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Step-By-Step Guide: Deploying Multiple KYC APIs and KYB APIs to Automate Customer Onboarding

When onboarding a new customer who is also an entrepreneur seeking both personal and business account, the process involves integrating – Know Your Customer (KYC) as well as Know Your Business (KYB) checks. Both these checks are triggered through API calls and queries to comply with regulatory requirements.

Developer teams need to be adept at deploying these complex API integrations and manifest them in the form of an on-boarding workflow.

Below are Some of the APIs Deployed by Our API Excellence and DevOps Center of Excellence (CoE):

  • Business Verification API
  • Anti Money laundering (AML) API
  • API for ID checks
  • Email Verification API
  • Passport Verification API
  • US Address Verification API
  • Biometric Verification API
  • Identity Verification API
  • Anti Money Laundering (AML) API
  • Document Verification API
  • Face Match API
  • Bank Account Verification API
  • Document Verification API
  • Enhanced Due Diligence (EDD)
  • Ultimate Beneficial Ownership (UBO)
  • Simplified Due Diligence (SDD)
  • Know Your Business (KYB)
  • Politically Exposed Person (PEP) API
  • Suspicious Activity Report (SAR) API
  • Device Fingerprinting API

 

Download this real-world use case to see how our dedicated Testing CoE can help deploy new software updates with minimal disruptions, ensuring a smooth transition and maintaining high levels of customer satisfaction.

Click to know how we empower IT teams and business users to launch new digital experiences rather than spending weeks on re-writing codes and app testing.

Below is an example showing how our API deployment is ensuring a smooth user experience by integrating multiple KYC and KYB APIs to create onboarding workflows:

  1. Customer Initiates Onboarding Process

  • The customer visits the bank’s online portal or mobile app to open both a personal and business account.
  • They are asked to submit their personal information (for KYC) and business information (for KYB).
  1. Data Collection from Customer

  • Personal Information (KYC):
    • Full Name
    • Date of Birth
    • Residential Address
    • Social Security Number (SSN)
    • Government ID (e.g., Driver’s License, Passport)
  • Business Information (KYB):
    • Business Name
    • Tax Identification Number (TIN)
    • Business Address
    • Legal Entity Type (LLC, Corporation, etc.)
    • Proof of Incorporation
  1. API Call to Identity Verification Services (KYC API)

  • The bank’s system triggers an API request to an external Identity Verification Provider. This API cross-checks the personal information provided with multiple databases:
    • Government ID Validation: Verifies the authenticity of the ID by comparing it against government databases.
    • Social Security Number (SSN) Validation: The API cross-references the SSN with official records to ensure that it matches the name and date of birth provided.
    • Address Verification: Compares the provided address with postal service databases to verify residency.
  1. API Call to Sanctions and Watchlist Screening (AML/KYC API)

  • A separate API is triggered to check if the customer is on any international sanctions lists, politically exposed persons (PEP) lists, or other anti-money laundering (AML) watchlists.
    • OFAC Sanctions Check: Verifies if the customer is listed in the Office of Foreign Assets Control (OFAC) sanctions lists.
    • Global Watchlist Check: Cross-references the customer’s information with global databases for adverse media coverage, blacklists, or criminal records.
  • The API responses will provide a pass or flag status, prompting further review if needed.
  1. API Call for Business Identity Verification (KYB API)

  • The system calls the KYB API for verifying the legitimacy of the business entity:
    • Business Registration Validation: Verifies the company’s registration details with government and business registries (e.g., IRS, state corporations).
    • Tax Identification Number (TIN) Check: The KYB API verifies the company’s TIN against tax authority records to confirm its legitimacy.
    • Business Address Validation: Ensures that the business address is valid and active through address verification services.
  1. API Call to Financial Standing and Creditworthiness (KYB API)

  • To assess the business’s financial health, the bank calls APIs from business credit bureaus:
    • Business Credit Score: Fetches the business’s credit score from a provider like Dun & Bradstreet or Experian.
    • Outstanding Liabilities Check: The API checks if the business has any outstanding debts or unpaid taxes.
  1. API Call to Beneficial Ownership Verification (KYB API)

  • To comply with Anti-Money Laundering (AML) and Beneficial Ownership regulations, the bank sends an API request to gather information on the company’s ultimate beneficial owners (UBO).
    • UBO Screening: The KYB API collects and verifies details of individuals who own more than a specific percentage (e.g., 25%) of the company. These individuals undergo similar KYC checks, such as identity verification and sanction screening.
    • Ownership Structure Validation: The API validates the ownership structure, ensuring that the business isn’t structured to hide illicit activities.
  1. API Call for Document Collection and Validation

  • The customer uploads required documents (e.g., incorporation certificates, utility bills). The system uses APIs to validate these documents:
    • Document OCR API: The uploaded documents undergo optical character recognition (OCR) to extract text and cross-validate it with the information provided by the customer.
    • Fraud Detection API: Checks the authenticity of the documents to ensure they haven’t been tampered with or altered.
  1. Real-Time Decision and Scoring

  • All API responses are aggregated in the bank’s decision engine.
  • The decision engine uses the information returned by the KYC and KYB APIs, along with risk scoring algorithms, to evaluate whether the customer and business meet the bank’s criteria.
    • The risk score takes into account:
      • KYC Score: Based on identity verification, address verification, and sanction screening.
      • KYB Score: Based on business legitimacy, creditworthiness, and ownership transparency.
    • If the score is above a certain threshold, the customer is approved for onboarding.
  1. Approval and Account Creation

  • Once the KYC/KYB checks are complete and the customer passes compliance requirements, the system approves the customer and proceeds with the creation of the personal and business accounts.
  • The system then triggers APIs to:
    • Create Account Records: API calls are made to the core banking system to generate personal and business account records.
    • Welcome Emails/Notifications: The customer is notified via email/SMS through APIs integrated with the bank’s communication platform.
  1. Post-Onboarding Monitoring

  • Continuous KYC: Post-onboarding, the customer undergoes continuous KYC checks through APIs that periodically screen them against new sanctions lists or adverse media reports.
  • Transaction Monitoring (AML): APIs monitor customer and business transactions to detect suspicious activities that may indicate money laundering or fraud.

Below are some key KYC API Testing challenges managed by Our DevOps Teams for Federal Banks and Fintech Companies:

Testing KYC (Know Your Customer) APIs present a unique set of challenges due to the complexity of regulatory compliance, data sensitivity, integration with third-party services, and the dynamic nature of customer data.

  1. Data Privacy and Compliance Concerns

  • Sensitive Data Handling: KYC processes involve handling sensitive personal data such as government IDs, social security numbers, and addresses. Ensuring that test environments comply with data privacy regulations like GDPR or CCPA is crucial. Testers must avoid using real customer data and create realistic anonymized datasets.
  • Regulatory Compliance: Different regions have varying compliance rules (e.g., AML, GDPR, FATCA). Testing workflows across jurisdictions requires ensuring that the APIs return accurate, compliant results and that workflows adapt to region-specific compliance requirements.
  1. Integration with Multiple APIs

  • Third-Party Dependencies: KYC workflows often rely on multiple external APIs for identity verification, sanctions screening, address validation, and more. Any downtime, API changes, or rate-limiting from these third-party services can disrupt testing and make it hard to create a reliable test environment.
  • Error Handling: External API failures need to be handled properly in real-time workflows. Simulating various failure scenarios (like slow response times, incomplete data, or API errors) and ensuring the workflow can recover gracefully is complex but necessary for testing.
  1. Dynamic and Real-Time Data Validation

  • Frequent Data Changes: Customer data, such as sanctions lists or PEP (Politically Exposed Person) status, changes frequently. KYC APIs must reflect these changes in real-time. Testing the ability of APIs to dynamically handle and reflect updated data, and ensuring workflows react appropriately, can be challenging.
  • Real-Time Decision Making: Testing real-time decision-making based on KYC API responses (e.g., automatically approving or flagging customers) is critical. Ensuring that the APIs correctly return and react to up-to-date information is complex due to the dynamic nature of customer data.
  1. High Availability and Performance Testing

  • Latency and Performance Issues: Ensuring low latency and high throughput when dealing with KYC APIs is critical, as delays in identity verification can negatively impact the user experience during onboarding. Testing how KYC workflows handle varying loads, network issues, or slower response times from external APIs is key to ensuring performance and scalability.
  • API Rate Limits: Many KYC providers enforce rate limits on API usage. Testing workflows in environments where API limits might be hit can lead to unexpected failures if the system isn’t designed to handle throttling.
  1. Complex Test Data Setup

  • Representative Test Data: KYC workflows need accurate and comprehensive test data to cover diverse scenarios (e.g., valid and invalid identities, people on watchlists, PEPs). Creating and maintaining an extensive set of synthetic test data that simulates real-world customer profiles, sanctions lists, and government data is a significant challenge.
  • Data Variability: Customers’ data can vary greatly depending on geographic, financial, and personal factors. Testing must account for different document types, languages, and formatting across global regions.
  1. Ensuring API Security

  • Authentication and Authorization: KYC APIs involve sensitive information and require robust authentication and authorization mechanisms (e.g., OAuth, API keys). Testing workflows to ensure proper handling of API security protocols and data encryption is crucial for preventing unauthorized access.
  • Vulnerability Testing: Testing for potential vulnerabilities like SQL injection, man-in-the-middle attacks, or data leaks during API communication is critical to ensure secure interactions with the KYC APIs.
  1. Test Coverage for Various Scenarios

  • Edge Cases: There are various edge cases, such as duplicate identities, fake or expired documents, and mismatched data across different KYC providers. Ensuring that these edge cases are thoroughly tested to cover all possible scenarios can be challenging.
  • Multiple API Versions: Testing different versions of KYC APIs or different APIs from multiple vendors might introduce challenges related to consistency. Each vendor may handle data and compliance requirements differently.
  1. Simulating Regulatory Events

  • Regulatory Updates: Financial regulations change frequently, often requiring modifications to KYC processes. Simulating these updates and testing workflows for future-proofing (e.g., adding new screening lists) can be difficult to manage.
  • Compliance Testing: Ensuring that workflows are compliant with regulations like AML (Anti-Money Laundering) requires extensive testing of various scenarios to ensure the API’s responses trigger appropriate actions.
  1. Test Automation Limitations

  • Complexity of Automation: Automating KYC workflows can be difficult due to the need for real-time validation, dynamic data inputs, and third-party API integrations. Creating robust automation test suites for workflows that handle real-time customer onboarding and fraud detection is challenging.
  • Maintaining Test Scripts: Since KYC APIs and regulatory rules frequently change, maintaining automated test scripts to keep up with these changes requires significant effort. Keeping automation in sync with API updates and regulatory shifts can introduce maintenance overhead.
  1. Time Sensitivity of Responses

  • Real-Time API Response Requirements: Testing how well the KYC API and workflow handle real-time data with time-sensitive information (e.g., changes in a customer’s watchlist status) can be complex, as delays or missed updates can result in failed compliance checks or erroneous approvals.

Here are Some of the Benefits You Can Unlock with the Help of Our API Excellence and DevOps CoE:

  1. Comprehensive Compliance: Integrating KYC and KYB APIs ensures compliance with multiple regulatory frameworks (AML, KYC, UBO).
  2. Improved Risk Management: APIs provide real-time checks for sanction screening, beneficial ownership, and fraud detection, reducing the risk of onboarding risky customers.
  3. Efficient Onboarding: Automated API calls expedite the onboarding process, reducing manual intervention and speeding up decision-making.
  4. Scalability: The use of APIs allows the system to handle a large volume of KYC/KYB checks without causing bottlenecks, making the process scalable for high-growth banks.

This example workflow demonstrates how financial institutions can leverage multiple APIs to automate and enhance the onboarding process, while ensuring that regulatory compliance is met efficiently.

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