Proof of Address: Why, When & How?

According to the United Nations Office on Drugs and Crime the amount of money laundered each year is 2% to 5% of global GDP. In order to combat money laundering and terrorist financing, the Know Your Customer (KYC) procedure was introduced, which is a part of a broader Customer Due Diligence (CDD) process. Every bank or financial institution has to implement KYC into its onboarding process. KYC, however, often includes address verification. What is Proof of Address (PoA)? Why and when should you use it?

What is address verification?

Address verification is a process, during which you make sure that a person lives where they claim to live. It also ensures that address data is accurate and up to date. Address verification services can also check that the address is accurate and exists as well as whether it is a residential or a commercial building.

Why and when do you need the address verification?

Verifying your customer addresses saves costs and gives you certainty.

How is it done?

A good address verification process benefits user experience.

1. A visit by a financial institution representative
2. A paper letter that is sent to the address with a One Time Password (OTP)
3. Proof of Address (PoA)
  1. A user uploads a PoA. This is usually a utility bill, a bank statement or governmental correspondence.
  2. Documents get checked for validity. BASIS ID uses machine learning algorithms and special filters to identify unofficial or falsified documents.
  3. Data is matched to user’s input. Using OCR, the data from the PoA is read and compared to the user’s input. At this moment document is also checked to be issued less than 3 months old.
  4. The address gets a final verification. Using multiple databases the address is checked for validity. Additionally, the algorithm determines if the building is residential.

Working with PoAs

The process of address verification is more difficult than it might look at first glance. Unlike government-issued passports and ID cards, it is relatively easy to alter documents that are usually used as PoA. Different jurisdictions allow different documents that can be used as a PoA but here’s a list of the more common ones:

  1. Bank statement
  2. Governmental correspondence

Complicated yet still important

The process of address verification is not simple yet it is still required to make sure that you are mitigating possible risks related to money laundering and terrorist financing. The biggest issue with the address verification is to identify whether the PoA is real or not. Luckily BASIS ID has a robust machine learning technology along with Compliance Officers with years of experience who make sure that there’s no possibility for criminals to get through the address verification while providing the smoothest possible experience for your customers.