What is KYT?
Know Your Transaction (KYT) extends traditional Know Your Customer (KYC) due diligence to ongoing analysis of individual transactions for AML/CFT risk. In the crypto context, KYT typically refers to blockchain analytics-driven scoring of incoming and outgoing transactions against high-risk addresses (sanctioned wallets, darknet markets, ransomware payments, mixer outputs). Leading vendors include Chainalysis, TRM Labs, Elliptic, Crystal and Coinfirm.
Why KYT is required
- FATF Recommendation 16 (Travel Rule): VASPs must share originator and beneficiary information for transfers above thresholds, but KYT additionally flags counterparty risk.
- OFAC sanctions screening: US OFAC has designated specific crypto addresses (Tornado Cash, Hydra, North Korea-linked wallets): KYT prevents inadvertent dealings.
- AML/CFT supervision: regulators expect transaction-level monitoring complementary to customer-level KYC.
Common KYT signals
- Direct exposure: counterparty is a sanctioned address or known illicit service.
- Indirect exposure: funds traced through mixers or chain hops from illicit sources.
- Behavioural anomalies: structuring, velocity spikes, unusual jurisdiction patterns.
- Risk scoring: aggregated risk score determines whether to allow, hold, or report the transaction.
KYT in Turkish crypto compliance
Know-your-transaction has hardened from best practice into expectation: MASAK guidance for crypto service providers anticipates transaction monitoring proportionate to the business, and the post-7518 SPK licensing regime makes a documented KYT capability part of any credible application file. The legal design questions sit at the edges: tuning thresholds and typologies so alerts are meaningful (an unmanaged alert queue is itself a finding), recording the rationale for clearing or escalating alerts (suspicious-transaction reporting decisions must be defensible years later), and contracting the chain-analytics vendor properly: data protection terms for wallet-address intelligence, liability for false positives that freeze customer funds, and audit rights regulators increasingly expect to flow through to the tooling layer.
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