Original author: Jason Jiang
With the rapid development of the industry and continued regulatory attention, the field of virtual assets is accelerating into the era of compliance. In order to deal with the on-chain money laundering risk of virtual assets, Ouke Cloud Chain has previously launched the Onchain AML compliance technology solution to help the industry develop in a healthy and orderly manner. In the Onchain AML anti-money laundering solution, many people have paid attention to a concept that is somewhat unfamiliar but feels very important: KYT (Know Your Transaction).
So what exactly is KYT? Why does virtual asset anti-money laundering require KYT?
1. Getting to know KYT for the first time
When it comes to anti-money laundering, the first thing many people think of is KYC (Know Your Customer). But with the rise of compliance technology, KYT is becoming a focus for financial institutions.
KYT refers to the process used by financial institutions to monitor and track financial transactions for fraud or suspicious activity. KPMG previously proposed in its Future Outlook for the Banking Industry that the focus of anti-money laundering in the future should shift from complying with KYC rules to actively managing and controlling risks arising from handling potentially suspicious transactions. The key to actively managing trading risks is KYT.
The main difference between KYC and KYT is that the former focuses more on the static identity of a specific individual/institution, while KYT focuses more on the dynamic transaction process of relevant entities. To give an inappropriate example, if you think of KYC as a photo, which records only the specific moment when it was taken, then KYT is like an online live broadcast that never ends. You can not only see the current status, but also You can watch the live broadcast process.
Of course, KYC and KYT are not either/or, and many international regulatory and regulatory technology experts prefer to regard KYT as the future of KYC. Applying KYT on the basis of KYC may be more suitable for the current development trend of digital finance.
2. KYT and virtual asset transactions
In the traditional financial field, KYT is currently a plus, but in virtual asset transactions, KYT has become a necessity to deal with risks.
Just like our mobile phones today can automatically identify whether an incoming call is a scam call, with the diversification of on-chain interactions and the frequent daily operations of users, on-chain transactions also need to be detected. After all, everyone who participates in the on-chain ecology wants their transactions to be safe, and no one wants to be exposed to risks.
KYT is a powerful tool for us to deal with on-chain transaction risks: it can help us identify whether each on-chain transaction may have risks such as phishing, fraud, theft, etc. It can also automatically take effective measures to cut off the risks while monitoring the risks. Isnt this steady sense of security?
The reason why KYT is so suitable for virtual asset trading scenarios is that the on-chain world focuses more on transactions than identity. More importantly, the distributed ledger technology used by Bitcoin and mainstream virtual assets gives us a see-through: each on-chain address and all their transaction records are open, transparent and cannot be changed. Suspicious transaction behavior, transaction addresses in the dark web, its associated addresses, KYC records of an address on the exchange and other information can help us connect the on-chain address with the corresponding entity, thereby better satisfying the needs of Regulatory compliance and risk management requirements for users, financial institutions and VASPs.
3. What are the advantages of KYT provided by Onchain AML?
At present, many technology companies around the world have launched KYT solutions. Compared with this, what are the advantages of Ouke Cloud Chain’s KYT transaction monitoring products?
KYT effectiveness is first closely related to the underlying data capabilities and address label capabilities. As of August 2023, OKLink has covered more than 170 blockchain networks around the world, collected more than 1,000 TB of data on the chain, and has more than 3.4 billion address tags, with nearly 70 million black and gray address tags. Based on such a huge data parsing capability and address tag library, Ouke Cloud Chains KYT can connect virtual asset transaction addresses with real-world organizations, sanctioned entities and malicious events, helping VASPs and financial institutions understand customers identities and transactions. Condition.
Secondly, for financial institutions and VASPs, continuous and real-time transaction monitoring is the key to discovering potential money laundering risks. Therefore, when evaluating the pros and cons of a KYT product, in addition to the underlying core capabilities, real-time and sustainability are two other important dimensions.
No monitoring technology can be completely real-time, but it can reduce the delay as much as possible - transaction monitoring starts after the API docking of Ouke Cloud Chains KYT is completed, and each transaction can be quickly detected within 100 milliseconds. This The response speed is at the leading level in the industry.
In terms of continuous monitoring, discovering suspicious transactions and analyzing transaction risks is the top priority. When it is discovered that there is interaction with external risk addresses such as phishing, fraud, theft, etc., or risk configuration rules previously set by users are triggered, Ouke Cloud Chains KYT products can automatically generate early warnings and reject or freeze suspicious transactions. Account and other measures to reduce the risk of being attacked. In addition, regular risk detection can be carried out on key deposit and withdrawal addresses to further reduce potential new risks.
It is predicted that the KYT market will grow at a compound growth rate of 14.5% from 2021 to 2026, and the KYT demand in the virtual asset market will be stronger as its own compliance and innovation rate increase. Especially with the widespread adoption of FATF travel rules, and Hong Kong and other regions gradually bringing virtual asset anti-money laundering into the scope of supervision, financial institutions and VASPs inevitably need to supplement KYC due diligence through KYT to meet the regulatory requirements for VASPs. compliance requirements.
OKLink is about to launch the next article: Uncover the story behind the address, KYA you need to know
