Proof of Address Verification: A Comprehensive Beginner’s Guide

What is Proof of Address?

Proof of address, also referred to as proof of residence, is an essential component of the customer identification program, one of the 4 pillars of KYC. It confirms a person’s registered home address, ensures that the company can be correctly matched, and verifies the customer’s identity. Financial institutions, in particular, require proof of address to strengthen security systems and facilitate customer communication. This step is required when opening a bank account or gaining access to specific financial services.

Proof of residential address is critical because it serves as an entry ticket to a variety of essential services. Proof of address is required for everything from routine tasks like opening a bank account to major milestones like obtaining a passport. The presentation of this document is also required for government services such as obtaining a driver’s license or accessing vital benefits such as food stamps.

Criteria of Proof of Address

To be considered a valid Proof of Address document, it must meet the following requirements:

1. Originate from a well-known institution (for example, a utility company, bank, or government entity).
2. Display your full name as well as your current residential address.
3. Show a recent date, usually within the last three months.
4. Be recognized and accepted by the organization or service requesting address verification.

Which Documents are Considered Proof of Address?

Many documents can serve as proof of correct address, allowing people to meet this requirement with greater flexibility. The following documents are commonly accepted as proof of correct address:

• Bank Statement: A bank statement that confirms financial transactions and your account status.
• Utility bills: Payments for essential services such as gas, electricity, water, or internet that are connected to your property.
• Official Agreement: Letters received from a recognized public authority or public servant, as well as any government-issued correspondence bearing your address.
• Lease Agreement: A current housing agreement signed by a landlord and tenant agreeing to live in their home.
• Credit Card Statement: A statement issued by your credit card company that details your purchases and financial activities.
• Employment Certificate: A document issued by your employer that confirms your residential address.
• Property Purchase Deed: A legal document confirming property ownership.
• Mortgage statements: This statement contains important mortgage loan information such as the current loan balance, interest rate, payment due date, and a breakdown of each payment into principal and interest.
• Government-issued documents: For example, tax documents, benefits statements, or vehicle registration)
• Council tax bills or statements: If you are registered for council tax, your council tax bill can be used as proof of address.
• Furthermore, as long as they contain your address, the following documents can be used as proof of address:
• Passport: As proof of address, an official identification document is usually accepted.
• Identity Card: A government-issued identification card that includes your address.
• Driving license: In some cases, a driver’s license can also serve as proof of address.
• It is important to note that in some areas, it is illegal to use the same document to prove identity and proof of residence, necessitating the issuance of separate documents for each purpose.

Also, some documents are not accepted as proof of address.

• Receipts and Invoices
• Handwritten letters
• Documents older than 3 months
• Pension statement
• Documents without dates

Geolocation- as Proof of Address:

Although regulators have not yet fully endorsed the use of geolocation data as residential proof, it gives businesses an additional choice when conducting customer verification procedures. The Financial Action Task Force (FATF) has recognized its potential in combating money laundering and terrorist financing in its  “Guidance on Digital Identity” and “Opportunities and Challenges of New Technologies for AML/CFT”. To pinpoint a user’s location, this method uses a variety of data points, including GPS, IP data, Wi-Fi positioning, and cell tower trilateration. To ensure compliance with data privacy regulations, businesses must prioritize obtaining user consent. Geolocation-based proof of address can result in cost savings, fraud prevention, and faster verification processes, particularly when checks for excluded high-risk countries are automated.

How to Verify Proof of Address Documents?

When it comes to proof of address verification, businesses have two choices: online or offline (paper) verification. Depending on the methods used, the cost of a full Know Your Customer (KYC) verification ranges from $13 to $130 or more, which has a significant impact on revenue.

Also, a hybrid approach combining pre-KYC procedures is an option. These methods can include things like passive identity verification via digital fingerprint scanning. This system works best with customers by verifying information such as their email address and phone number. A significant advantage is that this analysis occurs quietly in the background, allowing customers to have a pleasant experience without wasting time or money.

Suppose you work for a financial institution where you are in charge of verifying proof of address documents as part of their anti-money laundering (AML) compliance process. Here’s an example of how these steps work:

1. Obtain the client’s address, as well as the most recent payment. To begin, check the invoice’s date of issue to ensure that it is valid and within the required period, which is usually no more than three months.
2. Double-check the document to ensure that it contains the customer’s first and last name, as provided during account registration.
3. Examine the document for common signs of forgery or alteration. You can, for example, look for inconsistencies in characters, spacing, or evidence of document tampering.
4. This is the most important step. You carefully examine the document’s home address and confirm it with an online search engine or trusted database. If the address on the proof of address is insufficient, you must contact the customer to obtain the necessary information for a complete and correct address.

Following these steps will ensure that the proof of residence form is real and that the customer’s home address is valid and matches the written information, thereby contributing to strict AML compliance.

As technology advances, so do the market services, and proof of address is no exception. Modern businesses are increasingly abandoning time-consuming manual proof of address procedures in favor of efficient automated Address Verification services to streamline onboarding and simplify compliance.

When Is Proof of Address Required in Business?

Proof of address verification is required for many financial services, including cryptocurrency, e-commerce, banks, and fintech firms. Customers must provide Proof of Address (PoA) documents to substantiate their proof of address letter in the following scenarios to comply with AML regulations:

Transaction Thresholds

When customers exceed predetermined transaction thresholds imposed by AML requirements.

Service Registration

As part of AML compliance, clients may be asked to provide additional PoA documentation during the onboarding process.

Account Openings

Customers residing in high-risk areas or countries may face restrictions due to regional compliance requirements. Verification of their proof of address ensures compliance and reduces the risk of fraud.

Role of Proof of Address in KYC

Proof of address, along with date of birth and first and last name, is an essential component of identity verification (IDV) and the KYC (Know Your Customer) process. Proof of address verification is frequently a legal requirement that extends beyond financial institutions and spans multiple industries where fraud, money laundering, and identity theft are significant concerns. KYC regulations apply to sectors such as betting sites, exchanges, and cryptocurrency companies, and they frequently necessitate ongoing Customer Due Diligence (CDD) procedures. While there are online and offline (paper) methods for proof of address verification, the digital identity verification and e-KYC industry is growing and is expected to reach $16.7 billion annually by 2026.

Finally, proof of address allows customers and businesses to efficiently manage the verification process. Our KYC/AML companies comparison can advise you on the companies that use AI to analyze documents to ensure they are valid and genuine.