Know Your Transaction (KYT) for trade finance: map payment flows, screen sanctions, spot trade-based money laundering, and document controls lenders expect.
KYC tells you who your counterparty is. KYT tells you what they are doing with the money, the goods, and the payment rails. In trade finance, that difference is the whole game. A trade file can look clean on paper while the transaction flow signals sanctions exposure, third-party payment risk, or trade-based money laundering patterns. KYT is the control layer that connects documents, logistics, and payments into one defensible story.
KYT is not a buzzword. It is transaction-level assurance. The goal is simple: prove that the trade, the counterparties, the goods, and the payment path match each other, and that the risk flags are either resolved or escalated before funds move. In practice, KYT is what lenders, confirming banks, insurers, and compliance teams rely on when the file hits the real world.
KYT, Know Your Transaction, is the discipline of validating that the transaction makes sense end to end. In trade finance, that means matching (1) the commercial rationale, (2) the trade documents, (3) the logistics trail, and (4) the payment trail. It also means checking the parties and touchpoints that appear only at transaction time, such as vessels, ports, freight forwarders, inspection firms, warehouses, and third-party payers.
These controls work together, but they are not the same thing. Confusing them is a fast way to under-build the compliance layer and over-promise “approval”.
Know Your Customer focuses on identity, ownership, business profile, source of funds and wealth, and baseline risk rating. It answers: who are you dealing with and is onboarding acceptable.
Know Your Transaction focuses on the specific trade flow and the movement of value for that deal. It answers: does this transaction make sense and does it fit policy, sanctions rules, and risk appetite.
One practical rule:
A clean KYC file does not make a risky transaction acceptable. KYT is where most trade deals either become bankable or die.
Trade finance has more evidence than most asset classes, but it is spread across documents and counterparties. Good KYT pulls the signals together and checks for conflicts.
If a trade settles through digital assets, KYT extends to wallet screening and transaction tracing to assess exposure to sanctioned entities and high-risk typologies. The bar is still the same: identity, provenance, and an audit trail that stands up to review.
KYT fails when it is treated as a single screening event. In real trade, risk changes as documents, routing, and payment instructions change. A workable KYT workflow is staged and evidence-driven.
KYT is product-agnostic. The product changes the documents and control points, but not the need to validate the flow.
KYT is not about rejecting every unusual fact. It is about spotting patterns that break plausibility or policy, then demanding evidence.
Compliance teams care about two things: (1) whether you have controls, and (2) whether you can prove you used them. KYT becomes credible when you define evidence standards and produce a repeatable file.
What good looks like:
If a reviewer picks one transaction at random, they should be able to reconstruct the full story in 10 minutes and see why the risk was acceptable, based on evidence.
Financely helps clients structure trade transactions so they can pass lender and compliance review without chaos. That includes mapping the transaction narrative, tightening the document set, standardizing payment instructions, and building a KYT-ready pack that matches bank expectations. Where required, execution is coordinated with qualified counsel and regulated partners so documentation, screening, and control agreements are handled correctly.
Share your trade flow, counterparties, payment terms, and the draft document set. We will revert with a KYT readiness checklist and the underwriting steps required for lender review.
Contact FinancelyKYT, Know Your Transaction, is the process of validating a specific trade end to end by linking the commercial rationale, documents, logistics, and payment trail, then clearing or escalating risk flags.
No. KYC is about identity and onboarding. KYT is about the transaction behavior and value movement for a specific deal. A counterparty can pass KYC and still fail KYT on a given transaction.
Typical triggers include third-party payments, last-minute changes to beneficiary bank details, routing patterns that do not match the trade logic, pricing outliers without evidence, and document inconsistencies across the set.
KYT checks that the LC terms match the real trade, that the document set is consistent, and that parties, banks, and touchpoints do not create sanctions or policy issues. Amendments are a common source of drift and must be controlled.
Yes, in practice. The emphasis shifts from documentary presentation to invoice validity, shipment evidence, and payment behavior monitoring. Repeatable transaction patterns matter as much as the first deal.
At minimum: contract, invoice, shipment evidence, inspection or origin evidence where relevant, insurance alignment to Incoterms, and payment instructions that match the parties and the trade references.
Treat them as an exception that needs a documented basis, such as an assignment, agency relationship, or group structure with proof. If the basis is unclear, many banks will not proceed.
Yes. Compliance risk is not only about whether goods exist. It is also about who benefits, how value moves, whether sanctions exposure exists, and whether the payment path matches the trade story.
Disclaimer: This page is for general information only and does not constitute legal, tax, investment, or regulatory advice. Financely is not a bank and does not provide loans directly. Financely operates on a best-efforts basis as an arranger and advisor through third-party capital providers and, where required, regulated execution partners. No financing is guaranteed. Any terms are subject to diligence, lender approvals, definitive documentation, and compliance screening.
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