KYC APIs: Easiest Way Unlock Seamless AML Compliance in 2024

The ever-constant evolving nature of fraud today is such that it has become impossible for financial institutions to manually stay ahead with KYC processes financial institutions to manually keep up with KYC (Know Your Customer) processes. These processes are not only time-consuming but also resource-intensive, making it challenging to execute them effectively without the right technological support. Fortunately, KYC APIs have revolutionised the way businesses handle these processes, offering a more efficient, automated, and customisable solution to stay ahead of emerging fraud tactics.

So, what exactly are KYC APIs? How do they function? And how can businesses leverage them to combat fraud effectively? Let's explore!

An Overview of API Technology Today

Application Programming Interface (API) is a software intermediary that enables two applications to communicate, sharing data and workflows with each other through a set of definitions and protocols. APIs are able to extract information from a database, share it with another application and automatically trigger the next step in a workflow. 

APIs have several applications across app and web development and can be used for Know Your Customer (KYC) automation today. As a matter of fact, most financial institutions today rely on automation to speed up and make their KYC/ AML compliance process more efficient.    

What are Know Your Customer (KYC) APIs?  

KYC APIs are APIs designed to facilitate and automate KYC-related activities or processes. These APIs integrate with external data sources provided by the Regtech service company on one endpoint and also integrate with the business infrastructure at the other endpoint.  These are mostly reliable data sources like government databases, credit bureaus, etc for verifying customer identity and performing other KYC-related activities to ensure compliance with Anti Money Laundering (AML) regulations.

Developers can easily integrate KYC APIs with the existing technology infrastructure of financial institutions and customise it to the business’s needs. This ensures there’s not too much disruption, it fits into the organisation’s specific needs and minimises the risk of human error. Aside from pulling information from databases, KYC APIs also leverage artificial intelligence and machine learning algorithms to verify customer identity quickly and accurately.  

How do KYC APIs work?

KYC APIs simply respond to prompts and follow an automation sequence. For example, when a customer signs up, he or she initiates an onboarding sequence which in turn sends a request to the relevant KYC API. The API proceeds to collect the information provided by the customer during sign-up (e.g. name, address, phone number, ID documents), and run relevant checks on the information to validate their authenticity. 

Checks can be carried out in different ways including verifying the customer biodata information against government databases, validating their ID through MZR scanning and more. The solution could also run biometric verification and liveliness checks to ensure the customer's face matches the image on the identification documents and to protect against deep fakes. After the conclusion of the checks, the API then generates a response, sending the result to the financial institution.

Types of KYC APIs

There are several types of KYC APIs depending on the specific function the API was designed to execute. Some of the different types include:

1. Document Verification APIs

Document verification APIs are designed to authenticate identity documents such as passports, driver's licenses, and national IDs. These APIs use advanced technologies like OCR (Optical Character Recognition) and machine learning to extract and verify information from the documents. For example, when a user submits a passport, the API can check the validity of the document by cross-referencing the data with official records and detecting any signs of tampering or forgery. 

2. Government KYC Verification APIs

Government KYC verification APIs connect directly with government databases to validate the identity of individuals. These APIs provide access to official records, such as social security numbers, voter IDs, and other government-issued documents. By integrating these APIs, businesses can ensure that the information provided by customers matches the data held by government authorities. 

3. AML Check APIs

AML (Anti-Money Laundering) check APIs are designed to help businesses comply with AML regulations by screening customers against global watchlists, sanctions lists, and politically exposed persons (PEP) databases. These APIs perform real-time checks to identify potential risks and flag suspicious activities. For example, when onboarding a new customer, an AML check API can cross-reference the customer's details with international watchlists to ensure they are not involved in money laundering or other financial crimes. 

4. Biometric Authentication APIs

Biometric authentication APIs use unique biological characteristics, such as fingerprints, facial recognition, or iris scans, to verify an individual's identity. These APIs provide a high level of security and accuracy by ensuring that the person attempting to access a service is who they claim to be. For example, a banking app can use a facial recognition API to authenticate users during login or transaction approvals, enhancing security and reducing the risk of fraud. Biometric authentication APIs are particularly useful in scenarios where traditional passwords or PINs are insufficient.

5. Address Verification APIs

Address verification APIs are used to validate and standardise customer addresses. These APIs cross-check the provided addresses against official postal databases and geolocation services to ensure accuracy. For example, an e-commerce platform can use an address verification API to verify the delivery address of a customer, reducing the chances of failed deliveries and improving logistics efficiency. Accurate address verification also helps businesses comply with regulatory requirements related to customer information accuracy.

6. Bank Account Verification APIs

Bank account verification APIs confirm the validity of a customer's bank account details, such as account number and bank code. These APIs ensure that the bank account provided by the customer is active and belongs to them. For example, a fintech app can use a bank account verification API to validate the bank details of users before initiating transfers or processing payments. 

7. Phone Number Verification APIs

Phone number verification APIs validate the authenticity of a customer's phone number by sending a one-time password (OTP) or using other verification methods. These APIs ensure that the phone number provided by the customer is active and accessible. For example, a ride-hailing app can use a phone number verification API to confirm the phone number of a new user during registration, ensuring that the number is valid and can be used for communication and authentication purposes.

Overall, technology is so advanced today that you can find APIs for any KYC process required for your business compliance needs. 

What are KYC APIs Important?

Some of the benefits of KYC APIs to businesses today include: 

i. Simplifies Regulatory Compliance

Businesses operating in specific industries such as banking and finance, gaming and asset management are subject to heavy regulatory compliance. KYC APIs empower these businesses to easily comply with these regulations without compromising on service delivery. They can easily automate customer identity verification and other due diligence processes, achieving compliance and battling financial fraud.

ii. Better Customer Experience

KYC APIs offer flexibility that allows businesses to automate customer onboarding. This greatly improves customer experience and builds trust, which is crucial to the success of any business today. It also reduces onboarding time and churn rate. Customers do not need to visit the organisation physically or submit paper documents that are both stressful and take a long time to complete. 

iii. Enhanced Security

KYC APIs employ robust security measures to protect sensitive customer information. Data encryption, secure transmission protocols, and regular security updates help safeguard against breaches and cyber threats.

iv. Scalability

KYC APIs are designed to handle large volumes of verification requests, making them ideal for businesses experiencing rapid growth. This scalability ensures that companies can maintain efficient operations even as their customer base expands.

v. Global Reach

KYC APIs often support the verification of international identities, enabling businesses to expand their operations globally. This capability is particularly valuable for companies looking to enter new markets and serve a diverse customer base.

vi. Real-Time Verification

KYC APIs provide real-time verification, allowing businesses to instantly confirm customer identities. This immediacy is crucial for industries like finance and e-commerce, where quick decisions can impact service delivery and fraud prevention.

vii. Integration with Existing Systems

KYC APIs can be easily integrated into existing business systems and workflows. This flexibility allows companies to enhance their identity verification processes without overhauling their current infrastructure.

Industries that can Use KYC APIs

Some of the businesses/ industries that can use KYC APIs include:

• Banking and Finance 
• Asset management
• E-commerce
• Real estate 
• Buy now pay later (BNPL)
• Gaming and casino

Integrate with Smile ID KYC APIs for Seamless KYC/ AML Compliance

Smile ID compliance solutions are designed to provide you with comprehensive AML and KYC compliance coverage in 54 countries across Africa. Businesses can easily verify customer ID documents and biodata from government databases, run biometric authentication, and AML checks, verify their bank accounts, and more.

Our APIs and SDKs are designed for easy integration with and interaction with your existing infrastructure. Book a free demo today to learn more.