Know Your Transaction- Key to Anti-Money Laundering

Know Your Transaction (KYT) is a process used by financial institutions to monitor merchant business by analyzing transaction data. Transaction data studies allow for accurate and data-driven conclusions as they provide the necessary evidence necessary for suspicion of fraudulent seller activity.

Transaction laundering can easily be linked to money laundering, the main difference being that transactions are laundered on the Internet. The transaction laundering mechanism is unique.

 Transaction laundering disguised as a shell website. It is simply done by creating a website that looks “normal” (the shell website). unknown. Banks and card networks that conduct prohibited activities.

Money transactions followed from scam sites to regular sites. This tricks banks, payment service providers, and card networks into valid transactions on “regular” websites and profits from them. 

Why is transaction laundering used? 

Criminals, like money laundering,  need a way to hide and integrate the proceeds of illegal e-commerce, such as illegal internet gambling or child pornography,  into the legitimate financial system. Because such conduct violates the rules of the card network.

Applicants may not only be rejected when applying to open a trading account but their account may also be closed and reported if the linked website exhibits visibly limited business activity. After surpassing the system, criminals began unnoticed using the Shell website to continue fraudulent e-commerce activities, which contributed to transaction laundering.

Low reliance on KYC and web crawling 

There are many limitations to using Know Your Customer (KYC) and web crawling to manage risk, monitor sellers, and identify money laundering activity. KYC verification and web crawling rely heavily on public data and/or information provided by individuals or entities. This in itself causes some problems.

The public data provided by the applicant can be out of date and manipulative. Undoubtedly, KYC and web crawling are very important for due diligence. They help in acquiring new sellers as they provide basic profiling of candidates and business activity. However, both KYC and web crawling on their own are ineffective and inefficient for long-term risk monitoring and management. 

Both procedures may be sufficient to attract new sellers at an early stage, but they do not provide the specific evidence needed to confirm suspected illegal or money laundering activity. Another problem arises when using KYC and web crawling for risk management. False positives – Mislabeling potential sellers as financial risk.

Conclusion of Know your transaction

The advantage of KYT is that it targets transaction data. Therefore evidence is available in real-time and is difficult to manipulate or change. Examining transaction data allows quantitative and qualitative analysis to determine the actual business activity of the seller. With the specific supporting evidence available, KYT can help generate highly accurate insights and data-driven reasoning.

In a nutshell, because KYT can link transaction data to specific sites, it exposes hidden websites (used for illegal activities), creating opportunities for further investigation and further information based on data retrieved from websites that are no longer hidden. This method can increase the effectiveness of KYT by finding ignorable information. Such as the identity of other relevant stakeholders, such as hidden business and business activities.

Analyzing raw transaction data can reveal patterns and trends in transactions (such as transaction rate, frequency, time, location) as well as irregular changes worth noting or investigating. For example, location – a red flag you should be aware of to reduce your financial risk.

 If your transactions on your site are limited or come primarily from buyers in high-risk areas or countries. Looking at transaction times and rates, “normal” sites should accumulate transactions performed at any time of the day, while suspicious sites may have almost no transactions throughout the day, and a sudden spike of 1,000 transactions may exceed two specific times. hour. 

Even checking the amount of a transaction provides valuable insight. A $10,000 deal on a site that sells small fashion accessories can look suspicious because the store items must be at a lower price point. The list of searches and detections that KYT can perform continues, but ultimately, what is important is to identify potential risks as early as possible and take action in a timely manner.

The bottom line

Knowing Your Transaction Tells a lot. However, effective implementation of KYT requires the right tools, resources, and skills. Advanced technology and expert data mining expertise are critical to efficiently retrieving data and tracking transaction details to their origin. Using a third-party provider, especially an (MMSP)-approved service provider, is a great way to start your KYT journey.