Contents
- Introduction to KYT (Know Your Transaction)
- KYT: definition and difference from KYC
- Why transaction monitoring is mandatory
- Types of suspicious transactions: signs to look out for
- Suspicious transaction reporting and relationship with TRACFIN
- Automating KYT: configurable scenarios and explainable intelligence
- Operational difficulties observed
- Towards sustainable transactional monitoring
- Securing your KYT device
- FAQ – KYT
KYT (Know Your Transaction) KYT (Know Your Transaction) encompasses all mechanisms for continuous monitoring of financial transactions implemented by an institution. It aims to identify transactions that are suspicious or unusual in light of AML-CFT and AML-CFT compliancerequirements.
Chief Compliance Officers, RCCI, MLRO, CCO and KYC managers are finding that risk is no longer limited to the initial relationship-building phase. It now appears at the heart of financial flows, in the details of a transfer, in the repetition of split transactions, or in a payment circuit whose complexity does not match the declared profile.
According to the 2024 annual report, nearly 197,000 suspicious activity reports were submitted to TRACFIN, reflecting the authorities' explicit expectations and particularly high standards with regard to internal systems.
The monitoring of transactions is therefore no longer simply an organizational choice. The challenge now lies in the robustness of your transaction monitoring system. The institution must be able to explain its rationale, trace each decision, and defend its consistency before the regulator.
At AP Solutions IO, a French RegTech company based in Paris (9 rue des Colonnes), we have been supporting fifteen years financial institutions, ME and other regulated players in setting up a structured, documented, and technologically advanced KYT system that is structured, documented, and technologically advanced.
KYT: definition and difference from KYC
KYC (Know Your Customer) KYC (Know Your Customer) requires identifying the customer, verifying their identity, and assessing their risk profile and defining the expected activity at the time of establishing the relationship.
The KYT comes into play in a second step, as it analyzes the actual flows to verify their consistency with the previously established profile.
In practice, KYC answers a fundamental question: who is your customer? The KYT extends this analysis by examining whether the transactions carried out actually correspond to their profile and your risk mapping.
This articulation structures the entire AML-CFT frameworksystem, as rigorous initial vigilance can never compensate for transactional monitoring .
The inspections carried out by theACPR examine precisely the consistency between the level of risk assigned, the identification of the beneficial owner and the nature of the transactions carried out. Discrepancies frequently arise at this stage of the analysis.
Why transaction monitoring is mandatory
The Monetary and Financial Code requires constant vigilance throughout the business relationship, which gives the monitoring of transactions a fully mandatory nature.
The regulator expects effective detection of atypical operations, formalized analysis, and full traceability of decisions , and an explicit link to the suspicious activity report where applicable.
Recent inspections highlight consistently observed shortcoming : while data is indeed collected, the justification for alerts that are triggered or dismissed often remains insufficiently documented.
Opaque algorithmic models are now showing their limitations, especially as the gradual implementation of theEU AI Act reinforces the requirement forexplainability of algorithmic systems.
A motor KYT engine that complies with current standards must be able to indicate which criteria have been activated, which thresholds have been exceeded, and according to which scoring logic the alert was generated. The distinction between a Black Box approach and a Glass Box approach lies precisely in this ability to explain.
Types of suspicious transactions: signs to look out for
In operational practice, certain transaction patterns appear repeatedly and mustbe subject to special vigilance.
The transactions are one of the most frequently observed mechanisms. A customer may, over a short period of time, make several transfers of amounts below the internal thresholds, to the same beneficiary or through successive third parties, in order to circumvent the alert thresholds.
The inconsistent amounts are another significant signal, especially when an SMES suddenly makes large international transfers or when an individual carries out transactions that far exceed their known income. The discrepancy between the KYC profile and the observed flows is then a substantial risk indicator.
The complex payment circuits also require attention, as the use of high-risk jurisdictions, the proliferation of intermediaries, or the chaining of cross-transactions make manual analysis slow, uncertain, and legally fragile.
Without a suitable tool, teams spend a disproportionate amount of time processing false positives, which increases operational pressure and gradually degrades the quality of the analysis.
Suspicious transaction reporting and relationship with TRACFIN
When suspicion is established at the end of the analysis, a suspicion report must be sent to TRACFIN in accordance with legal requirements.
This approach assumes that theinstitution formalizes a reasoned analysis, reconstructs a precise chronology of events, and documents in a structured manner the factors that led to the decision.
The competent authority examines not only the relevance of the report, but also the robustness of the internal process that led to this conclusion.
A KYT device generates time-stamped alert histories, keeps reasoned decisions, and guarantees the existence of an fully usable audit trail . Simply detecting an anomaly is not enough in itself to meet regulatory requirements.
Automating KYT: configurable scenarios and explainable intelligence
The growing volume of transactions makes it impossible to rely solely on human oversight, necessitating the use of controlled automation.
AP Solutions IO has developed AP Monitoring based on a logic ofAugmented Intelligence known as "Glass Box", in which an unlimited number of scenarios are strictly aligned with your risk mapping. More than 90 criteria can be configured to fine-tune the system to your specific operational requirements, and alerts are prioritized according to their level of criticality.
Depending on the settings chosen, the reduction in false positives can reach 98%, which significantly improves the efficiency of alert processing.
Control over settings remains in the hands of the institution, which facilitates structured justification of decisions.
SaaS architectureSaaS architecture, fully accessible via API and hosted in France, ensures compliance with the GDPR, guarantees data sovereignty, and facilitates integration into your information system. Regulatory updates are integrated on a regular and planned basis to maintain alignment with regulatory requirements.
Operational difficulties observed
During our assignments, we find that similar difficulties arise regularly, including an overload of unnecessary alerts, analyst fatigue, insufficient documentation of decisions, and uncertainty regarding regulatory controls.
A poorly calibrated engine generates an excessive volume of irrelevant signals, which weakens the AML-CFT system rather than securing it.
Our method is based on a rigorous alignment between risk mapping, detection scenarios, alert thresholds, and human analysis capabilities, because technology must reinforce expertise without ever replacing it.
Towards sustainable transactional monitoring
The regulatory framework is constantly evolving, and the future European authority AMLA will strengthen the harmonization of practices at the Union level.
TheEU AI Act also imposes increased requirements for algorithmic transparency, which emphasizes the need for explainable intelligence.
Your transactional monitoring system must therefore remain adaptable, explainable, and auditable over time, as an architecture designed according to old standards may no longer fully meet current requirements.
The approach is based on a combination of operational expertise in AML-CFT and next-generation technologies, combining legal stability with controlled innovation.
Secure your KYT with a Glass Box approach
The KYT is a key pillar of the AML-CFTsystem, as it protects the institution, strengthens your position with the regulator, and secures your suspicious activity reports to TRACFIN.
Transactional transaction monitoring is a key lever for controlling operational and regulatory risk.
With AP Monitoring, you have a configurable engine, an explainable intelligence, and a significant reduction in false positives, and full traceability of decisions , and SaaS architecture interfaced by API and hosted in France.
A maturity assessment of the KYT system can be conducted to identify areas for improvement.
FAQ – KYT
Does KYT replace KYC?
The KYC is used when establishing a relationship and throughout the business relationship to identify and assess the customer, while KYT ensures the ongoing monitoring of transactions carried out. The two approaches remain complementary and inseparable in an AML-CFT strategy.
Which sectors are affected by KYT?
Banks, fintech companies, payment institutions, management companies, insurance organizations, as well as real estate and gaming operators are subject to transaction monitoring requirements set out in the AML-CFT.
How can false positives be reduced in transactional monitoring?
Reducing false positives requires precise configuration of scenarios, relevant prioritization of alerts, contextualized analysis of flows, and the use of explainable intelligence that allows thresholds to be adjusted according to the identified risk. This approach makes it possible to reconcile technical performance with regulatory risk control.
