KYT

An automated compliance mechanism that screens financial transfers against risk indicators, including sanctions lists, blacklisted wallet addresses, and heuristic patterns associated with money laundering or terrorist financing. In blockchain contexts, it specifically analyzes on-chain history to detect "tainted" funds linked to hacks, darknet markets, or mixers.

Operational Note

For stablecoins and real-time gross settlement (RTGS) systems, KYT engines must operate with low latency (milliseconds) to screen transactions before they are broadcast or finalized on the ledger. Advanced implementations utilize "pre-transaction" blocking logic to freeze assets at the smart contract level if a counterparty wallet interacts with high-risk addresses. This allows institutions to maintain compliance in permissionless environments without pausing the 24/7 flow of liquidity.

Scope Boundary

KYT assesses the risk of the specific funds and wallet behavior but does not identify the real-world identity of the wallet owner, which remains the domain of KYC/KYB procedures.