What is the importance of KYT for financial institutions

Banks and financial institutions are the target of six in ten fraud attempts in Brazil, according to Serasa Experian. Thus, anti-fraud and anti-money laundering (AML) practices have always been extremely important for financial institutions. 

However, as financial services become increasingly digital and on-chain, traditional defenses are no longer enough to protect systems and customers.

KYT ("Know Your Transaction") is a direct response to that challenge. It provides continuous, real-time monitoring that traditional compliance processes cannot.

What is KYT

While KYC ("Know Your Customer") processes help institutions assess risk through identity verification, KYT goes a step further: it analyzes the actual data behind every financial action in a client's account to surface possible red flags. KYC verifies who you are. KYT looks at behavior, patterns and destination. 

KYT uses sophisticated rulesets to monitor customer transactions for anomalous activity that could indicate financial crime. Used alongside other AML controls, its goal is to prevent bad actors from using the platform to launder funds or move illicit value. 

Consider a concrete example: a store receives hundreds of small fragmented payments from different people within minutes and immediately routes everything out. It could be legitimate. But it is a pattern that warrants a closer look. KYT is precisely that look: automated, constant and precise.

How does KYT work in practice

KYT involves continuously monitoring, analyzing and tracking client transactions. It breaks down into three steps.

• Data analysis: By collecting data from each transaction, including sender and recipient identifiers, amount, currency, date and time, and, where applicable, IP address and device, the system learns normal behavior and patterns. Any meaningful deviation is flagged. 

• Risk assessment: When a transaction is flagged, an investigation begins. A compliance analyst reviews it and, when needed, works with account managers to examine the origin, purpose and nature of the flagged activity in depth.

• System improvement: T The cycle closes with feedback from investigations. Analyst decisions refine the rules to reduce false positives and strengthen detection over time, making the system progressively more accurate.

How Unblock handles KYT

At Unblock, every transaction passes through two complementary layers of analysis: the wallet and the transaction itself:

• Wallet screening: Before funds move, we screen the counterparty address against a continuously updated risk database. Each address carries a risk profile built from its history and its connections: sanctioned entities, darknet markets, ransomware, scams, mixers and other high-risk categories. An address is rarely risky in isolation. What matters is its exposure, meaning the funds that reach it directly or indirectly from a flagged source.

• Real-time transaction screening: When a transaction is submitted, our integration with Chainalysis KYT scores it in real time. It traces the flow of funds across the blockchain, measures direct and indirect exposure to risky categories, and returns a risk score. Transactions that cross our internal thresholds are automatically held for review rather than settling silently.

But without a qualified team, tools aren’t enough. It’s all about a collaboration between them. 

When a wallet or transaction crosses a threshold, a compliance analyst investigates the origin of funds, the purpose, the counterparties and the broader pattern. Based on that, the transaction can be cleared, blocked, or escalated for reporting to the competent authorities.

Finally, we follow with continuous calibration. Every analyst decision feeds back into our rules, reducing false positives and sharpening detection over time.