A bank’s first-line of defense against account creation fraud is to detect new accounts before they can be used for criminal activities. This means using anomaly detection that compares new customer data against established baselines for normal behavior for banking transactions, loan applications and new account generation.
This machine learning model is trained to spot deviations from the norm and alert a human monitor to the issue, before it can be further investigated. This way, if the anomaly is detected as fraud, a decision can be made to alert a person with the necessary resources to investigate the issue.
New account fraud is a common type of financial crime that happens on a large scale, so it’s important to know how to detect this in the first place and what to look for once the perpetrator has been spotted. Here are a few tips to help your bank spot the signs and stop this type of fraud before it can happen:
Red flags for a newly opened account
A new detect new account fraud fraudster will often use a stolen or synthetic identity to set up a fraudulent account with your bank. This can be done through a variety of methods, including social media profiles, fake ID documents and fraudulent credit reports. Some will also apply in person to appear legitimate, using fake ID credentials to get past a bank’s Know Your Customer (KYC) tests.
The fraudster may then use the fraudulent identity to open a line of credit and withdraw funds from it without reimbursing the lender. They may also try to set up a debit card or make purchases using the bank’s services.
Scam artists also use the latest technology to fool the banks’ systems and avoid being detected. This includes switching IP addresses at will with a VPN, as was recently seen on Facebook. They also might create a fake profile on a popular social media platform to access the accounts of friends, family or co-workers.
Another way fraudsters can hide their true identity is to use a fake photo ID, which is often obtained from the Department of Motor Vehicles. Many scammers use this method to gain access to new bank accounts, as well as their own personal credit cards and lines of credit.
They might also try to obtain an ID that is older than six months. This will help them pass the KYC checks of the bank, but it also gives them a harder time obtaining other forms of identification.
This can be particularly challenging to spot if the new account holder doesn’t provide a home or business address that matches their application. Fraudsters might try to open an account from a location outside the local branch office, so they don’t get noticed.
OneSpan, a trusted global identity verification provider, offers facial biometrics as an added layer of protection for online account opening to prevent new account fraud. Face verification uses a user’s digital ID document to confirm their identity against a trusted source, and then completes a face scan to verify they are who they say they are.