exchanges have the anonymity of the customers which can be a hurdle in implementing KYT solutions. 

For KYT verification, the correct personal information of the customers is required, like;

  • First and last name
  • Day of birth
  • Gender
  • Full residential or business address
  • Phone number
  • Nationality

Verification of this data will be performed by demanding proof for instance identity documents. Not all documents having the above information are used as ID, these must be approved by some government department and have a photo on them. 

KYT verification was somehow part of the AML compliance program. It was known as transaction monitoring where suspicious transactions are screened. For example, a customer has represented his business as a bakery, but he is performing transactions worth millions. It should be verified from where the funds are coming and where they are transferring, the associate accounts of this customer can undergo video-based customer identification or by a process known as EDD (Enhanced Due Diligence). 

Summing It Up

In the financial sector, physical payments are now decreasing and people are using more digital payment transfer methods. It is an advantage that it can be traced easily as it has the history of the payments transfers. The services can be availed from KYT solution providers which will be integrated through APIs.