In various scenarios, financial institutions are required to collect residential or business addresses, rather than merely mailing addresses. This helps combat money laundering, wire fraud, and other criminal activity. Unfortunately, current automated mechanisms for validating addresses are vulnerable to a variety of subtle misrepresentations. This document describes the laws that regulate financial institutions, i.e. the scenarios in which we could be of service.

Accounts must have valid residential or business addresses

As part of Section 326 of the PATRIOT ACT, banks are required to implement Customer Identification Programs. (These are commonly known as Know Your Customer rules.) The pertinent law 31 CFR 103.121 broadly applies to all accounts created after October 1st 2003:

Account means a formal banking relationship established to provide or engage in services, dealings, or other financial transactions including a deposit account, a transaction or asset account, a credit account, or other extension of credit. Account also includes a relationship established to provide a safety deposit box or other safekeeping services, or cash management, custodian, and trust services.

Before opening an account, the bank must obtain a proper address for the customer, which is defined as:

(i) For an individual, a residential or business street address;
(ii) For an individual who does not have a residential or business street address, an Army Post Office (APO) or Fleet Post Office (FPO) box number, or the residential or business street address of next of kin or of another contact individual; or
(iii) For a person other than an individual (such as a corporation, partnership, or trust), a principal place of business, local office, or other physical location

Subsequently, FinCEN made another exception for customers enrolled in address confidentiality programs (ACP) for their safety:

...a [financial institution] should collect the street address of the ACP sponsoring agency for purposes of meeting its CIP address requirement.

A large identity verification industry provides these services to banks. However, their services are completely automated, and are oriented primarily towards ensuring the customer is a real person, rather than specifically verifying that their given address is valid.

Wire transfers (often) must have valid residential or business addresses

For transfers of over $3000, banks are subject to the Recordkeeping Rule (31 CFR 1020.410(a)) and the Travel Rule (31 CFR 1010.410(f)). (Per a recent FinCEN proposal, the rules may also cover virtual currencies, and the threshold may drop to $250). These require collecting the address of the transmittor and/or beneficiary. In general, the Travel Rule admits mailing addresses:

"After weighing the competing interests involved in whether to require street address information FinCEN has determined that the Travel Rule should be read to allow the use of mailing addresses.

However, in practice, the protocols employed by banks are more stringent. Furthermore, regulation in other countries may be more stringent.

Australian AML/CTF legislation is strict in its requirement that a payer's full business or residential address not be a P.O. Box. Accordingly, any inbound message to Australia containing a P.O. Box might be queried, delayed or rejected. Similar requirements may exist in other countries.

Beneficial owners of reporting companies must have valid residential or business addresses

Very recently, the Corporate Transparency Act was passed as Sections 6401-6403 of the 2021 NDAA. It strengthens previous laws requiring disclosure of ownership. A reporting company is a corporation, limited liability company, or other similar entity created by filing with the state. A beneficial owner owns over 25% of the reporting company, or exerts substantial control over it. The law requires disclosure of specific information on each beneficial owner, including:

current, as of the date on which the report is delivered, residential or business street address

This application is of particular interest to regulatory agencies such as FinCEN.