Transaction Monitoring can’t wait till after Launch

Advice from our very own experienced Start-Up Mentor

In a fast-moving world of crypto and fintech, startups are racing toward product launches, investment milestones, brand growth and market entry. We know it’s tempting to push certain operational safeguards, like Know Your Transaction (KYT) monitoring, down the road until after the launch. Naturally, this just doesn’t feel like the top priority. 

But this is the hard truth: waiting to implement a KYT plan until after you launch isn’t just risky, it can be fatal to your start-up. Often, promising start-ups find themselves entangled in regulatory issues, reputational damage, or unwittingly involved in illicit activity; all because they failed to implement KYT from day dot. 

Why? 

1. Criminals thrive from gaps in compliance 

Bad actors know that early-stage platforms are often under-secured and under-regulated, putting safeguards on the backburner while they try to grow. When you launch your start-up without KYT, your start up can become a soft target or even a launchpad for money launderers, sanctioned entities and malicious individuals who are looking for a way into the legitimate financial system. By the time you have noticed the suspicious activity, you may have already processed or approved tainted funds or dirty money, and reputational fallout is almost inevitable. 

In fact, a 2023 report from Alloy revealed that ‘60% of fintech companies paid at least $250,000 in compliance fines’, with ‘one-third incurring fines of over $500,000.’ These fines were primarily due to failure to meet compliance requirements such as KYT. 

2. Regulators don’t accept ‘We Just Launched’ as an excuse 

Whether you are a crypto exchange, a payment provider or processor, or a DeFi protocol, regulatory bodies are paying close attention to how you manage risk, from the very beginning. Having a ‘launch now, implement monitoring later’ approach will not hold up under scrutiny if you have been found to facilitate illicit transactions, even unknowingly. Many start-ups face fines, enforcement actions or complete deplatforming due to weak transaction monitoring, anti-money laundering and counter-terror financing frameworks. 

3. Early decisions determine your reputation among investors AND clients, especially in the long run 

When you launch without KYT this is not just a regulatory risk. You are shaping how your brand is perceived by the people who matter the utmost: your investors and your customers. 

Both groups are increasingly concerned and aware of crypto risk. If your platform becomes associated, even briefly, with illicit activity, it raises questions about your risk management, long-term viability, and leadership. The reputations of founders, decision-makers and leaders in the start-up are tarnished, with little chance of recovery. 

Given that reputations in this industry are built quickly, and fall even faster, early transaction decisions, wallet exposures or lax transaction monitoring can leave a stain that’s hard to clean. Immediate introduction of KYT demonstrates your company is serious about security, responsible innovation, and building a product that can scale and grow with confidence. 

4. Investors need assurance, and KYT enhances this 

Investors aren’t just taking a risk by betting on your product, they're also betting on your ability to operate responsibly and sustainably. They are keen to see that you recognise that growth and governance go hand in had. Implementing KYT from the off sends a strong signal that you take compliance seriously, and understanding the broader implications of your business model. It shows foresight and a commitment to long-term success - highly valued by investors. In an increasingly regulated landscape, KYT is not just a technical safeguard but also a trust signal. Alloy’s 2023 report asserted that 93% of fintechs struggle to meet compliance requirements. Investing in KYT from the first day sets you apart, putting you in the 7% who are capable of meeting your AML and CTF obligations. 

5. Implement from Day One Prevents Costly Pivots Later 

Start-ups that delay KYT can find themselves in difficulty later on: forced to retrospectively fit transaction monitoring into a live product. This disrupts existing workflows and requires re-onboarding of users. Expensive and disrupting user confidence, pivoting can also delay the growth roadmap of your product or service. 

Starting with KYT built into your architecture completely avoids this disruption - becoming a seamless part of your growth strategy as opposed to a painful pivot. The earlier it is implemented, the more natural and efficient it is to scale your product, with transaction monitoring already integrated. 

6. It’s easier to implement than you’re made to believe 

Founders and decision-makers often delay transaction monitoring integration because they assume KYT is resource-heavy, or hard to integrate. Realistically, modern KYT tools like nominis.io ’s Nominis Vue is built with start-ups in mind. Flexible, API-first solutions that plug seamlessly into your transaction flow prevent the headache and instead, grow with your product. 

Start-ups move fast, but so do bad actors. Launching without transaction monitoring is like opening a bank without a security system, without cameras or alarms. These risks wouldn’t be taken in the real-world, why should they happen on-chain? 

While we strive for accuracy in our content, we acknowledge that errors may occur. If you find any mistakes, please reach out to us at contact@nominis.io Your feedback is appreciated!