1. AML & KYC Compliance using Blockchain
Ashutosh Anand, Consultant
Mahesh Deosthale, Manager - Consulting
Cognizant Technology Solutions 1

2. Abstract
Blockchain has disrupted banking in this digital era. This technology is increasingly being adopted for settlements and payments systems. Adoption of Blockchain KYC registry is the next logical step. However, assuring Blockchain networks is no easy task and hence requires a completely different QA approach.
This paper, proposes an approach to navigate quality assurance for Blockchain innovations in areas such as KYC and AML, using a test model that validates business outcomes. The paper covers techniques to assure Blockchain adoption across multiple business processes - Account Opening, Customer Maintenance, Account Maintenance, Regulatory Reporting and Payments.

3. Index Blockchain Technology – Key Constructs
Problems & Opportunities for Blockchain Testing
AML / KYC Legacy Solution Testing
AML / KYC Blockchain Solution Testing
Blockchain Testing Touchpoints
Blockchain Testing – ABC Framework
Blockchain Testing – Anticipated Value Proposition
Blockchain Testing Conclusions
Appendix

4. Blockchain Technology – Key Constructs
A chronological record of transactions in a distributed ledger shared across a business network
Business logic embedded in ledger that can be triggered when certain conditions are met
Distributed Storage Ledger
Smart Contracts
All participants agree to a network verified transaction by consensus
Cryptography is a central feature, transactions are secure, authenticated & verifiable
Transactions are broadcasted through the network and travel from one node to another
Network Consensus
Security
Transaction stored in the Distributed Ledger
Lower Cost
Increased Transparency
Greater Security
Faster Settlement 4

5. Problems & Opportunities For Blockchain Testing
Fast Pace of Blockchain Tech Innovations
Expanding Blockchain Business Use cases
Blockchain Tech is fast moving to be mainstream technology
Lack of Blockchain Testing Expertise
Lack of Best Practices, Models, Tools etc. within Blockchain Testing area 5

6. Legacy Solution Testing
AML / KYC
Legacy Solution Testing
Client Onboarding Request
Client Due Diligence
On going mgt. /Exiting
AML / KYC Legacy
Solution
Data Systems
CRM Systems
External Interfaces
Consumer Systems
Reporting Systems
Customer
Onboarding Systems
Back Office Specialist
Customer Identification Data
Compliance Check
Data Validation
Customer Due Diligence Check List
External Due Diligence
KYC Approved
KYC Registry
Simplified KYC/ AML Flow
Key Concerns
Suboptimal Test Strategy- Test Effort duplication / redundancy
Inadequate Automation Testing
Lack of Integration Testing due to Need Based Testing
Testing done in silo environments
AML / KYC Legacy
Solution Testing
Functional testing
Non- Functional Testing
Other Testing
Testing Focus
Verification of KYC/AML business rules
Verification of KYC/AML data through Business and Product lines
Integration Testing of multi sourced data, Application touchpoints
Verification of KYC/AML data streamlining through Database Testing
Verification of AML/KYC Business rules, data transfer and transformations through System Test, Integration Test etc.
Targeted Volume Testing
Testing to validate responsiveness and stability of the system.
External Interface Testing to validated shared KYC registries
Database Testing to ensure validity of AML KYC datasets 6

7. AML / KYC Blockchain Solution Testing
Functional Testing
Non- Functional Testing
Other Testing
Testing Focus
Verification of KYC/AML business rules through Smart Contracts
Security Testing- verification of Blockchain hashing and encryption
Verification of Blockchain consensus, Transaction state - one version of truth through functional, database and API Testing
Verification of AML/KYC Business rules through Smart Contracts
Verification of Blockchain Consensus
Blockchain Platform performance Test
Blockchain scalability & stability Test
Blockchain Load Test
SOA/ API Testing
Security Testing- Verification of Hashing & Encryption
User Interface and Mobile
App Testing
Suboptimal Test Strategy – Lack of Blockchain knowledge base within Testing universe
Lack of Blockchain Testing tools
Lack of Best Practices optimized for Blockchain Testing
Lack of standardization in Blockchain Testing
Key Concerns
Blockchain Platform
Ref Data Systems
CRM Systems
Reporting Systems
External Interfaces
Organizational Internal Systems
Customer
Onboarding Systems
Back Office Specialist
Customer Identification Data
Organizational Internal Compliance Check
Data Validation
Customer Due Diligence Check List
External Validation
Central KYC Registry
Blockchain Network
Simplified Blockchain Based KYC/ AML Flow
AML / KYC Blockchain
Solution Testing 7

8. Blockchain Testing Touchpoints
Transaction Processing
Transaction State
Assets on Blockchain
History & Audit
Smart Contracts
Interaction with APIs
Vault / Wallet
Consensus Mechanism
Validation of Transactions life cycle through Apps/ Vaults / Wallets
Validation of Transaction state across various lifecycle events
Validation of Event notifications
Validation of Transaction message verification (Signing)
Validation of tokenization of assets on blockchain
Validation of Business Rules through Smart Contracts
Validation of interface with APIs for Access control, payments, track and trace, balances etc.
Validation of secure registry and audit of transactions
Validation of Transactions for timestamping etc.
Blockchain Protocols (Permissioned/ Permission less)
Blockchain Platform (Corda / Hyperledger /Ethereum /Ripple Etc.)
Leverage Test Delivery Framework
Blockchain Reusable Test Asset Development
Leverage Blockchain Test Tools
Test Delivery
Components of
Blockchain
Testing
Test Scaling
Test Types
Blockchain Knowledge Management
Blockchain Test Best Practices Implementation
BA-QA-Tech Test Delivery
People, Operations, Governance & Reporting
Test Excellence
Test Types
Blockchain Access Testing
Blockchain Secure Hash Algorithm Testing
Security Testing
Shared Ledger Database Testing
Smart Contract Validation Testing
Blockchain Node Consensus Testing
Functional Testing
Blockchain Platform Performance Test
Blockchain Scalability & Stability Test
Blockchain Load Test
Non Functional Testing
Blockchain Cloud Testing
SOA/ API Testing
User Interface & Mobile Apps Testing
Other Testing
Blockchain Test
Tools
Use case Specific Details
Business
Of Implementation
Details
Adapt Blockchain Test Accelerators
Blockchain Wallet Signature Testing
Differentiated Blockchain Test Delivery
Test Stream Collaboration
Cross
Components of
Test
Service 8

9. Blockchain Testing: Align-Build-Capabilities Framework
Blockchain QA-IT-Business Process Convergence
Enhanced Blockchain Quality Assurance
Target Blockchain Strategy Evaluation
Integration between Blockchain & Augmenting Technology
Verification of Smart Contract & Consensus Mechanism
Integration of Blockchain with Existing Infrastructure
Distributed Ledger Services Verification
Align
Blockchain Adoptions/Transformations
Capabilities
ABC
Capabilities
Blockchain Platform Services
ABC
Blockchain Prototyping
Build
Blockchain Event Streams Verification
Blockchain QA Knowledge
DApp
Test
Scenarios
Blockchain Test Tools and Accelerators Development Support
Blockchain Platform Agnostic Test Scenarios
Blockchain Skilled Resource Pool
Digital Asset Agnostic Functional Test Scenarios
TOKENS
Blockchain Knowledge Libraries 9

10. Blockchain Testing ABC Framework - Anticipated Value Proposition
Blockchain innovation and investments are growing multifold. We envisage Hugh traction with need for strategic Blockchain Test Delivery Models, skilled resources in near future and ABC Framework is our approach to tap the Blockchain Testing Market potential of about $100 MM. 10
Source: McKinsey & Company

11. Blockchain Testing Conclusions
ABC Framework Based Blockchain Testing
Value Delivery Through Blockchain Testing
Blockchain Tech Initiatives / Evolution
Blockchain As –a-Service (BaaS)
Blockchain Cloud Service
Expand Blockchain capabilities with infrastructure services like storage, middleware, messaging etc.
Focused alignment of Blockchain Testing with Blockchain As-a-Service, Fintech innovation , Digital and Regulatory initiatives
Improvement with Time to Market
Improvement
in ROI
Targeted Blockchain Testing solution building through Blockchain Test artefacts, accelerators, Tools, etc. which can be used across different Blockchain use cases
Efficient collaboration between Customer business streams and Blockchain Testing stream
Better Blockchain Test Quality Management
Blockchain- Fintech & Regulation
Blockchain- Digital & IOT
Improved Customer Trust
Better Business Blockchain Process Assurance
Heightened Convergence of Customer Centric Blockchain & Digital Strategies
Blockchain Tech Aligned QA Resources
Improved Blockchain Testing Insight Utilization
Improved Quality & Efficiency
Blockchain network on a private, virtualized environment
Regulatory and Fintech Blockchain Sandbox developments for enabling product testing
Innovative Internet of Things (IoT) and targeted Blockchain Dapps.
Support
Value

12. References & Appendix

13. Build Blockchain Knowledge Libraries
New Developments
Bottom up creation of Blockchain knowledge artefacts
Enhancements
Enhancing existing Blockchain knowledge base, adding new resources
Conformance
Conforming to customer Blockchain usecase ensuring interoperability
Re-Architecture
Restructure existing Blockchain knowledge base and leverage latest Blockchain trends

14. Blockchain Test Capabilities
Blockchain Ledgers
Blockchain State / Events
Tokenization of Asset
Encryption & Hashing
Blockchain Consensus
Corda
External APIs
Register Users
Query Blockchain
Issue Transactions
Blockchain Key & Identity Services
Blockchain Applications
Consortium or Private Blockchains
Public Blockchains
Native Tokens
Asset-backed Tokens
Unique ID for Asset
Smart Contract
Web Applications
Blockchain Native Applications
Wallets / Vaults
Cryptographic hashing
Immutable records
Secure identification of assets
Consolidated, consistent dataset
Proof-of-Work
Proof-Of-Stake
Byzantine fault tolerance
Self enforcing contracts
Digitized Analog Contract
Real-time Auditing of Transactions
Common Trusted Database
Storage algorithms (Merkle Trees, MerklePatriciaTrees, Linked List)
Transparency & Verifiability
Proof of distribution
Basic Data Model for Blockchain
Blockchain Solutions/ Providers
Transactions
Blockchain Frameworks/ Platforms
Blockchain Underpinnings

15. Author Biography Ashutosh Anand, Consultant
Business Consultant in Banking & Information Technology with more than 5 years of experience in Business Analysis, Project Management, Relationship Management and QA roles. Demonstrated expertise in Banking, Financial Services, and Business Analysis Functions. Has varied work experience and certifications in Wholesale Banking, Investment Banking, Retail Banking and IT.
Mahesh Deosthale, Manager - Consulting
18+ years of IT experience with 13+ years into software testing and quality assurance specializing into Test Consultancy, Test Management and Test Solutions architect. Master of Business Administration with Dual Specialization in Banking Management and Project Management. PRINCE2 Practitioner, ISTQB Advance Test Manager, Technical & Functional Test Analyst certified 

16. Thank You!!!