Do I need an SSN verification API for my app?

Do I need an SSN verification API for my app?

As part of the ongoing efforts to keep the American financial banking system secure, financial institutions are required to onboard and vet every client that goes through their system. This process is known as Know Your Customer, or KYC, and Know Your Business (KYB)

For most individuals who sign up for KYC, some personal information is required. But does this include a person’s social security number? Read on to learn more about collecting personal information for KYC.

Is SSN Verification Required? 

When you run any type of fintech operation, as a financial institution or fintech app, you need to perform identity verification for AML, or anti-money laundering compliance. In the United States, Know Your Client or Know Your Customer exists as part of AML regulatory compliance under the Bank Secrecy Act and the Patriot Act of 2001. 

Performing a KYC check allows financial institutions to understand their clients’ risk tolerance, investment knowledge, and financial position. More importantly, KYC improves the security of the financial network in the U.S. and protects clients. 

In addition to identity verification, the KYC process on the backend for fintech apps is a lengthy one. It includes ongoing monitoring, policies for risk management, customer acceptance policies, and reporting, including suspicious activity reports, to the Financial Crimes Enforcement Network (FinCEN). 

By following these standards, fintech apps can improve the financial banking system preventing financial crimes like money laundering and identity theft. On top of that, the Securities and Exchange Commission (SEC) requires that new clients provide this information when opening a new account. Even if you are operating through a bank agent like Sila, Sila, or their bank Evolve Bank & Trust, are still required to collect this information and report it to the SEC.

What Do KYC and KYB Entail? 

KYC and KYB require that fintech apps collect personal information about the client being onboarded. Each situation might be different depending on the type of vertical your app is in, the risk type of the client, and other details. 

The process of information gathering for KYC is so that financial institutions understand their clients’ risk tolerance and financial position. With this understanding, KYC can protect clients and financial institutions.

FinCEN establishes minimums for KYC, which includes:

  • Name
  • Date of birth
  • Address
  • Contact information

In most cases, individuals must also prove through ID verification that their information matches that provided during bank account linking. This means that even if clients are approved in the initial KYC check, they can be rejected again if issues arise in the bank account linking process or throughout their tenure with the app.

For KYB, fintech apps must collect information for any individual who indirectly or directly owns 25% or more of the legal entity (also known as a beneficial owner). The information collected must be:

  • Their name
  • Birthdate
  • Address
  • And social security number

For most cases of customer due diligence (CDD) and enhanced due diligence (EDD) document verification is also required. This means that the individual must also provide government-issued identification to verify their person. The types of identification acceptable documentation include: 

  • Passport
  • Driver’s license
  • Government-issued identification card

In most cases, address verification may also be required. Therefore individuals must provide an identity document for proof of address, such as a utility bill, with the same legal name on it in addition to other verified identification methods like biometrics verification and face verification (if applicable). 

Additionally, for entities with high anti-money laundering or terrorism finance risk, more scrutiny and ongoing monitoring are required.

SSN Verification API for my Fintech App

As you can see, most payment apps will need an identity verification API, like the KYC API or KYB API, in order to process and onboard clients. If you want to work with businesses, then you will need social security number verification or an SSN verification API. 

Unfortunately, the verification process and ongoing monitoring take time and money. To offload some of the startup costs and challenges that may be associated with compliance, some apps may not include businesses as part of their clientele. For the majority of fintech apps that are creating an app through an app aggregator and bank agent, then this will offload a lot of cost and compliance. However, these types of compromises do not need to be made when you work with Sila. 

Sila is a smart fintech building code that allows each client access to a bank account API, ACH API, KYC/KYB API, and smart contract technology. These are the four basic components of our product. Every client gains access to it; and if you want to add more features, you can always do so through our fintech marketplace. But, this means that you don’t have to compromise on KYB for businesses as the SSN verification API comes included in our code. 

Minimizing KYC Friction for Fintech Apps

When it comes to KYC, fintech apps might experience some friction during the onboarding process. This is an unfortunate reality of onboarding and identity verification as it requires a bit more effort on the side of the client. While this effort is much appreciated, it can be burdensome. 

Luckily, the processes for KYC onboarding are becoming simpler and more efficient. For example, when you start your fintech app with Sila, you gain access to the KYC API code, which means that you’ll have KYC capabilities from the start. 

Luckily, some of the friction that clients experience when onboarding KYC with a fintech app is minimized with the amount of information that they need to provide. For some verticals, this friction is unfortunately increased. For example, if you run a crypto trading app, it is encouraged that more biometric verification methods are added to reduce the level of risk on your app. However, running a money transfer app may allow fintech owners to only collect a basic level of customer information to ease this onboarding process. 

In addition to this, fintech apps should consider allowing verified third parties to collect KYC data to offload additional compliance burdens, such as the cost and expenses to store and collect sensitive data over encryption.

Another way to minimize KYC friction is to use a compliance and KYC-centric approach. If you establish KYC throughout all of your product design, then you’ll make better decisions when designing your company and product. With compliance front-and-center, you’ll notice that you choose apps built for compliance, which means that the KYC process is continually being improved and refined. 

Fulfilling Requirements for KYC and SSN Verification

Compliance in fintech is complicated and costly, but fulfilling these compliance requirements becomes far easier when you partner with Sila. 

Sila is a fintech app-building code that provides a KYC and SSN verification API in addition to an ACH API, bank account linking API, and even smart contract technology. Sila also connects clients to their ever-expanding list of fintech partners in their fintech marketplace so clients can always gain access to competitive financial features when they are ready to scale. 

There are a lot of benefits to working with Sila, including embedded compliance through the SSN verification API and other regulatory compliance features like OFAC and SARs reporting included. 
If you’re ready to make KYC and U.S. regulatory compliance far easier, start in the Sandbox. If you have any questions, reach out to Sila today! Or visit our weekly demo!