Address is a crucial indicator in authenticating online transactions. As banks move toward complete digitisation, they are facing a surge in counterfeit accounts. Criminals use empty houses or inaccurate location details as supporting proof of their identity. This hinders banks’ capability to identify imposters and their malicious intentions.
As of 2022, banks recorded an increase of 71% in losses to different scams. Considering this, financial institutions must integrate efficient identity verification solutions that offer adequate accuracy to validate address. Being an integral part of fraud prevention in the UK, location details help remove crime risks, deter counterfeit account creation, prevent payment scams, and improve user experience.
This article entails how address verification systems help banks run smoothly within jurisdiction of the UK.
The Need for Banks to Check Proof of Address in UK’s Jurisdiction
Regulatory bodies are continuously making efforts to ramp up game against fraudsters and put forth necessary obligations. Similarly, within the UK, address verification is a part of legal AML/KYC standards which mandate banks require complete information of every customer before allowing them to access financial services. Furthermore, this requirement is tougher for individuals who recently moved to this region than those who are born residents.
Banks require efficient address verification systems to add an extra layer of security during customer onboarding. Furthermore, AI-powered IDV solutions help them comply with evolving UK regulations.
Meaning of Address Proof for Banks
Banks operating within jurisdiction of the UK are subject to certain fraud prevention protocols. These obligations mandate financial service providers acquire proof of residency to verify address before opening an account. The process involves asking for identity documents from customers including ID cards, passports, rental or ownership agreements, insurance papers, utility bills, and credit/debit card statements. Later banks validate these proofs against global databases to identify fraud.
Role of Address in the Account Opening Process
Address verification is a pivotal component of banks’ security measures. They validate proof of residence to stay put with KYC/AML regulatory standards. Furthermore, verification of address helps banks ensure that their services are not used for illicit activities such as terror funding, money laundering, and others. With proof of residence, banks can accurately flag accounts to respective customers. Furthermore, address serves as additional evidence in customers’ identity claims.
Verification of Address for Banks – Documents that Count as Proof
Regulations regarding online address verification vary depending on jurisdiction. However, within the UK, document requirements are same for every bank which includes:
- Utility bills such as electricity, internet, water, gas, and others linked to owned property
- Government-issued letters justifying the claim of address details
- Lease, ownership, or rental agreement
- Credit/debit card statements
- Bank statements
- Residential proof with signatures of tenants or landlords (for cases excluding property ownership)
- Address verify proof from employers
Depending on banks’ security policies, they can ask for additional documents to further authenticate identities of customers. However, the obligation remains that none of the proofs should be older than three months. Documents should also have authenticity characteristics such as signatures, stamps, watermarks, holograms, and others.
Examples of Alternative Address Proofs
Considering the increase in document forgery and identity theft, banks often ask for additional supporting evidence to validate address. Where fraudsters can compromise almost every proof, they might not be able to camouflage all of them. Therefore, banks can ask for any document that compromises address details irrespective of their type to discourage fraud attempts.
Some other examples of documents banks commonly use for verification of address include the following:
- Drivers’ License
- ID Cards
- Tax Records
- Pension or Educational Grant Papers
Steps Involved in Proof of Address Validation
Banks have been using manual identity verification methods to validate address where a human interpreter cross-checks the authenticity of documents. This process is highly inclusive of errors and also lacks accuracy as well as time effectiveness. Moreover, fraudsters have come up with sophisticated forgery techniques that are difficult to identify with conventional methods.
Banks require efficient AI-powered IDV algorithms while verifying an address to ensure they are not leaving any loopholes. These robust proof of residence validation methods automate account opening processes by deploying OCR technology for data extraction. Furthermore, with ML algorithms, banks can leverage additional layers of accuracy against fraud attempts.
Online address verification further involves the following steps:
- Collection of data through an online form
- Submission of documents as evidence
- Data extraction through OCR
- Real-time address verification by cross-matching details on documents
- Cross-verification through global registers and financial databases
- Geo-location tagging
Summarising the Facts
Loopholes in banks’ security systems can drive them to regulatory scrutiny by UK’s regulatory authorities. Therefore, banks must integrate efficient IDV mechanisms for verifying address. These AI-powered residential proof checks authenticate documents by cross-matching them across global databases. Hence, online address verification helps banks stay a step ahead of fraudsters.