NFT-Based KYC Verification on Private Blockchain
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Solution Overview
Problem
Current KYC and AML processes are fragmented, resource-intensive, and inefficient, requiring significant human input and resulting in slow compliance, high costs, and inadequate detection of money laundering activities.
Innovation Solution
The implementation of NFT-based mechanisms using private blockchain technology and smart contracts to digitize and automate KYC/AML processes, reducing duplication across departments and institutions, enabling the reuse of verification results, and enhancing transaction monitoring.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If traditional KYC/AML processes are used with significant human input and paper-based procedures, then compliance verification can be performed, but the process becomes fragmented, duplicative, and resource-intensive across departments and institutions
Solution Approach 1:
The patent merges KYC/AML verification processes across multiple departments and institutions into a unified blockchain-based system. Verification results are consolidated into a single NFT that can be shared and recognized across the entire network, eliminating the need for separate verification processes at each institution and reducing process fragmentation.
Solution Approach 2:
The NFT-based verification result serves multiple functions across different institutions and departments. A single verification NFT can be used for KYC, AML, and CTF purposes across multiple financial institutions, replacing the need for institution-specific verification processes and enabling universal acceptance of verification results.
2Reliability
If traditional KYC/AML processes with significant human input are implemented, then compliance can be achieved, but approval becomes slow and potential business is lost
Solution Approach 1:
The system enables self-service KYC/AML verification through automated smart contracts that execute verification processes without requiring manual intervention. The NFT-based verification results can be automatically validated by institutions through smart contract execution, eliminating the need for manual review processes and significantly speeding up approval times.
Solution Approach 2:
KYC/AML verification is performed in advance and the results are stored as NFTs that can be immediately presented to multiple institutions. This preliminary verification action eliminates the need for repeated verification processes when customers interact with different institutions, as the pre-verified NFT serves as immediate proof of compliance.
3Reliability
If traditional paper-based KYC/AML compliance processes are used, then verification can be conducted, but resource consumption is high and compliance is insufficient
Solution Approach 1:
The patent replaces paper-based mechanical verification processes with a digital blockchain-based system. NFTs store verification results in an immutable digital format that can be instantly validated by any institution on the network, eliminating the need for physical document handling, storage, and manual verification processes, thereby significantly reducing resource consumption.
Solution Approach 2:
The verification result is copied into an NFT that can be distributed and validated across multiple institutions simultaneously. Instead of each institution maintaining separate verification records and processing duplicate verification requests, the single NFT copy serves as the source of truth for all participating institutions, reducing overall system resource consumption.
4Reliability
If multiple KYC processes are conducted across different departments and institutions, then comprehensive verification is achieved, but computational and network resources are wasted
Solution Approach 1:
The patent combines multiple verification processes into a single unified KYC/AML verification that results in one NFT. This merged verification approach maintains comprehensive checking across all necessary compliance areas while ensuring that the verification result is recognized and accepted by all participating departments and institutions, eliminating redundant verification activities and associated resource waste.
Data Source
AI summary
The present disclosure generally relates to the fields of computing, data processing, cryptography, blockchain technologies, tokenization and non-fungible tokens (NFTs), identity verification, account verification, information security (InfoSec), and fraud prevention technologies, and in particular, to technologies for creating NFTs for know your customer/client (KYC) and anti-money laundering (AML) purposes. A KYC NFT service receives a set of user data items associated with a user, verifies each user data item of the set of user data items, and generates a set of hashes, wherein each hash in the set of hashes corresponds to a verified user data item in the set of user data items. The KYC NFT service mints a KYC NFT that includes each hash in the set of hashes, and updates a smart contract to include the KYC NFT. Other embodiments may be described and/or claimed.