Online Fraud Strategies that Enterprises Should Examine

The Quintessential Technology Source for Corporate Financial Professionals

Online Fraud Strategies that Enterprises Should Examine

CFO Tech Outlook | Wednesday, September 15, 2021

Fraud is an ever-changing target, and the most effective defense grows alongside the organization.

FREMONT, CA: Global fraud threats necessitate adaptable and secure fraud protection processes that ensure good customers can onboard and trade swiftly and seamlessly.

Identity fraud cost the US $16.9 billion in 2019. While not all 41 types of fraud will apply to every organization, it shows the breadth and depth of fraudulent conduct that should be considered.

Cybercrime is also rising, with the global economy expected to lose $6 trillion annually by 2021. Cybercrime can potentially cause compliance failures by weakening control systems or by not reporting criminal operations. Viruses, ransomware, phishing, and other cyber threats increase the risk of fraud.

Understanding fraudsters' use of technology to create new possibilities is essential. Organizations must have sophisticated anti-fraud systems that quickly react and provide security and protection with minimal customer friction.

The following are just a few examples of online fraud schemes businesses should consider as part of their overall fraud strategy.

New account fraud: Most new account fraud occurs within 90 days of the account being opened. Also known as application fraud or account origination fraud, the presence of fraud so soon to account opening shows that the account was not opened for legitimate business purposes.

New account fraud is particularly dangerous for businesses because there is no prior history to compare to, no established relationship, and no history of trust. The early activities may be innocent, or they may be concealed acts of fraud.

Globally increasing data breaches have resulted in widespread black-market access to so-called "fullz," a complete collection of identity data that can be used to register an account. As hackers point out, "buying identities was far more advantageous than stealing payment card data because card data could only be used once or twice before becoming useless." However, identities can be reused for years.”

Identity fraud: Identity fraud occurs when someone improperly utilizes another person's personal information to deceive or defraud another person.

With so much of lives being conducted digitally, vast amounts of personally identifiable information (PII) are stored in multiple databases, just waiting for a data breach to fall into the hands of fraudsters or organized criminal rings. According to Flashpoint, one can purchase an ID on the dark web for as low as four dollars. Alternatively, fraudsters can build synthetic identities based on the PII of legitimate IDs and use them to conduct fraudulent actions.

Synthetic identity fraud (SIF) creates false identities by merging fraudulent information with legitimate identification data. A phony identity can include a genuine social security number, a fictitious address, and other fabricated data points. The fraudster can then use the fabricated identity to get various items, from driver's licenses and passports to credit cards and other accounts.

Protecting the information of customers and taking safeguards to avoid data breaches is a wise business strategy. Preventative expenses are negligible in comparison to the financial and reputational consequences associated with a data breach.

See Also: Top Risk and Compliance Consulting Companies

Weekly Brief