Why check the bank account owner ?
Checking the holder of an IBAN (or bank account) allows you to protect yourself against fraud, in particular bank transfer fraud and IBAN fraud, which affect more and more businesses, but also to avoid bank transfer errors.
After making a transfer to the wrong account, finding the owner of this account may be necessary as part of banking procedures for recovering funds.
Prior to the transfer, this verification ensures that it will be executed on the account of the correct beneficiary, whether it is a company or an individual.
Indeed, these frauds are based in almost all cases on the usurpation of the identity of a transfer beneficiary, and are made more and more simple by the dematerialization of RIB, KBIS and identity documents. The fraudster then enters the name of your beneficiary on his RIB, in order to receive the transfer on his behalf.
In this context, what concrete steps can be taken to verify the holder of an IBAN?
Let's just say it right away: once the transfer has been made to the wrong account, it will be very difficult to find the account holder associated with this account.
This will depend on the goodwill of the bank holding the account, which is bound by banking secrecy and is not authorized to disclose the identity of the account holder. On the other hand, it will be able to investigate on its own and contribute to the procedures for recovering funds.
On the other hand, there are simple methods to check the RIB holder in advance and ensure that the transfer will be made to the right account, for the right beneficiary.
What are these methods? We'll see that in this article.
As you will have understood, when it comes to fraud, prevention is better than cure.
The IBAN, the RIB and the bank account.
First of all, we think it is necessary to explain the link between the bank account, the IBAN, and the RIB.
IBAN, an acronym for International Bank Account Number, is a global standard used to uniquely identify a bank account, just as a license plate identifies a car.
Composed of letters and numbers that must meet certain standards, 14 to 32 characters long depending on the country, it contains essential account information: the country and the identity of the bank that holds the account, the account number and the control key (also called RIB key).
Why all of this? To simplify and secure banking transactions by allowing the precise identification of the recipient account and by minimizing the risk of error. Its creation in 1997 revolutionized the fluidity and security of international bank transfers.
The first step in verifying who owns a bank account is therefore to retrieve the IBAN associated with this account. This step is generally not the most complicated: it is the person who is supposed to receive the transfer or debit who communicates it to you.
In most cases, she will send you her RIB, the Bank Identity Statement, which centralizes the important information related to the account: the IBAN, the name of the bank, and the name of the bank account holder.
IBAN format check
You have recovered the RIB on which the IBAN of your supplier or customer appears. This is where the serious stuff starts: How can I be sure that this IBAN is compliant?
The first step in avoiding fraud and errors is to check that the IBAN format is correct. This means that it respects the right number of characters depending on the country (for example, FR followed by 25 characters for a French IBAN) but also that the sequence of numbers that make up the IBAN meets a certain number of criteria..
(By the way, we have produced a summary table of IBAN formats by country, you can consult it by following this link)
Format control is essential, in particular because there is necessarily a step during which you must enter or save the IBAN that was given to you in accounting software, treasury software or on your bank's online space. It is therefore first necessary to ensure that there were no errors when registering the IBAN.
The good news is that this check is very easy to do. Many websites allow you to do this for free online. All you have to do is make sure that the IBAN respects the format of the corresponding country, and that it also follows a particular algorithm (the Luhn algorithm, for the intimate).
The problem is that this check is not enough: an IBAN may have the right format but not belong to the right person. It can also correspond to a closed account, or simply to an account that never existed.
Whether in the case of a transfer or a direct debit, format control is therefore necessary, but far from being sufficient.
The three methods to verify the holder of an IBAN
Now that we've seen the basics together, we can finally move on to the original purpose of this article: how do you make sure that an account belongs to the right person?
Method 1: Ask directly to the beneficiary of the transfer
This method is generally the first that comes to mind when you want to verify that an IBAN belongs to the recipient of the transfer: contact this beneficiary directly (whether a company or an individual) to ask him to confirm his account number and identity.
The first disadvantage of this method is its reliability: how can you be sure that it is not the fraudster himself who is confirming that the IBAN provided belongs to the person you think you are paying?
The second disadvantage of this method is that it is tedious: You must make sure to contact the right person, and that this person is reliable and authorized to confirm the IBAN, which is not always easy, especially if it is a corporate IBAN. It can sometimes take several days for confirmation to be received.
In summary, this method is both time consuming and unreliable.
Method 2: contact the bank
The second method is to ask your own bank or the bank of the holder for the IBAN in question.
For obvious reasons of confidentiality and data protection, the bank will not be able to tell you the identity of the holder of a given IBAN. On the other hand, if you give her the IBAN and the identity of the legal person or the natural person, she may be able to confirm that it is indeed the IBAN of this person.
This method has the advantage of being reliable but has a major drawback: its accessibility. Banks will not always be willing to share this information.
Moreover, like method 1, this method takes time and is difficult to implement on a large scale if you have a large number of IBANs to check.
Method 3: Use an IBAN holder control solution
We will conclude our article with the most reliable and effective method to check who owns an IBAN: use a dedicated IBAN control solution.
This type of solution allows you to check who owns the bank account without having to contact the person or the bank. They make it possible to verify in a reliable, simple and fast way that the IBAN belongs to the right person.
How do they work? To summarize, there are two types:
- First, there are solutions that are based on data from various external sources, and on declarative information. These solutions allow you to have a first indicator with a certain level of confidence in the holder of an IBAN, but they are not infallible and can sometimes give false information.
Moreover, these solutions are sometimes expensive and complex to implement. Their advantage lies mainly in their ability to give an indication of IBANs from certain foreign banks.
- The second type of IBAN control solution are which are based on a bank query and thus have access to bank databases.
This is the most reliable and effective control method: the bank is questioned directly and answers in just a few seconds. The result of the verification is 100% reliable since it is the bank itself that validates that the IBAN belongs to this or that person.
Our Ibantrack solution uses this method to check the IBANs of suppliers and customers, relying on the banking network SEPAmail Diamond to ask the banks directly.
This type of solution is much easier to use and implement than solutions that use external data sources, as they must aggregate large volumes of data from multiple sources, resulting in a complex and costly solution for the end user.
Note that all these solutions will confirm the IBAN holder by telling you whether or not the IBAN belongs to a given person or company, which makes it possible to avoid fraud by checking the IBAN before making a transfer or direct debit.
However, banking secrecy does not allow the identity of the holder to be disclosed based on the IBAN alone, and no solution or bank will be in a position to tell you the exact identity of the holder.
Conclusion
In conclusion, verifying the ownership of an IBAN is of critical importance to prevent fraud and errors in transfers or withdrawals, by guaranteeing that the funds will be paid to the right account, for the right beneficiary.
Finding the holder once the transfer has been made to the wrong account is a complex process, and only verifying the holder before the transfer is effective to avoid fraud.
Traditional methods such as interviewing the person concerned directly or at the bank are tedious and unreliable, but dedicated solutions like Ibantrack allow you to verify the identity of the IBAN holder in a reliable and fast manner.
These solutions are very easy to use and effectively eliminate the risks of fraud and associated financial losses.
Contact us to find out more about IBAN control solutions and the fight against fraud!