New Account Fraud Red Flags to Watch For

January 5, 2023

During our second session of Fraud Office Hours, an attendee asked, "What information indicates synthetic ID fraud or identity theft in combating new account fraud?" Watch this video clip and read below to see how Unit21's Head of Fraud Risk, Alex Faivusovich, responded.

What Information Indicates New Account Fraud Such as Synthetic ID Fraud and Identity Theft?

"Collecting the maximum amount of indicators during the onboarding journey of the customer is the most essential and critical thing you can do.

During this time of economic distress, many companies are paying more attention to new account fraud - for good reason.

Because new account fraud impacts your growth capabilities, it’s a serious problem for companies looking to scale. This has only been compounded by companies that have traditionally focused on 'growth at all costs,' which is a mentality that has been changing in risk and compliance - with organizations shifting to strategies that lead to intelligent, calculated, sustainable growth.

New Account Fraud Prevention: What Information to Look At

The best - and most critical - strategy for preventing new account fraud is to collect the maximum amount of indicators during the onboarding journey of the customer.

Financial institutions (FIs) should collect as much different personally identifiable information (PII) as possible, enabling them to understand all the different elements of the prospective customer. Organizations then need to evaluate each of these indicators separately, one by one, exploring the associated risk for each specific element.

This starts at a high level, with FIs examining all of the PII as a whole. This information can be used to identify whether or not the identity is real. Next, organizations need to dig deeper and determine with surety whether the person going through the onboarding journey and attempting to onboard to your platform is the right person - in this case, the person for which PII has been presented.

At this point, it’s beneficial to examine each risk factor in detail, exploring the risk associated with each risk signal you’ve collected on the potential customer throughout onboarding. To do this, ask some questions about the risks associated with different factors.

A good method is to ask yourself: “What is the associated risk around…”

  • the device(s) being used
  • the phone number being used
  • the email being used
  • the geolocation of the user
  • the IP address of the user

Any risk signals you can collect information on should be examined for potential threats both individually and as a whole. By exploring each risk factor in detail, teams can catch fraud that would otherwise slip through the cracks.

For most financial institutions, the process and relationship with the identity verification vendor will be critical, as it will define what information you have access to - and what analysis methods are possible. Ideally, you want a vendor that doesn’t limit your ability to analyze the various risk signals that could be present during onboarding.

This analysis will also help financial institutions understand where you need more (or less) controls to protect against synthetic ID and identity theft fraud adequately. Teams can determine where the most significant exposure lies, and then make efforts to close those gaps.

Looking for more insights? Check out our second session of Fraud Office Hours on-demand for a deeper dive into current fraud trends and which preventative measures to consider.

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