How wallet screening works
The platform sends the address and its network to an analytics provider's API. The provider looks up who the address is attributed to, traces where its funds came from and went, and returns categories of exposure with a score.
Rules then decide whether to allow the transfer, ask the customer for more information, pass the case to an analyst or refuse. Screening runs at set moments:
- When a customer registers a withdrawal address
- Before each withdrawal is signed
- When a deposit arrives, before it is credited
- When a payer's address appears at a crypto checkout
- Again later, because labels change
The rules behind wallet screening
Wallet screening is an industry term with no legal definition. In the EU, Article 23 of the Transfer of Funds Regulation requires crypto-asset service providers to have internal policies, procedures and controls to ensure that EU and national restrictive measures, meaning sanctions, are implemented when they transfer crypto-assets.
The same regulation amended the EU's anti-money laundering directive: providers identify and assess the risk of transfers to or from self-hosted addresses, and apply mitigating measures. In the US, OFAC says that it may add digital currency addresses to its SDN List, and that those listings are not likely to be exhaustive.
A listed address is therefore the easy case. Indirect exposure is the harder one, and it is what the risk score measures.
Wallet screening, KYT or sanctions screening?
- KYT
- Monitors each transfer as it happens and afterwards. Wallet screening checks an address, often before any transfer exists.
- Sanctions screening
- Checks the names of customers and counterparties against lists. Wallet screening checks addresses, which carry no name.
- Travel Rule
- Passes the names behind a transfer from one provider to the other. Screening reads only the blockchain.
Where Wallet screening shows up in a platform
Modules that do the work
- Compliance reportingTransaction monitoring, the Travel Rule and regulatory reports, ready for your regulator.
- KYC / AMLIdentity checks, screening and ongoing monitoring, with the verification provider you choose.
- Fraud & riskReal-time fraud scoring, limits and case management, with the risk engines you already trust.
- Custody & walletsWallets on every major chain, with MPC custody from leading providers or your own keys.
Platforms that need it
Guides that go deeper
- Stablecoin payments for EU merchants: MiCA, USDC and the Travel RuleWhat a stablecoin checkout for EU merchants needs: MiCA and payment licences, why USDC and not USDT, Travel Rule checks on self-hosted wallets, euro settlement and refunds.
- MiCA checklist: launching a crypto exchange in the EUWhat the EU's Markets in Crypto-Assets Regulation asks of an exchange: authorisation, capital, governance, client assets, the trading platform rules, and the laws that sit beside it.
Where it is written
The laws and standards this page's facts come from.
- Regulation (EU) 2023/1113, the Transfer of Funds Regulation, Articles 23 and 38 (EUR-Lex)
- OFAC, Frequently Asked Question 562, on digital currency addresses on the SDN List
General information, not legal advice: what applies to you depends on your services and your market.