The 4th European Anti-Money Laundering Directive (EU) n°2015/849, aims to combat money laundering and the financing of terrorism, has strengthened the rules on customer identification and improved awareness of money laundering and financing of terrorism, in particular by advocating a risk-based approach, as part of the so-called “KYC” (Know Your Customer) procedures.
Thus, the use of the KYC as an essential tool in the process of improving customer knowledge and analysis is now widely applied.
The 5th European Anti-Money Laundering Directive (EU) n°2018/843 has, for its part, provided for a series of measures aimed at better combating money laundering and the financing of terrorism and ensuring better transparency of financial transactions (the “Directive”).
The “KYT” (Know Your Transactions) is part of this legislative arsenal.
The aim of the KYT is to complete the KYC procedure by identifying risky transactions, in particular in order to improve the regular monitoring of the customer relationship.
The monitoring of transactions carried out by the client thus consists of examining all transactions carried out throughout the business relationship and, where appropriate, the origin of the funds, in order to verify whether these transactions are in line with the characteristics of the client, the nature and purpose of the relationship or the transaction envisaged, and the risk profile of the client, in order to detect atypical transactions which should be the subject of an in-depth analysis, or even a suspicious transaction report if it turns out that the real purpose of the payments/transactions is difficult to identify.
The Law of 12 November 2004, as amended, on the fight against money laundering and the financing of terrorism, like the Directive, is silent on the criteria to be taken into account for establishing a KYT.
The result is that the criteria to be taken into account essentially result from a set of indicators such as: concentration of transactions over a short period of time, origin of payments, payments in cash, by bank accounts, senders and receivers of the payment (especially in the case of payments coming from abroad or from intermediary banks),….
Monitored transactions can be of all kinds: from debit to credit operations, including cash deposits, withdrawals, wire transfers, investments, insurance schemes, domestic or cross-border transactions, etc.
The methodologies for monitoring and filtering transactions will have to be adapted to the size of the company concerned by the implementation of the KYT in order to find the most appropriate solution.
In conclusion, despite the lack of precise guidelines for the development of the KYT tool, its complementarity with the KYC also makes it an essential tool, whether it is implemented through IT systems or manually through systematic manual due diligence.