5 Ways APIs Are Transforming KYC & AML

Following the coronavirus digital boom, businesses have realised the need to find the right software to help them with customer onboarding, due diligence and anti-money laundering investigations. What are they looking to get out of this software? Decreasing onboarding times, achieving perpetual KYC, decreasing false positives, and aligning with AMLD6, the European Commission’s latest directive on AML. 

What enables a software to successfully provide these solutions is the efficient use of APIs. Application programming interfaces (APIs) are one of the main cogs in the KYC and AML tech and today we’ll have a look at 5 ways they are helping the industry develop. 

1. Onboarding Customers Instantaneously

 Customer onboarding has been troubling businesses, banks and merchants since its inception since it is a rather lengthy, tedious and unpleasant process. The problem with customer onboarding is that it is necessary and unavoidable and at the same time it is the first point of interaction between customer and business. 

Just so you get an idea of how bad the onboarding issue is, a recent report from Signicat shows abandonment rate increase by 23% compared to 2019 with one in five abandonments being attributed to a lengthy and complicated onboarding process. 

How do APIs help with this problem? APIs can speed up the onboarding process by providing aggregated and analysed global KYC data, automatically building a risk profile for new customers in a few minutes. Data APIs are crucial in gathering information, eliminating manual labour and automating the process of filling out gaps such as UBO, shareholder or directorship information.

2. Centralizing Information & Having One Single Profile

One of the most common KYC problems of the modern era is that information is divided amongst different teams, platforms and mediums. Data silos are blocking effective KYC as businesses use different softwares to gather, view and store customer data, transaction data, PEP & sanctions checks, and more. APIs can help alleviate that problem. 

APIs can unify these datasets and create one customer profile, one main location where everything and anything you need to know about the customer is there. By doing so, you immediately have clarity on the risk profile, you have a better allocation of human resources and a streamlined, polished process.

3. Establishing Automation & Eliminating Manual Tasks

Can you imagine the amount of time, effort, spreadsheets and email threads required for manual KYC and AML? It is a battle lost before the battle is fought as there is no way humans, no matter how bright and skilled they are, to manage the volume and frequency of information when it comes to building risk profiles. 

APIs are paving the path of automating many manual processes in KYC and AML. Here is an example: using Robotic Process Automation (RPA) to access data that are behind paywalls,  via scanned documents supplied by customers or even the world wide web. Artificial intelligence can even “learn” how stored information such as company registration details. The possibilities are endless but what APIs can do is automate huge parts of the process and free the hands of compliance professionals that can use their skills to make informed decisions rather than hunt for data. 

4. APIs Are Both A Product & A Foundation For Custom Solutions

When it’s time to establish your KYC process, the question of whether you outsource or build your own is often on the table. KYC is a core company need and it’s always worth questioning whether you should invest in creating something in house. 

APIs provide a middle ground between the two options since they can act as both a ready-made product you can use as well as the building blocks for building your own custom solution. For example, using KYC and AML data APIs can have an instant impact on client onboarding and building a complete risk profile but they can be the first block of a much bigger solution since their architecture and functionality can be the blueprint for more solutions such as monitoring alerts. 

5. Transparency, Manageability & Usability

APIs are easy to manage, monitor and use. It’s a technology that can scale without any additional burden and additionally, it provides the required transparency to help regulators, auditors and internal staff to understand how and why data was collected. There is a digital audit trail that allows interested parties to investigate each and every step of the way.

What’s more, APIs offer a standardised approach to collecting data, eliminating the inconsistencies of a human, DIY approach. Data is captured automatically — the same way, every single time, improving both consistency and accuracy. KYC & AML processes are by nature very sensitive and prone to error so finding technologies that can remove these elements is essential.