KYT (know your transaction) is the analysis of crypto transfers and wallet addresses with blockchain analytics, to detect exposure to illicit sources such as sanctioned persons, darknet markets, scams, mixers or hacks. Few laws use the term KYT, but the FATF standards require ongoing monitoring of transactions and compliance with sanctions, and for crypto this cannot be done properly without looking on-chain. In practice every regulated crypto provider is expected to screen deposits and withdrawals, and banks and counterparties ask for it even in countries with light rules.
How KYT works
A KYT tool attributes addresses to known entities (exchanges, services, sanctioned actors, criminal clusters) and traces funds through intermediate hops. For each incoming or outgoing transfer it returns a risk assessment: direct and indirect exposure to risky categories, the share of funds involved and the number of hops. Your own rules then decide whether the transfer is accepted, held for review or rejected.
Where the obligation comes from
The duty rests on international standards that most countries have adopted:
- FATF Recommendation 10 requires ongoing due diligence, including scrutiny of transactions against what you know about the client;
- Recommendation 15 applies the AML standards to VASPs, and the FATF 2021 guidance explains how they apply to virtual assets;
- targeted financial sanctions prohibit making assets available to listed persons, which for crypto includes known wallet addresses;
- national rules give the detail, for example the AMLA and SRO regulations in Switzerland or the EU AML rules for CASPs; supervisors and auditors there routinely check that on-chain monitoring is in place.
When to run it
Good practice is to screen every deposit before funds are credited, every withdrawal before it is broadcast, and the client's declared wallets at onboarding. Ongoing wallet monitoring catches addresses that become high risk after the transfer, for example when a new sanctions designation or hack attribution is published. Trained staff must review alerts and document their decisions, and where suspicion is founded the case is reported to the financial intelligence unit.
Limits of KYT
KYT scores are probabilistic. Attribution can be incomplete, and indirect exposure several hops away rarely says much on its own. The decision on a transfer must combine the on-chain result with what you know about the client: KYC, source of funds and expected activity. Regulators and auditors look for consistent rules and reasoned decisions case by case, not blind reliance on a score.
How Advisorn helps
Advisorn defines KYT rules, risk thresholds and alert procedures that auditors can follow, and reviews difficult cases on-chain.
FATF Recommendations 6, 10, 15 and 20; FATF Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers (October 2021). Examples of national rules: Swiss AMLA, art. 6, and SRO regulations; Directive (EU) 2015/849 as amended and EBA Guidelines on ML/TF risk factors (EU).
Updated November 2026 · General information, not legal or tax advice on your specific case.