How it works

KYT tools score each transfer using its counterparties and history. For crypto-assets, blockchain analytics link wallet addresses to known entities, such as exchanges, mixers, darknet markets or sanctioned addresses, and calculate direct and indirect exposure. Transfers that exceed risk thresholds can be held, rejected or routed to an analyst. For fiat payments, KYT overlaps with real-time transaction monitoring and payment screening.

Requirements by jurisdiction

KYT is not a defined legal term; it is one way firms meet monitoring, sanctions and Travel Rule obligations.

• US: OFAC lists specific digital currency addresses on the SDN List and states that sanctions obligations are the same for virtual and fiat currency. Blocked virtual currency must be reported to OFAC within 10 business days. Crypto money services businesses must monitor for and report suspicious activity under the BSA.

• EU: The Transfer of Funds Regulation (EU) 2023/1113, applicable since 30 December 2024, requires crypto-asset service providers to obtain originator and beneficiary information for every transfer, and to verify ownership or control of self-hosted addresses for transfers over €1,000 sent or received on behalf of a client. AMLR ongoing-monitoring duties apply from July 2027.

• UK: Cryptoasset businesses must comply with the Travel Rule in Part 7A of the Money Laundering Regulations, with transaction monitoring expected under the general MLR framework.

Common challenges

Attribution data is probabilistic and varies across analytics providers. Indirect exposure scores can flag legitimate users, cross-chain bridges and privacy tools complicate tracing, and FATF's 2026 targeted update reports that most identified on-chain illicit activity now involves stablecoins.

How teams handle it in practice

Teams set exposure thresholds by risk category, combine on-chain signals with customer KYC data and Travel Rule information, and define clear actions (allow, hold, reject, escalate) for each score band. Thresholds are reviewed as typologies change. Compliance platforms like Corsa can combine KYT signals with customer risk and case history in one alert.