Understanding Proof of Address

Verifying a customer’s address is an important part of doing business for many organizations. It can confirm the person’s identity, establish their eligibility as a patron, and ensure the ability to communicate in the future. For banks and financial institutions, these checks are also a matter of law—meaning that regulations require them to confirm the locality of the customer before onboarding them.

Confirming a customer’s address is also an important step in catching and preventing fraud. Since it is not uncommon for cybercriminals to use an address other than their own to carry out their schemes, many cases of financial fraud involve a manipulated or forged proof of address document. Organizations that identify document fraud in this form may be able to outright prevent a case of fraud and avoid the often devastating costs associated with it.

What is Proof of Address?

Proof of address is the act of verifying where a person or business physically resides. This is typically done by reviewing an approved proof of address document and cross-referencing it with both identification or ownership documents and an address database.

What are Proof of Address Documents?

Various documents can be used to establish proof of address. While the requirements will vary from organization to organization, the most commonly accepted forms of documentation are lease agreements or residence permits, as well as utility bills.

Generally accepted proof of address documents are listed below.

• Utility bills (water, electricity, gas, telephone, mobile phone or internet)
• Bank or credit card statement
• Bank reference letter
• Lease agreement or mortgage statement or contract
• Pay stub
• Insurance policy
• Car registration
• Change of address letter
• Letter of employment
• Letter from a government agency or public authority (such as a tax authority or police department)
• Driver's license
• Residence permit

To establish someone’s residence, the proof of address documentation must meet several requirements, including … 

1. Current: The document should have been issued in the past three months to ensure the address is current.
2. Original: The document must be an original version or an official copy.
3. Official: The document must be issued by a recognized third-party organization, such as a utility provider or government agency. The organization’s name must be clearly visible and contain their direct contact information.

Again, it is important to remember that proof of address requirements will vary from organization to organization. There may be specific requirements based on the company’s industry or location. It is the responsibility of the individual to review proof of address requirements for their situation and prepare their documentation accordingly.

The Significance of Verifying Address

There are many reasons why a company or organization may need or want to verify an application’s or customer’s address. These may include:

• Complying with regulations, such as Know Your Customer (KYC) and Anti Money Laundering (AML), that require the organization to verify the person’s personal information, including their name, date of birth, government ID number, and address.
  
• Reducing the risk of fraud by confirming the individual’s identity and personal details.
  
• Establishing a line of regular communication.
  
• Ensuring eligibility as a customer or service recipient based on geography, jurisdiction, or other details set out in a licensing agreement.  

Traditional Methods of Address Verification 

Traditionally, the address verification process was largely manual. Would-be customers would scan and submit copies of documents that were then reviewed by a human analyst to confirm they matched other documentation and showed no obvious signs of tampering. This person would also search for the address in a database or via a search engine to ensure it existed.

This process can be time-consuming, error-prone, and resource-intensive, especially if the documents received are in poor condition. This leads to longer wait times for customers and higher costs for businesses as companies must follow up with the customer and request additional documentation or ask them to re-scan files.

In addition, relying on human reviews is often not an effective way to identify fraudulent documents, as many alterations and manipulations are invisible to the naked eye, and forged documents can be indistinguishable from real files. These reviews can also be subjective and variable, in that they rely on one person’s experience and expertise to approve or deny a customer—potentially introducing bias into the customer experience.

Finally, many companies that complete proof of address checks manually must also develop processes for saving and storing these materials for future reference. For many organizations, there are specific security requirements that must be adhered to when storing sensitive personal information or documents like bank statements.  

The Challenge of Address Fraud

Fraud is a real concern for organizations of all kinds. And in the digital age, the risk is greater than ever. In fact, data from Inscribe shows that 10% of all financial application documents submitted in an online channel have been manipulated.

While a customer’s proof of address document may seem insignificant, it holds incredible value for detecting fraud. When viewed within the context of the total customer profile, it can provide valuable clues that may alert reviewers to a case of potential fraud.

For example, if a person’s proof of address documentation does not match their identification documents, that could be a potential red flag that the person is not who they are purporting to be. If addresses are not consistent across a proof of address file and a pay stub or bank statement, that may be a sign that one or more documents is fraudulent or has been tampered with.

Organizations should recognize the role that proof of address documents play in detecting and preventing fraud and take steps to improve their ability to identify documents that have been altered or forged.

AI-Powered Fraud Detection in Address Verification

To combat the rise in document fraud of all kinds, organizations should leverage AI-enabled document review tools to more quickly and accurately identify fraudulent documents. These solutions use algorithms that analyze millions of data points to check every aspect of a submitted document, including the metadata, pixel-level information, and file history, comparing submitted files against known authentic statements to determine discrepancies invisible to the naked eye. 

Here’s what you can achieve with AI-driven, automated scrutiny of documents:

• Swift operationality: Our analysis underscores that an exhaustive manual examination of an individual document could span 5-10 minutes, impeding the decision-making process and prolonging the coordination lifecycle with potential borrowers by several business days. By leveraging a document automation tool like Inscribe, you can receive a comprehensive analysis of file metadata, pixel-level details, and file history in a mere 10 seconds. This empowers human reviewers to significantly amplify their processing speed when handling applications.

• Precision augmentation: A staggering 90% of document fraud eludes human detection, making alterations to identity or financial details nearly imperceptible. Nonetheless, Inscribe employs state-of-the-art AI and machine learning technology to render invisible fraud signals visible. The X-Ray feature exposes both the uploaded and recovered versions of a document, enabling reviewers to discern precisely what changes have been made, including names, amounts, dates, balances, and other critical details.

• Bias mitigation: Automated review tools, exemplified by Inscribe, function with objectivity, appraising documents based on face value and ensuring uniform scrutiny of all applicants using identical criteria and standards. This contributes to the reduction of unintentional bias throughout the entire customer onboarding process.

• Accumulative benefits: AI-powered tools possess a learning capability, refining their precision and accuracy over time as the model encounters an expanding array of examples. This evolutionary trait is pivotal, especially considering that criminals consistently devise novel methods to produce fraudulent documents

Integrating an AI-powered fraud detection tool into an organization's existing tech stack requires careful consideration of the other software and systems in use. A reputable vendor will help their customers determine if these systems are compatible and offer support to configure and integrate these solutions, as well as incorporate them within existing workflows. This is a critical point for ensuring that the tool works accurately and efficiently.

Frequently Asked Questions About Proof of Address

How Recent Does a Proof of Address Document Need to Be?

While specific requirements will vary from organization to organization, most proof of address documents should be less than three months old. This helps ensure that the document provided is up-to-date and is linked to the individual’s current residence.

Can AI Fraud Detection Software Identify Fake Address Documents?

Absolutely. AI-enabled fraud detection software is far better and faster at detecting fake address documents than manual reviews.

Can Digital Documents Be Used as Proof of Address?

Yes. In the digital age, most companies have the option to onboard customers through a digital customer experience. These processes require the submission of digital documents to establish the person’s identity and address. However, as with physical documents, organizations must take steps to ensure that the documents provided by their customers are authentic.

What Are the Risks of Submitting False Proof of Address?

While submitting a false proof of address may seem harmless, it is a form of fraud and may be punishable by fines or even jail time. In many cases, proof of address fraud is part of a more elaborate scheme, such as identity theft, which can have significant legal consequences.

Is AI-Powered Verification Faster Than Traditional Methods?

Yes. Our analysis shows that organizations can reduce typical review times from 5-10 minutes to less than 10 seconds with the help of AI-enabled tools. In addition, these tools tend to be far more accurate than traditional methods, making them a far superior option to manual reviews.

How Do I Integrate AI-Powered Fraud Detection into My Existing Systems?

Integrating an AI-powered fraud detection tool with existing systems depends on what systems and tools the organization is using currently. A good vendor will not only provide details on whether a system is compatible but also provide support during this process, ensuring that the fraud detection tool works seamlessly within the rest of the toolset.

What Are the Challenges of Using AI in Proof of Address Verification?

Like any digital tool, an AI-enabled fraud detection system must be properly calibrated and integrated to ensure it will work as advertised. Another common challenge is user adoption and ensuring that people understand how to use the tool effectively and the value of doing so. Finally, companies must consider that no digital solution is completely foolproof. Organizations should have checks and balances in place to ensure the tool is producing accurate results and that some customers are not inadvertently denied service through a false positive.

Are There Any Legal Considerations When Using AI for Address Verification?

Each industry and country has different rules and regulations regarding how addresses are verified. Be sure to ask prospective vendors to explain how their tool addresses these specific requirements and will help your company maintain compliance.

Final Thoughts on Proof of Address 

For many organizations, proof of address may seem like little more than a formality. But as discussed here, being able to detect a fraudulent proof of address document can be a critical step in identifying and preventing serious financial crimes.

In fact, as we see fraudsters spend significant time and resources creating primary documents like fake bank statements or pay stubs, and they may overlook something as seemingly insignificant as a proof of address file. Reviewing these documents and comparing them to other materials submitted by the customer is an important step in making sure a customer is who they say they are.

In the digital age, it is more important than ever for companies to utilize high-tech tools and solutions that will help them pinpoint document fraud quickly and accurately. This isn’t just important to preventing fraud and cutting back on losses—it’s also a way to fuel healthy growth, by selecting legitimate, low-risk customers.

For banks, financial institutions, and any company regularly conducting proof of address checks, an AI-powered document review tool is essential for enhancing security measures. To learn more about how Inscribe can help you automate manual document reviews and improve fraud detection, request a demo.