How does Know Your Transaction (KYT) work?

Know Your Transaction (KYT) is the practice of screening blockchain transactions in real time to assess the risk they carry. Where Know Your Customer (KYC) checks the identity of a person, KYT checks the money itself: where it came from, where it is going, and whether either side is connected to sanctioned entities, known theft, fraud, or other illicit activity.

What KYT looks at

A KYT check typically evaluates:

• The counterparty addresses. The sending and receiving addresses are screened against sanctions lists (OFAC, UN, EU) and databases of addresses tied to hacks, scams, darknet markets, and mixers.
• The fund flow. Tracing how value reached an address, across multiple hops, surfaces exposure that a single-hop check would miss.
• Behavioural patterns. Structuring, rapid pass-through, and interaction with high-risk services all raise a transaction's risk.

From signals to a decision

Those signals are combined into a risk score, usually on a 0 to 100 scale, with a categorical level (for example low, medium, high, severe). Compliance teams set thresholds: below a threshold the transaction clears automatically, above it the transaction is held for human review or blocked, and a case is opened for investigation and, where required, a suspicious activity report.

Why it matters

Screening at the point of transaction lets a business stop tainted funds before they settle, rather than discovering the problem in an audit months later. That is the difference between preventing exposure and remediating it.

This is general educational information, not legal advice.