Fake Identities, Real Crimes: Preventing Synthetic Identity Fraud
Synthetic identity fraud is one of the fastest-growing financial crimes in the United States, accounting for up to 20 percent of credit losses and costing lenders roughly $6 billion annually. Unlike traditional identity theft, synthetic identity fraud involves using a real social security number in conjunction with a fake identity. The combination of real and fake information makes preventing synthetic identity fraud extremely difficult.
Synthetic identity fraud accounts for up to 20% of credit losses and costs lenders roughly $6 billion annually.
With billions of dollars in uncollectible debt at risk, preventing synthetic identity fraud must be key for banks and lenders. As fraudsters apply for credit cards, cars, and even mortgages with fake identities, financial institutions must understand how the current digital environment affects this activity and what steps they can take to minimize these risks.
How today’s digital climate is impacting fraud
Amid the pandemic, consumer behavior and business operations suddenly shifted online and created brand new transaction types. Cybercriminals and fraudsters set their sights on new opportunities like the economic recovery stimulus, online banking, and the rise in unemployment insurance claims. According to the Federal Trade Commission, in the first half of 2020, there were over 70,000 fraud reports related to stimulus funding. Scammers also received $36 billion in unemployment payments.
What changing fraud trends mean for banks and lenders
Due to the shift away from in-person activity, financial institutions have had to work hard to keep up with the change, including adjusting their online identity verification and online banking authentication requirements. As mortgage rates declined, application volumes skyrocketed for refinancing and new home purchases. In this active housing market, lender fraud is more likely to occur while overwhelmed mortgage staff are less prepared to catch the signs.
Fake identities can easily slip through the cracks when onboarding processes aren’t built for today’s market conditions. Yet fraudulent accounts aren’t the only threat. Straw buyers, people who purchase something on behalf of another person to evade legal restrictions, are also an issue. They’re unidentifiable throughout the underwriting process but can be caught after the loan closes with occupancy verification tools.
It’s critical for lenders to perform their due diligence to verify that borrowers and their property addresses are real.
Mortgage fraud takes more forms than simply false occupancy and ownership. Fictitious properties are also a possibility. Air loan scams involve the creation of a fake property and borrower to cash out on the loan. With a nonexistent borrower, the loan ultimately goes into default, leaving the lender holding the bag. With more business transactions taking place virtually, scams like this could become more of a threat. To minimize these risks, it’s critical for lenders to perform their due diligence to verify that borrowers and their property addresses are real.
Preventing synthetic identity fraud with the right tools
An essential first step in the battle against synthetic identity fraud is to leverage technology that can protect both financial institutions and consumers. Innovative solutions like Urjanet’s identity and address verification platform provide lenders with digital, on-demand access to utility bill data, satisfying compliance requirements and weeding out synthetic identities.
Don’t let these red flags go unnoticed. To learn how automated and direct access to utility bills can protect you and your customers from identity thieves, schedule some time to speak with one of our experts today.
You might also be interested in:
- How Today’s Digital Environment Is Impacting Mortgage Fraud Trends
- National Mortgage Lender Simplifies Compliance Process with Digitized Proof of Occupancy
- 5 Digital Tools to Help Fight Identity Fraud
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About Ma-Keba Frye
Ma-Keba Frye is a Content Marketing Associate at Urjanet, assisting with content development and execution. When she's not writing, she enjoys reading, listening to music, and volunteering.