Know your customer, or KYC, as it is referred to, originated as a standard to combat the laundering of illicit money flowing from terrorism, organized crime, and drug trafficking. The primary process behind KYC is that governments and enterprises need to track customers for illegal and money laundering activities. Moreover, KYC also enables banks to understand their customers and their financial dealings better. This helps them manage their risks and make better decisions.KYC may be a manual, time-consuming, and redundant across institutions. Sharing KYC information on Blockchain would enable financial institutions to deliver better compliance outcomes, increase efficiency, and improve customer experience.
Each bank has its own KYC process set up. Due to this, customers have to do KYC separately for each individual bank.The lack of KYC standards makes it a time-consuming task to compile each KYC request.Due to disparate KYC specifications, customers have to provide the same information to different banking entities and industries. This becomes irksome for customers. Banks sometimes even follow up with customers to get more details for KYC. A recent study concluded that overheads for KYC in a bank increase the onboarding cost for a customer by 18% and the minimum time required to 26 days.
The blockchain architecture and the DLT allow us to collect information from various service providers into one cryptographically secure and unchanging database that does not need a third party to verify the authenticity of the knowledge. It makes it possible to form a system where the user will only need to undergo the KYC procedure once to verify his/her identity.
- The bank collects the information for the KYC from the customer.
- The information given by the customer includes username and customer data, which is the hash of the link for the customer data. This username is unique for each customer.
- A bank creates the request for submission, which is stored in the smart contract.
- A bank then verifies the KYC data, which is then added to the customer list.
- Other banks can get customer information from the customer list.
- Other banks can also upvote/downvote customer data to demonstrate its authenticity. If the number of upvotes exceeds the number of downvotes, then the kycStatus of the corresponding customer is set to true. If a customer is downvoted by one-third of the banks on the network, then their kycStatus is changed to false, even if the number of upvotes is greater than the number of downvotes. For such logic, there should be a minimum of 5 or 10 banks on the network.
- In short, there are two conditions that are to be checked: the number of upvotes and downvotes, and whether the number of downvotes is greater than one-third of the total banks on the network.
- A bank can also report another bank if it finds that the other bank is corrupt and is verifying false customers. Such corrupt banks will then be banned from upvoting/downvoting further. If complaints against a particular bank are received from more than one-third of the total banks on the network, then that bank will be banned (i.e., isAllowedToVote will be set to false for that corrupt bank.)
| Function Name | Input Params | Return value | Description |
|---|---|---|---|
| addBank() | Bank Name, metamask address of bank,Bank reg number |
- | To add new bank |
| isAllowedToVote() | metamask address of bank,boolean value |
- | Used by the admin to change the status of isAllowedToVote of any of the banks at any point in time |
| removeBank() | metamask address of bank |
- | To remove the bank |
| Function Name | Input Params | Return value | Description |
|---|---|---|---|
| addKycRequest() | Customer Username, Hash of the customer data |
- | To add new KYC request by adding new customer |
| removeKYCRequest() | Customer Username | - | Removes the KYC request |
| addCutomer() | Customer name, customer data |
- | To add a Customer |
| viewCustomer() | Customer Username | This function allows a bank to view the details of a customer. | |
| upvoteCustomer() | Customer name | - | This function allows a bank to cast an upvote for a customer. |
| downvoteCustomer() | Customer name | - | This function allows a bank to cast an downvote for a customer. |
| modifyCustomer() | Customer name, customer data |
- | This function allows a bank to modify a customer's data. This will remove the customer from the KYC request list and set the number of downvotes and upvotes to zero. |
| reportBank() | Bank address , bank name |
- | This function is used to report a complaint against any bank in the network. |
| getBankComplaints() | Bank address | - | This function will be used to fetch bank complaints from the smart contract. |
| viewBankDetails() | Bank address | The return type of this function will be of type Bank | This function is used to fetch the bank details. |
Install the dependencies
npm install
To compile your contracts in your Hardhat project, use the built-in compile task:
npx hardhat compile
You can deploy in the localhost network following these steps:
- Start a local node
npx hardhat node - Open a new terminal and deploy the smart contract in the localhost network.
npx hardhat run --network localhost scripts/deploy.js - Deploy on goerli test net.
npx hardhat run --network goerli scripts/deploy.js