With KYB now the legally-required norm for many B2B relationships, companies have to do background checks on businesses they onboard to ensure they are legitimate and pose acceptable levels of risk. In the US, the prime place to do that is at Secretary of State offices, since most US businesses have to be registered at the state level.
Unfortunately, getting business information online from Secretary of State portals is filled with pitfalls: non-standardized user interfaces, account registration requirements, and fee payments. But there’s a better way to get business information from Secretary of State online portals: using an API.
This article will explain what a Secretary of State API is, what kind of businesses would typically use one, and what the advantages of using one are.
Let’s first talk a bit more technically about what Secretary of State APIs are and how they work.
A Secretary of State API is a software intermediary that allows an application to query business-related data directly from any US Secretary of State office. This is often used by companies that want to validate a business’s details for identity verification and risk assessment purposes.
The main advantage of using one is that it forgoes the need to search for this information at each Secretary of State office individually. This is a time-consuming process that often requires registering for multiple separate accounts and repeatedly paying fees for searches.
An SoS API allows for inputting known details about a business, selecting the types of information objects to return, and then running a query. The API will then search each state’s online SoS portal for the information, and then report on what it finds. It can report on things like which SoS portal(s) the information was found in, whether the information is from an active or inactive business, or whether the business is missing registration details. It can also check information it returns against the input data for inconsistencies, and flag those.
So what kinds of companies would want SoS integration via API for their systems? Plenty, as it turns out. Any company that wants or needs to regularly work with other businesses as clients or partners – and thus has to verify their identities and assess their risks as per KYB regulations – can find having API access to Secretary of State portals useful.
Here are a few industries in which SoS API use is common.
One of the big draws of challenger banks over traditional banks is that they tend to onboard and serve customers with less friction and greater speed. However, this shouldn’t come at the expense of security and regulatory objectives. Getting information quickly through a Secretary of State API helps neobanks onboard business clients or partners faster, helping them maintain their agility advantage while still remaining compliant.
In many places in the US, businesses have to be registered with the Secretary of State before they can open commercial bank accounts. Banks need to be able to rapidly pull up the necessary information and documentation from the SoS office to verify this for each applying business. Using an API helps banks get this information quicker, reducing the friction involved in onboarding. This leads to more – and happier – business customers.
Companies that offer corporate loans need to know that they’re dealing with legitimate businesses. They also need to know the degree of risk each business represents to determine how much money to lend, how much interest to charge, and other terms of the agreement. Being able to access Secretary of State records through an API helps lenders quickly verify that a business is properly registered, as well as check other information that may indicate risk.
Insuring businesses is another high-stakes industry where there is little room for error. Insurers must make sure businesses that are seeking coverage are real, operating legally, and not presenting an unacceptable level of risk. Having a Secretary of State API helps insurers get the information they need to verify businesses swiftly and from trusted sources.
How does a company that runs a marketplace know a business that wants to sell on its platform is trustworthy? Having Secretary of State business verification at its fingertips through an API can certainly help. This allows marketplace administrators to quickly check an applying business for registration documentation indicating the business is legally allowed to operate. It also allows for checking other information that helps administrators determine that a business won’t present an elevated risk of fraud.
Like marketplace administrators themselves, payment service providers also need to know they aren’t indirectly allowing illegitimate businesses to rip people off. If they have access to SoS data via API, it’s another layer of verification and trust between all parties in a transaction: merchants, payment providers, customers, and marketplace administrators (if the merchant is hosted on a larger marketplace).
So why use a Secretary of State API to fetch business data, as opposed to doing the process manually or using other sources? There are several advantages to using an SoS API; here are five of them.
Most US businesses are legally required to register with at least one Secretary of State office before they can begin operations. So going right to a Secretary of State portal to verify a business is the surest way to know if a business is officially registered or not.
Looking up information on SoS portals individually can be a hassle. Each state’s SoS portal is designed a bit differently, so it can take time to get used to the interface. Most portals also require registering for an account and paying fees before conducting searches. An API bypasses much of this extra work by pulling data directly from each state’s SoS portal at the same time.
Time is of the essence in today’s fast-paced world. Onboarding business clients or partners is no exception, especially for large businesses who want to do so at scale. Using a computer-powered API to instantly pull business information from SoS portals helps companies verify businesses faster than if they looked up this information manually.
Besides being time-consuming, looking up business information manually increases the risk of human-caused mistakes. A compliance team member may accidentally input or copy information incorrectly, or even not be able to find a piece of critical information altogether. An API, if set up correctly, will be able to find and retrieve the precise information you’re looking for. It may also be able to deal with errors in data input (like typos or alternate spellings).
There’s another benefit of an API being able to automatically pull business data instantly from multiple SoS portals at once. The less time business verification takes, and the less compliance agents have to complete tasks manually, the more time compliance agents have to investigate critical cases or work on other projects.
Individual states can sometimes have APIs for querying business information from their Secretary of State offices (like this one from Iowa). But the US federal government doesn’t have a master API for querying all state SoS offices at once. Hence the need for third-party software to do this job. Here are some of the top choices.
Best for: Adding risk assessment on top of business verification
Providing tools for both verifying and underwriting business customers, Middesk goes beyond fetching the information needed to validate a company from Secretary of State portals. It can also fetch information related to watchlist statuses, digital footprint, UBOs (via Socure), industry classification, litigations, bankruptcies, and more. So you can find out not only if a company is representing itself truthfully, but also how risky it is to start a relationship with. You can also get this information via an API, a visual dashboard, or both – whatever is most convenient for your organization.
Best for: Getting US data quickly and affordably
Cobalt Intelligence is a SoS API provider that offers over 20 attributes of up-to-date business information from Secretary of State offices in all 50 US states. However, it doesn’t appear to cover the District of Columbia, and not all attributes are covered for all states.
Best for: Finding information on business leaders and owners
OpenCorporates is a worldwide database of information on businesses. It contains data on over 200 million companies and over 300 million corporate officers from over 140 countries and territories. However, its data refresh times can be slow in some places – even in the US – so its data can be stale and incomplete. Its API is also rather expensive to run.
Best for: Secure, tamper-resistant verification of business information and documents
DIRO provides an API for verifying business documents and information. It draws from over 50,000 data sources across over 195 countries, including Secretary of State offices, financial institutions, utility companies, and other government agencies. It also provides a secure environment in which to validate business documents, so there’s less chance of them being faked or altered.
Middesk has a directory of the Secretary of State online portals for all 50 US states, including DC. Our Business Verification tool is a much faster, accurate, and cost-effective method to check state Secretary of State offices for business information.
In addition to registration details like names, addresses, and TINs, you’ll also get information about a business’s UBOs (via Socure), sanctions lists status, registration documentation, industry classification, web presence, litigations, and more. This lets you go beyond verifying if a business is real and legally registered; it also allows for evaluating how much risk a business presents so you can decide if starting a relationship with that business is a safe idea.
To learn more, contact our sales team.