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Identity Theft
Learn about identity theft - its impact, methods, and how to protect against this growing global fraud threat.
Learn about identity theft - its impact, methods, and how to protect against this growing global fraud threat.
Statistics show that 95% of businesses experience identity theft fraud every year.
Banks and fintech companies are the most vulnerable to identity theft. Most of them report repeated incidents of fraud:
These statistics make identity theft a global difficulty that requires increased attention.
Identity theft is the unauthorized appropriation of someone else's personal information for illegal purposes.
This information may include:
Typically, stolen data is used by fraudsters for financial gain. For example, to illegally access funds or open accounts using the victim's identity without their knowledge or permission.
Fraudsters can use various methods of identity theft:
It is worth considering that cybercriminals are constantly inventing new methods of stealing other people's personal data. This makes fraud prevention more difficult.
Once they have someone else's data at their disposal, criminals move on to using it – that is, identity fraud.
Here are the most well-known types of identity fraud:
1. Account Takeover (ATO). This is a particular form of fraud in which criminals use stolen credentials to take over other people's online accounts.
In the context of lending, ATO can be used to gain illegal access to bank accounts, for example, it can be done by taking over an online banking account.
2. Document fraud. This type of criminal activity involves the creation, alteration, or use of forged documents for criminal purposes.
Fraudsters may approach financial organizations with such documents to illegally obtain credit.
3. Creating a synthetic identity. This is a type of fraud that involves creating a non-existent identity using real and fictitious information.
Based on such fictitious customers, fraudsters can apply for credit, open accounts, etc.
According to TransUnion, in 2023, U.S. banks' losses from this category of fraud will reach $3.1 billion. This is a 12% increase over the 2022 figure.
4. Bust-out fraud. This is a variant of financial fraud in which criminals open a credit account and make several on-time payments to maximize the credit limit.
After a large amount of money is deposited into the account, the fraudsters withdraw all the funds and disappear. In this case, the creditor suffers huge losses.
Often, stolen documents or a synthetic identity are relied upon to make such loans.
5. Loan stacking. This category of fraud occurs when a borrower simultaneously applies for various loans from different lenders. The same stolen identities are often used.
This leads to unmanageable debt and defaults.
Digital footprint analysis is an effective way to combat identity theft. It involves an in-depth examination of all the data that remains on the web as a result of user activity.
Digital footprint analysis surpasses traditional credit scoring by providing access to data that is harder to manipulate.
It is useful to analyze potential borrowers for identity verification:
1. Email. The lender should pay attention to the presence of online accounts registered to an email address. Important is the age of the email, facts of data leakage, and the presence of the subscriber in blacklists.
2. Phone number. It is significant to make certain that the number is active. The applicant's use of disposable phone numbers, burner phones, and virtual SIM cards will be suspicious.
3. IP address. This confidential identifier contains information about the borrower's real location, variety of connections, and Internet service provider.
The lender can also detect the fact of hiding the real IP address by using an anonymizer (e.g. VPN, proxy, or TOR).
Identity theft is a serious problem that causes huge losses to financial organizations every year. Therefore, lenders are paying more and more attention to fraud detection.
For this purpose, it is effective to analyze the digital footprint of potential borrowers. It comes with a wide range of data and is virtually impossible to fake.
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Identity Verification - Tree Advanced Borrowers' Checks
The Role of AI in Modern Credit Risk Management