Know Your Transaction Procedure – Tracking Suspicious Customers in Banks

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Cybercriminals use various digital tools to commit fraud, hacking, phishing, data theft, and security breaches. Several international regulatory bodies and governmental authorities have proposed relevant laws and regulations to identify fraudsters and financial criminals. Businesses should comply with these regulatory standards and help minimize financial crimes. Know your transaction procedure in financial organizations is one such way. 

KYC Transaction Monitoring

Financial institutions are highly susceptible to fraud and crimes, such as money laundering and terrorist financing. Banks, digital asset firms, and cryptocurrency exchanges must protect their organization and customers from malicious financial activities and potential criminals. Moreover, they must ensure compliance with AML/CFT regulations to evade heavy fines. Hence, the technological advancements in fintech offer solutions like transaction screening to banking and non-banking financial organizations. The know your transaction procedure is a particular KYC approach that monitors customers’ transactions. 

Importance of Know Your Transaction Procedure for Banks

Bits of information or signals that flow with the financial transactions in banks must be vigilantly monitored. The record must be secured for later auditing and checking against anti-money laundering compliance. This is where the KYT procedure plays its part. The know your transaction procedure assesses a bank’s financial transactions in real-time to detect suspicious activities such as fraud, money laundering, and terrorist financing.

Monitoring of transactions is significant because it protects banks from unknowingly becoming a facilitator of unlawful financial transactions. It also ensures transparency and accountability in banks. Furthermore, it allows the financial institute to comply with AML and CFT regulatory standards. Moreover, it secures customers from the possible threat of financial fraud and other crimes. Implementing an effective know your transaction procedure showcases a bank’s commitment to preventing illicit funds transactions and complying with AML/CFT regulations. Thus, it enhances the bank’s reputation and integrity in the eyes of customers and regulatory bodies.

Requirements of Know Your Transaction Procedure

According to a projection, the digital banking market will value 1610 billion US dollars globally by 2027. This stresses the significance of online banking in the coming years. Thus, strictly surveilling transactions through know your transaction procedure is crucial for protecting this booming industry from malicious financial activities. Banks must pursue such methods for enhanced customer due diligence and risk assessment. Banks must comply with know your transaction requirements, including data collection, risk assessment, and continuous transaction monitoring. If a suspicious transaction is detected, the bank must initiate an investigation to trace its links to a possible financial crime. Finally, if the financial crime is proven, the organization must report it to authorities immediately to ensure AML and counter-terrorism compliance. 

The Significance of Transaction Monitoring Solution

Banks and other financial organizations use relevant transaction monitoring solutions to detect suspicious monetary transfers like those involving high-value cash. The system detects and checks the data against various risk factors. It then automatically flags suspicious transactions as high-risk and blocks such actions. Suspicious transactions include high-value domestic or international cash deposits and transfers. Know your Transaction (KYT) solution compiles the data in the form of a particular file called “Suspicious Activity Report (SAR).”

The transaction reporting system is immensely significant for banks to maintain security and combat financial crimes like money laundering and terrorist financing. It also replaces manual procedures that are prone to human error. Moreover, the know your transaction procedure allows the banking sector to identify potential criminals by detecting suspicious monetary transfers through their organization. Hence, it is vital for compliance with anti-money laundering and counter-terrorism financing measures.  

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Payment Screening Process 

The payment screening process involves checking inbound and outbound transactions to identify their risk level or potential for AML violation. The prime objective of payment screening in know-your-transaction (KYT) is to verify the legitimacy of a bank’s account holder. It is more aligned with AML compliance and slightly differentiates from transaction monitoring. The latter aims to detect fraud, while payment screening is more related to customer identity verification. It also assesses whether a transaction is suspicious, and if found so, it allows banks to launch an investigation.


The payment screening process includes the following steps. 

  • Integration of customer credentials and payment data into a bank’s system for screening.
  • Assessment and monitoring of the data to detect any abnormalities in transactions.
  • Verification of payment information against particular checks such as sanctions, lists of politically exposed persons (PEPs), and other black lists established by the regulatory authorities. 
  • Analysis and comparison of payment information with the customer’s data provided during KYC, such as the source of income. 
  • Collection of all the customer data before transaction approval should any suspicious activity be identified.


Transaction monitoring and payment screening constitute know your transaction procedure. It enables banks to detect and deter fraud. Most significantly, it ensures AML/CFT compliance by elevating overall performance. Therefore, payment screening is essential for banks. 

Final Thoughts

The know your transaction procedure holds much significance for banks. It enables them to monitor and identify suspicious high-risk customers through their transaction activity. Therefore, banks must integrate adequate KYT solutions into their system for assured compliance with AML and CFT regulatory standards.