KYT Crypto Compliance

Meet cryptocurrency compliance obligations with Know Your Transaction (KYT) screening, wallet risk assessment, and ongoing transaction monitoring.

What is KYT?

Know Your Transaction (KYT) extends traditional KYC to cryptocurrency by analysing:

• Wallet Addresses: Screen crypto wallets for risk
• Transaction History: Analyze fund sources and destinations
• Blockchain Analytics: Detect illicit activity patterns
• Risk Scoring: Comprehensive wallet risk assessment

Supported Blockchains

• Bitcoin (BTC)
• Ethereum (ETH)
• Binance Smart Chain (BSC)
• Tron (TRX)
• Litecoin (LTC)
• Bitcoin Cash (BCH)
• And 50+ other major cryptocurrencies

Wallet Screening

Risk Factors Analyzed

Illicit Activity Exposure

• Ransomware wallets
• Dark web marketplaces
• Scam addresses
• Sanctioned entities
• Stolen funds
• Terrorist financing

Behavioral Patterns

• Mixer/tumbler usage
• Chain-hopping
• Multiple small transactions (structuring)
• Dormant wallet reactivation
• High-risk exchange interactions

Counterparty Risk

• Direct exposure to illicit addresses
• Indirect exposure (2-3 hops)
• Percentage of tainted funds
• Time since exposure

How It Works

1. Submit Wallet Address

const check = await fetch('/api/v3/kyt/crypto', {
  method: 'POST',
  body: JSON.stringify({
    walletAddress: '1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa',
    blockchain: 'bitcoin',
    applicantId: 'app_abc123' // Optional: link to applicant
  })
});

2. Analysis Processing

Our system analyses:

• Transaction History: Last 10,000 transactions
• Fund Sources: Where funds originated
• Fund Destinations: Where funds were sent
• Cluster Analysis: Associated wallets
• Entity Attribution: Known exchange/service wallets

Processing time: 10-30 seconds

3. Receive Risk Score

{
  "checkId": "kyt_xyz789",
  "walletAddress": "1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa",
  "blockchain": "bitcoin",
  "riskScore": 75,
  "riskLevel": "high",
  "findings": {
    "sanctionsExposure": true,
    "illicitActivityExposure": {
      "ransomware": 0.05,
      "darkweb": 0.12,
      "scam": 0.03
    },
    "mixerUsage": true,
    "totalTransactions": 8423,
    "firstSeen": "2020-03-15",
    "lastActive": "2024-01-10"
  },
  "recommendation": "reject"
}

Risk Scoring

2 Credits Per wallet check

Transaction Monitoring

Ongoing Monitoring

Monitor approved wallets for changes in risk profile:

await fetch(`/api/v3/kyt/crypto/${checkId}/monitor`, {
  method: 'POST',
  body: JSON.stringify({
    frequency: 'daily',
    alertThreshold: 70
  })
});

Real-Time Alerts

Get notified when:

• Wallet interacts with sanctioned address
• Large transaction to high-risk wallet
• Mixer/tumbler usage detected
• Pattern changes indicating increased risk
• Wallet receives funds from illicit source

1 Credit Per wallet per month

Travel Rule Compliance

What is the Travel Rule?

Financial institutions must share originator and beneficiary information for crypto transfers above certain thresholds (typically $1,000 USD equivalent).

VeriPlus Travel Rule Support

• Automatic Threshold Detection: Monitor transaction amounts
• VASP Identification: Identify Virtual Asset Service Providers
• Data Exchange Integration: Connect with Travel Rule solutions (TRUST, Sygna, etc.)
• Compliance Reporting: Generate required documentation

Implementation

const transfer = await fetch('/api/v4/kyt/travel-rule/transfer', {
  method: 'POST',
  body: JSON.stringify({
    originatorWallet: '0x123...',
    beneficiaryWallet: '0x456...',
    amount: 1500,
    currency: 'USDT',
    originatorInfo: {
      name: 'John Doe',
      country: 'US',
      accountNumber: 'ACC123'
    }
  })
});

Sanctions Screening

OFAC SDN Wallet List

VeriPlus maintains an up-to-date database of:

• OFAC Specially Designated Nationals (SDN) crypto addresses
• EU sanctioned wallet addresses
• UN sanctions list wallet addresses
• Country-specific sanctioned wallets

Automatic Sanctions Checks

Every wallet check includes:

• Direct sanctions list matching
• Indirect exposure (transactions with sanctioned wallets)
• Historical sanctions exposure
• Real-time list updates

Use Cases

Cryptocurrency Exchanges

• Screen user wallets at registration
• Monitor ongoing transactions
• Comply with Travel Rule
• Detect suspicious patterns

DeFi Platforms

• Assess liquidity provider risk
• Screen borrower wallets
• Prevent protocol abuse
• Maintain compliance

NFT Marketplaces

• Verify buyer wallet legitimacy
• Screen seller wallets
• Prevent money laundering
• Detect wash trading

Payment Processors

• Merchant wallet verification
• Transaction risk assessment
• Fraud prevention
• Regulatory compliance

Risk Mitigation Strategies

Tiered Approach

Enhanced Due Diligence

For high-risk wallets that you choose to accept:

1. Source of Funds: Detailed documentation
2. Purpose of Account: Clear business justification
3. Enhanced Monitoring: Daily transaction monitoring
4. Transaction Limits: Strict limits on amounts
5. Regular Reviews: Monthly risk reassessment

Blockchain Analytics

Clustering

Identify related wallets belonging to the same entity:

• Common ownership indicators
• Transaction pattern analysis
• Temporal correlation
• Behavioral clustering

Entity Attribution

Link wallets to known entities:

• Major exchanges (Coinbase, Binance, Kraken)
• DeFi protocols (Uniswap, Aave, Compound)
• Mixing services
• Illicit services
• Merchant wallets

Fund Flow Analysis

Trace fund origins and destinations:

• Multi-hop analysis (up to 6 degrees)
• Percentage calculations
• Time-based decay
• Volume weighting

Compliance Reporting

Suspicious Activity Reports (SARs)

Generate reports for:

• High-risk wallet interactions
• Unusual transaction patterns
• Sanctions exposure
• Money laundering indicators

Audit Trail

Maintain complete records:

• All wallet checks performed
• Risk scores and decisions
• Monitoring alerts
• Resolution actions
• Regulatory submissions

Integration Options

API Integration

Full REST API for automation:

POST /api/v3/kyt/crypto          # Check wallet
GET /api/v3/kyt/crypto/:id       # Get results
POST /api/v3/kyt/crypto/:id/monitor  # Enable monitoring
GET /api/v3/kyt/alerts           # List alerts

Webhooks

Real-time notifications:

{
  "event": "kyt.alert.high_risk",
  "walletAddress": "0x123...",
  "riskScore": 85,
  "trigger": "sanctions_exposure",
  "timestamp": "2024-01-15T10:30:00Z"
}

Dashboard

No-code interface for:

• Manual wallet checks
• Alert management
• Monitoring configuration
• Report generation

Cost Summary

Best Practices

1. Screen at onboarding - Check all wallets before accepting customers
2. Monitor high-risk wallets - Daily monitoring for scores >70
3. Document decisions - Maintain audit trail for regulators
4. Set transaction limits - Risk-based limits
5. Review regularly - Monthly reassessment of monitored wallets
6. Stay updated - Lists change daily, re-screen periodically

Regulatory Resources

• FATF Guidance: Virtual Assets and VASPs
• EU MiCA Regulation: Markets in Crypto-Assets
• US FinCEN: Virtual Currency Guidance
• UK FCA: Cryptoasset Regulations

Next Steps