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Best practices for KYC/AML

2022-08-05
3 min read

Guide to Proof of Address 2022: Why It’s  Necessary and When It’s Mandatory

Everything you need to know about proof of address—one of the basic requirements for KYC checks.

The standard Know Your Customer (KYC) check requires obtaining proof of identity (PoI) and proof of address (PoA). Businesses request PoI and PoA to establish user identity as part of their Anti-Money Laundering (AML) obligations. Let’s get into the finer details of proof of address and when it’s mandatory for businesses to gather it. 

What is the address verification process? 

If a business falls under AML regulations, they must not only verify user identity but also establish proof of address. This allows businesses to effectively cut off residents from restricted jurisdictions.

When should businesses verify a user’s address?

Address verification is a requirement in most jurisdictions with a few exceptions, such as Hong Kong. This typically obligates financial services, fintechs, payment and e-money institutions, and other similar businesses to verify proof of address*.  Accordingly, clients need to provide documents establishing their address when registering with such services or when performing a transaction that exceeds a certain amount (usually specified by AML law). 

*The national AML laws of a given jurisdiction contain full lists of AML-obligated businesses required to establish proof of address. 

What is proof of address?

Proof of address (PoA) is evidence that a user truly resides at their claimed address. The conventional approach to proof of address is collecting documents requiring manual or semi-manual review, such as utility bills or bank statements.

What can be used as proof of address?

Here are some of the most common documents that count as valid proof of address:

  1. Bank statement;
  2. Utility bill for gas, electricity, water, internet, etc. linked to the property;
  3. Letters from a recognized public authority or public servant/any government-issued correspondence;
  4. Current lease agreement with signatures of the landlord and the tenant;
  5. Credit card statement;
  6. Employer’s certificate for proof of residence;
  7. House purchase deed.

*For 1) and 2), it’s common practice to reject proof of address documents older than 3 months. 

Alternative proof of address examples

A number of documents can be accepted as a valid proof of address if they contain an address. This includes:

  1. Passport;
  2. Identity card;
  3. Driving license.

In some jurisdictions, it’s forbidden to use the same document to establish both proof of identity and proof of residence. 

How to check  proof of address

Below you’ll find the typical steps to manual proof of address verification:

  1. Accurately inspect the document for common patterns of graphics editing and other types of fraud;
  2. Check if the document is valid (the validity period may vary depending on the jurisdiction);
  3. Make sure that the document has the person’s full name on it;
  4. Check if the document contains the user’s claimed address (the more specific the better) and confirm its existence through search engines. If the applicant resides in an apartment building but does not provide a unit number, the compliance officer must request them to specify it. 

Proof of address is often not readily available, as people change their residences frequently. Therefore, it may take some time and effort for businesses to obtain a user’s proof of address. 

Also, some proof of address documents have no security markings or photos, and therefore can easily be forged. Besides, many of these documents are non-standardized and may require additional checks, which leads to longer onboarding time and, consequently, lower pass rates. 

Geolocation as proof of address

Geolocation data as proof of address might be a convenient and time-saving alternative to obtaining physical documents. Although regulators haven’t yet accepted geolocation-based proof of address solutions on par with conventional, document-based approaches, businesses can still consider this as a complementary measure during the CDD/KYC process. The Finanсial Action Task Force (FATF) has already mentioned geolocation-based proof of address in its “Guidance on Digital Identity” and “Opportunities and Challenges of New Technologies for AML/CFT”.

A geolocation-based solution can detect the user’s location using a number of data points:

  • GPS data;
  • IP data;
  • Wi-Fi positioning;
  • Cell tower trilateration. 

Before accessing this kind of data, businesses must obtain user consent to meet GDPR and other data privacy laws requirements.

Geolocation-based proof of address is effective in terms of saving money and preventing fraud. Also, it can speed up the verification process by automatically determining if an address falls within the excluded countries list.

Simplify proof of address verification and increase conversion rates by using Sumsub’s geolocation tool for KYC/AML.

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