Intellicheck : How to Spot Fraudulent Behavior in Consumers Before It's Too Late

Identity theft continues to increase in frequency due to the potential for fraud in new information delivery systems. Mobile apps and other remote connections make ID theft and unauthorized account access all too easy. From the perspective of a banking institution, this increased risk directly translates to a loss of credibility and funds.

In 2018, bank fraud resulted in over $25 billion in fraudulent withdrawals, almost 20% higher than the previous year. This number does not include the money that financial institutions spend each year on detecting, preventing, and responding to account breaches.

In other words, fraud costs banks billions of dollars each year, an amount that will only climb as data-delivery systems become more readily available. However, banks can prevent fraud early if they know the fraudulent behaviors to look for. By identifying suspicious account activity such as large withdrawals or sudden address changes as signifiers of identity theft or fraud, banks can prevent their institutions from becoming part of these looming statistics.

Signifiers of Identity Theft

To prevent fraud early, banks need to know the account activities that signify potential identity theft (or 'fraudulent behaviors'). To steal an identity, fraudsters require personal identifying information for opening fraudulent accounts or making withdrawals. This information could include passwords, date of birth, social security number, or credit card information. Fraudsters can obtain this knowledge by listening to phone conversations in public or sending spam emails.

They then use these numbers to change passwords, open credit cards, withdraw money, or make fraudulent calls. As far as the banking institutions or credit card companies are concerned, they have 'become' that account holder. That's why it's called identity theft.

However, banks can catch identity theft early by knowing what to look for. Account activity that is unlikely or rare raises a red flag, if an institution is prepared to recognize it. This activity could include:

• Large, sudden withdrawals

• Unfamiliar accounts added to credit reports

• A sudden change mailing address, signifying that a fraudster may be opening additional lines of credit using another name

In addition to bank account activity, banks prepared to catch fraud early should be aware of other fraudulent behaviors. These include multiple tax returns filed for one customer as well as news of a local employer's data being stolen.

Unfortunately, account fraud/identity theft is not the only type of fraud banks need to watch out for.

Signifiers of Credit Fraud

Banks also need to be prepared for credit fraud and to know who pays the cost when it happens.

Credit fraudsters use account information such as passwords and Social Security numbers to withdraw funds. Criminals can get this info by emailing or telephoning phishing scams or stealing data from companies that processed that card.

Fraudulent behavior that is indicative of credit fraud include:

• Frequent small purchases, such as $1 withdrawals, which could indicate a fraudster testing the account's credit limit

• Records of purchases from foreign companies

• Charges out of the state or country not previously approved by the account holder

Customers should check their statements carefully and be wary of using their PINs at public ATMs over the phone. Banks must be vigilant with the above warning signs to detect credit fraud before it goes too far. In most cases, the bank reimburses the account for funds lost due to fraud, making it more imperative for them to spot fraudulent behavior early.

Remote Scams

During the COVID-19 quarantine, the number of online purchases has skyrocketed, leading to a similar increase in the rate of remote scams or 'person-not-present fraud.' Remote scams could include:

• Spam emails to your customers that request information, also called 'phishing'

• Robocalls to your account holders' cellphones offering financial or unemployment assistance

• Stolen information from online applications, used to apply for a credit card under the account holder's name

Remote scams have become easier during quarantine, which is why banking institutions need to remain more vigilant about the risks to their account holders.

The Takeaway for Banks

Banks need to be aware of the fraudulent behaviors that indicate fraudulent activity on their customers' accounts, whether it's credit fraud, identity theft, or a remote scam. However, identifying these warning signs is only the first step. Financial institutions also need secure, integrated systems that identify breaches and red flags and respond accordingly.

Intellicheck offers easy-to-use software that integrates into a bank's existing network, saves time compared to other security solutions, and reduces the risk of fraudsters working under the radar. Contact Intellicheck today to catch the fraudsters before they cross the threshold of your business, as well as those that have already made it inside without you even knowing.