Identity fraud isn’t just harmful to businesses, it’s evolving and becoming harder for businesses to catch. The trends revolving around identity theft fraud are always changing. Fraudsters attempt newer methods to gain access to the internal systems of a bank. The primary focus is to steal someone’s identity data and use it for a number of fraudulent activities. Fraudsters and bad actors use a series of new methods to steal information, and this is why they become harder to catch. In this blog, we examine three key insights as to why ID fraud is getting tougher to detect.
What is Identity Fraud?
Identity fraud happens when fraudsters use fake or stolen information to commit any kind of crime. There is no limit to the type of fraud a bad actor can commit using stolen information. Federal Trade Commission has broken down identity fraud into six main categories:
- Credit card fraud: Using someone else’s credit card number to make fraudulent purchases. Fraudsters can gain access to credit card information using phishing emails, or fake websites.
- Employment or tax-related fraud: Another common identity fraud is using someone else’s social security number to access an employment file or an income tax return.
- Phone or utility fraud: Fraudsters can use stolen information to open a new phone or utility account.
- Bank fraud: Bank fraud is the most common identity fraud. Using someone else’s personal information, fraudsters decide to take over a financial account or open a new bank account.
- Loan or lease fraud: stealing and using someone else’s information to get a loan or a lease.
- Government benefits fraud: using stolen identity information to obtain governmental benefits.
There’s another type of identity fraud known as criminal identity fraud, this happens when someone cited or arrested for a crime presents himself as someone else by using someone else’s identity information.
Identity fraud is a pretty significant crime, and millions of Americans suffer from identity fraud every year. In 2017 alone, the financial losses due to identity theft were more than $2.2 billion.
Here are the 3 reasons why identity theft is becoming harder to detect:
1. Fraudsters Keep Using New Methods of Attack
Fraudsters are pretty much the ones that work hardest, they work continuously to find flaws in the systems of financial institutions. Almost all the fraudsters are pretty creative, and the pandemic even forced fraudsters to devise new and creative plans. New methods of laundering money and attacking the systems emerged during the pandemic and continue to evolve. Most fraudsters care about improving their ROI just like businesses and that’s their incentive for improving fraud methods. They keep on leveraging new technologies to trick individuals into divulging their financial information.
2. All Fraud Isn’t Equal
Another reason why businesses can’t detect fraud is that each fraud is different. The losses incurred during these frauds are also different. Usually, identity fraud is split into 3 different categories: Easy, medium, and hard.
- Easy: This type of fraud is easy to detect as the elements in documents are clearly wrong. It usually contains the wrong font or clear signs of a photo being doctored.
- Medium: Medium criminal fraud is when it contains less obvious errors. Using fonts that are less visibly incorrect, a photo that’s printed using the right technique, or imitating security features.
- Hard: Fraud types that can be detected with only enhanced technology like DIRO’s online document verification technology.
In 2020 itself, the easy level of fraud rose from 57% to 70%. Businesses may mistake that the development of new fraud techniques is becoming slow, but they are wrong.
3. Hard Fraud is Getting Tougher
One reason there’s an increased percentage of easy fraud is that businesses have adjusted their strategies to meet fraud.
As more and more sophisticated technologies are being used by businesses, it is getting tougher for fraudsters to accomplish hard-level fraud. Some of the hard-level fraud may now be just medium-level for businesses.
While the naming of these frauds remains the same, the fraud is getting harder and harder. We can expect that the new fraud techniques developed by fraudsters to be on the whole another level.
Businesses Need to be Prepared For Evolving Fraud
Businesses need to be aware of the latest fraud trends and what type of fraud can emerge in upcoming years. When it comes to document fraud, one of the biggest frauds is synthetic identity fraud. Technological solutions like DIRO verifies documents online in an instant. DIRO eliminates 100% use of fake and stolen documents thus improving the detection of fraud.