Understanding address risk in business entity verification (BEV) is increasingly essential for financial institutions navigating today's complex regulatory landscape. In our inaugural BEV Break webinar, hosted by Middesk’s Kate Young, Middesk co-founders Kyle Mack (CEO) and Kurt Ruppel (CTO) delved into the intricacies of address verification, addressing both fraud and compliance challenges. For those who missed the live event, here are the key takeaways that can help your business better manage address risk.
Address Verification: The Foundation of Compliance
The key takeaway from this webinar is that robust address verification is critical to ensuring compliance and mitigating fraud risks. Kyle highlighted the complications that arise from using commercial mail receiving agencies, PO boxes, and virtual addresses, which many states do not verify. Such practices can obscure a business's true identity and increase vulnerability to fraud.
Leveraging accurate and comprehensive data sources is the best way for banks, fintechs, and other financial institutions to enhance their address verification processes. It’s vital to incorporate various data types—customer-provided, publicly available, government-owned, and vendor-sourced—to create a reliable business identity that can be used for fast and accurate onboarding decisioning.
Recognize the Risks of Non-Compliant Addresses
Kurt provided insights into the prevalence of addresses that raise red flags, such as high-frequency, temporary, or vacant addresses. These can signal potential fraudulent activity, making it crucial for businesses to understand the different types of addresses they encounter. Establishing a clear strategy for identifying and managing these risks can prevent compliance issues and protect against fraud.
Invest in Data Integrity
Quality data is at the heart of effective address verification. Kyle and Kurt stressed the importance of sourcing data from trusted and authoritative vendors. Businesses should ensure that their partners offer current and accurate information, as this will enable them to confidently verify addresses and make fast and informed onboarding decisions.
Investing in high-quality data solutions not only helps mitigate risks but also streamlines the onboarding process, providing a smoother experience for customers to gain access to financial services.
Adopt a Step-by-Step Approach
Transitioning to a more effective address verification practice is a gradual process that does not need to happen overnight. Kyle emphasized the importance of beginning with foundational strategies and progressively implementing more sophisticated solutions. This incremental approach not only aids in refining address verification practices but also informs how businesses can model fraud risk. By thoughtfully considering the types of businesses that should be flagged for enhanced review and due diligence, organizations can establish a solid starting point for their address verification efforts.
To further strengthen their practices, businesses should examine their policies regarding the necessity of various address types and determine which ones they are willing to accept. Identifying potential risks during the onboarding process will ensure that organizations can adapt their strategies based on real-world experiences. This thoughtful, iterative approach ultimately leads to improved accuracy and compliance in address verification practices, enabling businesses to navigate the complexities of fraud risk without sacrificing business growth.
Engage with the Right Partners
Choosing the right vendors is crucial for effective address verification. Businesses should conduct thorough research to identify partners that align with their goals and compliance needs. Look for vendors that offer flexibility and adaptability in their solutions, enabling a customized approach to address verification.
Conclusion: The Urgency of Address Risk Management
The risks associated with inaccurate address data are significant, but with the right strategies and tools, companies can enhance their onboarding processes and protect against fraud while still enabling business growth.
The insights shared during the BEV Break webinar highlight the necessity of addressing these challenges head-on. You can watch the full 30-minute webinar here.
