KYC Functional Specification

Document Information

Document Version	1.2.0
Last Updated	August 21, 2025
Author	BizFirstFi Product Team
Review Status	Approved
Target Audience	Business Analysts, Developers, Compliance Officers

1. System Overview

1.1 Purpose

The KYC (Know Your Customer) Platform is designed to automate customer identity verification processes while ensuring compliance with regulatory requirements. The system provides a comprehensive solution for customer onboarding, document verification, risk assessment, and ongoing monitoring.

1.2 Scope

This specification covers the functional requirements for:

Customer information collection and validation
Document upload and verification processes
Identity verification and biometric authentication
Risk assessment and screening workflows
Compliance officer review and approval processes
Reporting and audit trail generation

1.3 System Architecture

Frontend Layer

React-based customer portal and admin dashboard with responsive design

API Layer

RESTful API built with .NET Core providing secure access to all functionality

Business Logic Layer

Core business rules, workflows, and validation logic

Data Layer

SQL Server database with Entity Framework for data persistence

2. Functional Requirements

2.1 Customer Registration Process

FR-001: Basic Information Collection

Field Name	Type	Required	Validation Rules
FirstName	String(50)	Yes	2-50 characters, alphabetic only
LastName	String(50)	Yes	2-50 characters, alphabetic only
Email	String(100)	Yes	Valid email format, unique in system
DateOfBirth	Date	Yes	Age >= 18 years, <= 120 years
Nationality	String(3)	Yes	ISO 3166-1 alpha-3 country code
PhoneNumber	String(20)	Yes	International format with country code

FR-002: Address Information

Business Rules:
- Residential address is mandatory
- Business address is optional for individual customers
- Address must be verified against postal service databases where available
- Support for multiple address formats (US, UK, EU, etc.)

Validation Logic:
if (addressType == "Residential") {
    validateRequiredFields(streetAddress, city, postalCode, country);
    validatePostalCode(postalCode, country);
    if (country == "US") validateStateCode(state);
}
                

2.2 Document Upload and Verification

FR-003: Document Type Requirements

Document Category	Accepted Types	Requirements	Verification Method
Primary ID	Passport, National ID, Driver's License	Government-issued, unexpired, clear photo	OCR + Document Authentication
Proof of Address	Utility bill, Bank statement, Tax document	Dated within last 3 months	OCR + Date validation
Selfie Photo	Live photo capture	Clear face, no glasses/hat, liveness proof	Facial recognition + Liveness detection

FR-004: Document Processing Workflow

Document Upload Process:
1. File validation (size, format, quality)
2. Virus/malware scanning
3. OCR text extraction
4. Document authenticity verification
5. Data field extraction and mapping
6. Quality assessment scoring
7. Fraud detection analysis
8. Storage in secure document vault

Quality Thresholds:
- Image resolution: minimum 300 DPI
- File size: 50KB - 10MB
- Supported formats: JPG, PNG, PDF
- OCR confidence: minimum 85%
- Authenticity score: minimum 70%
                

2.3 Identity Verification Process

FR-005: Biometric Verification

Facial Recognition Algorithm:
1. Face detection and landmark identification
2. Liveness detection (blink, head movement)
3. Face quality assessment
4. Photo-to-ID comparison
5. Confidence score calculation
6. Anti-spoofing verification

Acceptance Criteria:
- Face match confidence: >= 85%
- Liveness score: >= 90%
- Image quality: >= 80%
- No spoofing indicators detected
                

FR-006: Data Cross-Validation

Validation Type	Data Sources	Validation Rules
Name Matching	Document OCR vs User Input	Fuzzy matching with 95% similarity threshold
Date of Birth	Document vs User Input	Exact match required
Address Verification	Document vs Postal databases	Address normalization and validation
Document Expiry	Document OCR extraction	Must be valid for at least 6 months

2.4 Risk Assessment and Screening

FR-007: Automated Screening Process

Screening Workflow:
1. Name-based screening against watchlists
2. Date of birth and nationality cross-checks
3. PEP (Politically Exposed Person) identification
4. Sanctions list verification
5. Adverse media monitoring
6. Risk score calculation
7. Decision routing based on risk level

Screening Sources:
- OFAC Sanctions Lists
- UN Security Council Consolidated List
- EU Consolidated List
- HM Treasury Consolidated List
- World Bank Debarred Entities
- Custom client watchlists
                

FR-008: Risk Scoring Algorithm

Risk Factor	Weight	Scoring Criteria
Geographic Risk	25%	Country risk rating (FATF, Transparency Intl)
Document Quality	20%	OCR confidence, authenticity score
Identity Verification	25%	Biometric match confidence
Screening Results	30%	Watchlist matches, PEP status, adverse media

Risk Level Classification:
- Low Risk: Score 0-30 (Auto-approve eligible)
- Medium Risk: Score 31-70 (Manual review required)
- High Risk: Score 71-100 (Enhanced due diligence)

Auto-Approval Criteria:
riskScore <= 30 AND 
documentQuality >= 85 AND 
biometricConfidence >= 90 AND 
noWatchlistMatches AND 
!isPEP AND 
countryRisk <= "Medium"
                

3. Business Logic Specifications

3.1 Application Status Management

BL-001: Status Transition Rules

Status Flow:
Draft → Submitted → UnderReview → [Approved|Rejected|RequiresAdditionalInfo]

Transition Conditions:
- Draft → Submitted: All required fields completed, minimum documents uploaded
- Submitted → UnderReview: Automatic upon submission
- UnderReview → Approved: Risk score <= threshold OR manual approval
- UnderReview → Rejected: High risk score OR compliance officer rejection
- UnderReview → RequiresAdditionalInfo: Missing/unclear documents

Automatic Transitions:
if (application.Status == "Submitted") {
    var riskScore = CalculateRiskScore(application);
    var screeningResults = PerformScreening(application);
    
    if (riskScore <= AUTO_APPROVE_THRESHOLD && !screeningResults.HasMatches) {
        application.Status = "Approved";
        application.ApprovedAt = DateTime.UtcNow;
        application.ApprovedBy = "SYSTEM";
    } else {
        application.Status = "UnderReview";
        AssignToReviewer(application);
    }
}
                

3.2 Document Processing Logic

BL-002: OCR Data Extraction

Extraction Process:
1. Image preprocessing (enhancement, rotation correction)
2. Text region identification
3. Character recognition with confidence scoring
4. Data field mapping and validation
5. Error correction and post-processing

Field Mapping Rules:
switch (documentType) {
    case "Passport":
        extractPassportData(ocrResult);
        validateMRZData(ocrResult.MRZ);
        break;
    case "DriversLicense":
        extractDLData(ocrResult);
        validateDLNumber(ocrResult.LicenseNumber, issueState);
        break;
    case "NationalID":
        extractNationalIDData(ocrResult);
        validateIDNumber(ocrResult.IDNumber, country);
        break;
}
                

BL-003: Document Authentication Logic

Authentication Checks:
1. Security feature detection (holograms, watermarks)
2. Font analysis and consistency checks
3. Image tampering detection
4. Template matching against known formats
5. Metadata analysis for manipulation signs

Authenticity Scoring:
var authenticityScore = 0;
authenticityScore += ValidateSecurityFeatures(document) * 0.3;
authenticityScore += ValidateFontConsistency(document) * 0.2;
authenticityScore += ValidateTemplate(document) * 0.3;
authenticityScore += ValidateMetadata(document) * 0.2;

return Math.Min(100, authenticityScore);
                

3.3 Compliance Workflow Logic

BL-004: Review Assignment Algorithm

Reviewer Assignment Logic:
public ComplianceOfficer AssignReviewer(KycApplication application) {
    var riskLevel = application.RiskAssessment.Level;
    var workload = GetReviewerWorkloads();
    var specializations = GetRequiredSpecializations(application);
    
    var eligibleReviewers = complianceOfficers
        .Where(r => r.RiskLevel >= riskLevel)
        .Where(r => HasRequiredSpecializations(r, specializations))
        .Where(r => r.IsActive && r.IsAvailable)
        .OrderBy(r => workload[r.Id])
        .ThenBy(r => r.LastAssignedAt);
    
    return eligibleReviewers.FirstOrDefault();
}

Escalation Rules:
- High-risk applications: Senior compliance officer required
- PEP matches: Specialized PEP reviewer assigned
- Complex cases: Team lead escalation after 48 hours
- SLA breaches: Automatic manager notification
                

BL-005: SLA Management

Risk Level	Review SLA	Escalation Trigger	Business Hours
Low	4 hours	6 hours	24/7 (automated)
Medium	24 hours	36 hours	Monday-Friday 9AM-6PM
High	48 hours	72 hours	Monday-Friday 9AM-6PM

4. Data Model Specifications

4.1 Core Entities

Entity: KycApplication

public class KycApplication {
    public Guid Id { get; set; }
    public string CustomerId { get; set; }
    public ApplicationStatus Status { get; set; }
    public DateTime SubmittedAt { get; set; }
    public DateTime? ReviewedAt { get; set; }
    public string ReviewedBy { get; set; }
    public string ReviewNotes { get; set; }
    
    // Navigation Properties
    public CustomerInfo CustomerInfo { get; set; }
    public List<KycDocument> Documents { get; set; }
    public RiskAssessment RiskAssessment { get; set; }
    public List<ScreeningResult> ScreeningResults { get; set; }
}

public enum ApplicationStatus {
    Draft,
    Submitted,
    UnderReview,
    RequiresAdditionalInfo,
    Approved,
    Rejected
}
                

Entity: KycDocument

public class KycDocument {
    public Guid Id { get; set; }
    public Guid ApplicationId { get; set; }
    public DocumentType Type { get; set; }
    public string FileName { get; set; }
    public string StorageUrl { get; set; }
    public DocumentStatus Status { get; set; }
    public DateTime UploadedAt { get; set; }
    public decimal ConfidenceScore { get; set; }
    
    // OCR and Verification Results
    public OcrResult OcrData { get; set; }
    public VerificationResult VerificationResult { get; set; }
}

public enum DocumentType {
    Passport,
    DriversLicense,
    NationalID,
    ProofOfAddress,
    SelfiePhoto,
    Other
}
                

4.2 Database Schema

Key Relationships

-- One-to-One: KycApplication ↔ CustomerInfo
-- One-to-Many: KycApplication → KycDocuments
-- One-to-One: KycApplication ↔ RiskAssessment
-- One-to-Many: KycApplication → ScreeningResults
-- One-to-Many: KycApplication → AuditLogs

-- Indexes for Performance
CREATE INDEX IX_KycApplication_Status ON KycApplications(Status);
CREATE INDEX IX_KycApplication_SubmittedAt ON KycApplications(SubmittedAt);
CREATE INDEX IX_KycApplication_CustomerId ON KycApplications(CustomerId);
CREATE INDEX IX_KycDocument_ApplicationId ON KycDocuments(ApplicationId);
                

4.3 Data Validation Rules

Field	Validation Rule	Error Message
Email	Regex: ^[^\s@]+@[^\s@]+\.[^\s@]+$	"Please enter a valid email address"
PhoneNumber	E.164 format validation	"Please enter phone number in international format"
DateOfBirth	Age between 18-120 years	"Customer must be between 18 and 120 years old"
PostalCode	Country-specific format validation	"Please enter a valid postal code for your country"

5. Integration Specifications

5.1 External Service Integrations

Watchlist Screening Services

Service: WorldCompliance API
Endpoint: https://api.worldcompliance.com/v1/screening
Authentication: API Key + OAuth 2.0
Rate Limit: 1000 requests/hour
Timeout: 30 seconds
Retry Policy: Exponential backoff, max 3 retries

Request Format:
{
    "searchType": "Individual",
    "firstName": "John",
    "lastName": "Doe",
    "dateOfBirth": "1985-03-20",
    "nationality": "US",
    "includeWatchlists": ["OFAC", "UN", "EU"],
    "includePEP": true,
    "includeAdverseMedia": true
}
                

Document Verification Service

Service: TrustID Verification API
Endpoint: https://api.trustid.com/v2/verify
Authentication: Bearer Token
Rate Limit: 500 documents/hour
File Size Limit: 10MB
Supported Formats: JPG, PNG, PDF

Verification Process:
1. Upload document to secure endpoint
2. Receive verification job ID
3. Poll for results every 5 seconds
4. Parse and store verification results
5. Clean up temporary files
                

5.2 Internal System Integrations

Customer Database Integration

CRM System: Salesforce
Integration Type: REST API
Authentication: OAuth 2.0
Sync Frequency: Real-time via webhooks
Sync Direction: Bidirectional

Data Mapping:
KYC.CustomerInfo.Email → Salesforce.Contact.Email
KYC.CustomerInfo.FullName → Salesforce.Contact.Name
KYC.RiskAssessment.Level → Salesforce.Contact.Risk_Level__c
KYC.Application.Status → Salesforce.Contact.KYC_Status__c
                

6. Performance Requirements

Metric	Requirement	Measurement Method
Page Load Time	< 3 seconds	Lighthouse performance audit
API Response Time	< 500ms (95th percentile)	Application Performance Monitoring
Document Processing	< 30 seconds per document	Processing time logs
System Availability	99.9% uptime	Health check monitoring
Concurrent Users	10,000 simultaneous users	Load testing scenarios
Throughput	1,000 applications/hour	Performance counters

7. Security Requirements

7.1 Data Protection

PII encryption at rest using AES-256
TLS 1.3 encryption for data in transit
Database encryption with transparent data encryption (TDE)
Key management using Azure Key Vault
Regular security audits and penetration testing

7.2 Access Control

Role-Based Access Control (RBAC):
- Customer: View own application status and documents
- ComplianceOfficer: Review and approve/reject applications
- Administrator: Full system access and configuration
- Auditor: Read-only access to all data for compliance

Permission Matrix:
Action                    | Customer | Officer | Admin | Auditor
--------------------------|----------|---------|-------|--------
Create Application        |    ✓     |    ✗    |   ✓   |   ✗
Upload Documents          |    ✓     |    ✗    |   ✓   |   ✗
Review Application        |    ✗     |    ✓    |   ✓   |   ✗
Approve/Reject            |    ✗     |    ✓    |   ✓   |   ✗
View Audit Logs           |    ✗     |    ✗    |   ✓   |   ✓
Configure System          |    ✗     |    ✗    |   ✓   |   ✗
                

7.3 Audit Requirements

Complete audit trail for all user actions
Immutable log storage with timestamp verification
Data retention for 7 years minimum
Regular backup and disaster recovery testing
Compliance with SOX, GDPR, and industry regulations