Fraud & Identity Management

Happy holidays! It’s the holiday season and a festive time of year. Colorful lights, comfort food and holiday songs – all of these things contribute to the celebratory atmosphere which causes many people to let their guards down and many businesses to focus more on service than on risk. Unfortunately, fraudsters and other criminals can make one of the busiest shopping times of the year, a miserable one for their victims. The nature of the stolen data has the potential to create long-term headaches for the organization and tens of millions of individuals. Unlike a retailer or financial breach, where stolen payment cards can be deactivated and new ones issued, the theft of permanent identity information is, well, not easily corrected. You can’t simply reissue Social Security numbers, birth dates, names and addresses. For individuals, we need to internalize this fact: our data has likely been breached, and we need to become vigilant and defend ourselves. Sign-up for a credit monitoring service to be alerted if your data or ID is being used in ways that indicate fraud. Include your children, as well. A child’s identity is far more valuable to a fraudster as they know it can be several years before their stolen identity is detected. The good news is, in addition to the credit bureau, many banks and auto clubs now offer this as a service to their customers. For organizations, the focus should be on two fronts: data protection and fraud prevention. Not just to prevent financial theft, but to preserve trust — trust between organizations and consumers, as well as widespread consumer trust.  Organizations must strive to evolve data protection controls and fraud prevention skills to minimize the damage caused by stolen identity data. There are dozens of tools in the industry for identifying that a consumer is who they say they are – and these products are an important part of any anti-fraud strategy.  These options may tell you that the combination of elements is the consumer, but do you know that it is the REAL consumer presenting them? The smart solution is to use a broad data set for not only identity verification, but also to check linkage and velocity of use.  For example: Is the name linking to other addresses being presented in the past week? Is the phone number showing up to other addresses and names over the past 30 days? Has the SSN matched to other names over the past 90 days? Since yesterday the address matches to four phone numbers and two names – is this a problem? And it must be done in ways that reinforce the trust between consumers and organizations, enhance the customer experience, and frustrate criminals.  Click here to learn more about Experian’s products and services that can help. As we go walking in the winter wonderland, remember, the holiday season is a time for cheer… and vigilance!

2017 data breach landscape Experian Data Breach Resolution releases its fourth annual Data Breach Industry Forecast report with five key predictions What will the 2017 data breach landscape look like? While many companies have data breach preparedness on their radar, it takes constant vigilance to stay ahead of emerging threats and increasingly sophisticated cybercriminals. To learn more about what risks may lie ahead, Experian Data Breach Resolution released its fourth annual Data Breach Industry Forecast white paper. The industry predictions in the report are rooted in Experian's history helping companies navigate more than 17,000 breaches over the last decade and almost 4,000 breaches in 2016 alone. The anticipated issues include nation-state cyberattacks possibly moving from espionage to full-scale cyber conflicts and new attacks targeting the healthcare industry. "Preparing for a data breach has become much more complex over the last few years," said Michael Bruemmer, vice president at Experian Data Breach Resolution. "Organizations must keep an eye on the many new and constantly evolving threats and address these threats in their incident response plans. Our report sheds a light on a few areas that could be troublesome in 2017 and beyond." "Experian's annual Data Breach Forecast has proven to be great insight for cyber and risk management professionals, particularly in the healthcare sector as the industry adopts emerging technology at a record pace, creating an ever wider cyber-attack surface, adds Ann Patterson, senior vice president, Medical Identity Fraud Alliance (MIFA). "The consequences of a medical data breach are wide-ranging, with devastating effects across the board - from the breached entity to consumers who may experience medical ID fraud to the healthcare industry as a whole. There is no silver bullet for cybersecurity, however, making good use of trends and analysis to keep evolving our cyber protections along with forecasted threats is vital." "The 72 hour notice requirement to EU authorities under the GDPR is going to put U.S.-based organizations in a difficult situation, said Dominic Paluzzi, co-chair of the Data Privacy & Cybersecurity Practice at McDonald Hopkins. "The upcoming EU law may just have the effect of expediting breach notification globally, although 72 hour notice from discovery will be extremely difficult to comply with in many breaches. Organizations' incident response plans should certainly be updated to account for these new laws set to go in effect in 2017." Omer Tene, Vice President of Research and Education for International Association of Privacy Professionals, added "Clearly, the biggest challenge for businesses in 2017 will be preparing for the entry into force of the GDPR, a massive regulatory framework with implications for budget and staff, carrying stiff fines and penalties in an unprecedented amount. Against a backdrop of escalating cyber events, such as the recent attack on Internet backbone orchestrated through IoT devices, companies will need to train, educate and certify their staff to mitigate personal data risks." Download Whitepaper: Fourth Annual 2017 Data Breach Industry Forecast Learn more about the five industry predictions, and issues such as ransomware and international breach notice laws in our the complimentary white paper. Click here to learn more about our fraud products, find additional data breach resources, including webinars, white papers and videos.

How will the FinCEN revisions impact your business? (Part 2) I recently discussed the new FinCEN requirements to Customer Due Diligence. This time, I’d like to focus on the recent FinCEN advisory regarding “email-compromise fraud.” This new advisory sheds additional light on the dual threats of both Email Account Compromise impacting the general public and Business Email Compromise that targets businesses. FinCEN has rightly identified and communicated several high-risk conditions common to the perpetration of scams such as varied languages, slight alterations in email addresses, out-of-norm account and transaction information, and social engineering in the form of follow-up requests for additional transfers. In addition to introducing operational standards to detect such conditions, institutions also would benefit from these other tactics and focal points as they respond to email requests for financial transfers: Email validation and verification — use of third-party vendor services that can deliver a measurable level of confidence in the association of an email address to an actual, true identity. Multifactor authentication — use of dual-step or out-of-band verification of the requested transaction using alternate channels such as phone. Robust KYC/CIP at application and account opening to ensure that name, address, date of birth and Social Security number are verified and positively and consistently linked to a single identity, as well as augmented with phone and email verification and association for use in customer communications and multifactor authentications. Customer transactional monitoring in the form of establishing typical or normal transfer activity and thresholds for outlying variations of concern. Known and suspected fraud databases updated in real time or near real time for establishing blacklist emails to be segmented as high risk or declines upon receipt. Identity application and transactional link analysis to monitor for and detect the use of shared and manipulated email addresses across multiple transaction requests for disparate identities. Access to device intelligence and risk assessment to ensure consistent association of a true customer with one or more trusted devices and to detect variance in those trusted associations. Which of these 7 tactics are you using to stop email-compromise fraud?

Reinventing Identity for the Digital Age Electronic Signature & Records Association (ESRA) conference I recently had the opportunity to speak at the Electronic Signature & Records Association (ESRA) conference in Washington D.C.  I was part of a fantastic panel delving into the topic, ‘Reinventing Identity for the Digital Age.’  While certainly hard to do in just an hour, we gave it a go and the dialogue was engaging, healthy in debate, and a conversation that will continue on for years to come.  The entirety of the discussion could be summarized as: An attempt to directionally define a digital identity today The future of ownership and potential monetization of trusted identities And the management of identities as they reside behind credentials or the foundations of block chain Again, big questions deserving of big answers. What I will suggest, however, is a definition of a digital identity to debate, embrace, or even deride.  Digital identities, at a minimum, should now be considered as a triad of 1) verified personally identifiable information, 2) the collective set of devices through which that identity transacts, and 3) the transactional (monetary or non-monetary) history of that identity. Understanding all three components of an identity can allow institutions to engage with their customers with a more holistic view that will enable the establishment of omni-channel communications and accounts, trusted access credentials, and customer vs. account-level risk assessment and decisioning. In tandem with advances in credentialing and transactional authorization such as biometrics, block chain, and e-signatures, focus should also remain on what we at Experian consider the three pillars of identity relationship management: Identity proofing (verification that the person is who they claim to be at a specific point in time) Authentication (ongoing verification of a person’s identity) Identity management (ongoing monitoring of a person’s identity) As stronger credentialing facilitates more trust and open functionality in non-face-to-face transactions, more risk is inherently added to those credentials.  Therefore, it becomes vital that a single snapshot approach to traditionally transaction-based authentication is replaced with a notion of identity relationship management that drives more contextual authentication.  The context thus expands to triangulate previous identity proofing results, current transactional characteristics (risk and reward), and any updated risk attributes associated with the identity that can be gleaned. The bottom line is that identity risk changes over time.  Some identities become more trustworthy … some become less so.  Better credentials and more secure transactional rails improve our experiences as consumers and better protect our personal information.  They cannot, however, replace the need to know what’s going on with the real person who owns those credentials or transacts on those rails.  Consumers will continue to become more owners of their digital identity as they grant access to it across multiple applications.  Institutions are already engaged in strategies to monetize trusted and shareable identities across markets.  Realizing the dynamic nature of identity risk, and implementing methods to measure that risk over time, will better enable those two initiatives. Click here to read more about Identity Relationship Management.

How will the FinCEN revisions impact your business? (Part 1) Some recently published FinCEN revisions and advisories are causing a stir. First, let’s look at revisions to Customer Due Diligence that require compliance by May 2018. Under the updated requirements for Customer Due Diligence, covered financial institutions must expand programs, including Customer Identification Programs (CIP), to include Beneficial Owners of Legal Entity customers. Under the new rule, financial institutions must collect and verify identity information (name, address, date of birth, Social Security number or passport number for foreign individuals):  For each Natural Person with at least 25% ownership in the Legal entity and  For an individual with significant responsibility for managing or controlling the business — for example, a chief executive officer, a chief financial officer, a chief operating officer, a managing member, a general partner, a president, a vice president or a treasurer The U.S. Treasury estimates that illicit proceeds generated in the United States alone total $400 billion annually. These requirements are intended to prevent anonymous access to financial systems through shielded or minority ownership. While the effort to stem the tide of illicit proceeds is laudable, the impact to business may be significant. Most organizations will need to audit their data collection practices, and many will need to make changes to either data collection or workflow processes to ensure compliance. While quite simple and straightforward on paper, the standardization of additional CIP policies and procedures tend to create substantive impact to the customer experience as well as operational resource allocations and utilization. Covered financial institutions should already be discussing with their current or prospective fraud risk and identity management vendors to ensure that: There is a clear path to altering both data collection and verification of these additional identity elements. Clear and accurate benchmarking around expected verification rates is available ahead of the compliance date to allow for operational workflow design to accommodate both ‘verifications’ and ‘referrals stemming from lack of full verification.’ Service providers are granting access to best-in-class data assets and search & match logic related to identity element verification and risk assessment, along with multi-layered options to reconcile those initial verification ‘fails.’ Full business reviews and strategy design sessions are underway or being scheduled to align and document overall objectives of the program, benchmarking of leading industry practices, current and future state gaps, near- and long-term initiatives and a prioritized roadmap, a viable business case toward additional investment in services and resources, and a plan of execution. Will this impact your business? Will you need to make any changes? Click here to read part two - FinCEN and email-compromise fraud.

Experian is recognized as a leading security solution provider for fraud and identity solutions in order to protect customers and financial institutions

U.S. Communities national contract awarded to Experian to use their data and analytic solutions in order to enable state and local government agencies to help consumers and better serve their communities for the future.

As we approach the one-year anniversary of the EMV liability shift, we have seen an increase in e-commerce fraud — to the tune of 15% higher than last year. Additional insights from Experian’s biannual analysis on e-commerce fraud include: 44% of e-commerce billing fraud came from Florida, California and New York* 52% of e-commerce shipping fraud came from Florida, New York and California* Miami, Fla., is the most dangerous city in the United States for e-commerce merchants* As fraudsters continue to perpetrate card-not-present fraud, ensure you are prepared. You’ll be thankful if fraudsters come calling. >> E-commerce Attack Rates

Experian analyzed millions of e-commerce transactions from the first six months of 2016 to identify the latest fraud attack rates across the United States for both shipping and billing locations. As we approach the one-year anniversary of the EMV liability shift, the 2016 e-commerce fraud attack rates look to be at least 15 percent higher than last year’s total. Experian analyzed millions of e-commerce transactions from the first six months of 2016 to identify the latest fraud attack rates across the United States for both shipping and billing locations. Billing fraud rates are associated with the address of the purchaser. Shipping fraud rates are associated with the address where purchased goods are sent. As we approach the one-year anniversary of the EMV liability shift, the 2016 e-commerce fraud attack rates look to be at least 15 percent higher than last year’s total. E-commerce fraud is often an indicator that other fraud activities have already happened, whether a credit card has been stolen, identity fraud has occurred, or personal credentials have been compromised.

Historically, the introduction of EMV chip technology has resulted in a significant drop in card-present fraud, but a spike in card-not-present (CNP) fraud. CNP fraud accounts for 60% to 70% of all card fraud in many countries and is increasing. Merchants and card issuers in the United States likely will see a rise in CNP fraud as EMV migration occurs — although it may be more gradual as issuers and merchants upgrade to chip-based cards. As fraud continues to evolve, so too should your fraud-prevention strategies. Make a commitment to stay abreast of the latest fraud trends and implement sophisticated, cross-channel fraud-prevention strategies. >>Protecting Growth Ambitions Against Rising Fraud Threats

Unfortunately, identity theft can happen to anyone and has far-reaching consequences for its victims. According to the US Department of Justice (DOJ)’s most recent study, 17.6 million people in the US experience some form of identity theft each year. This includes activities such as fraudulent credit card transactions or personal information being used to open unauthorized accounts. The most obvious consequence that identity theft victims encounter is financial loss, which comes in two forms: direct and indirect. Direct financial loss refers to the amount of money stolen or misused by the identity theft offender. Indirect financial loss includes any outside costs associated with identity theft, like legal fees or overdraft charges. The DOJ’s study found that victims experienced a combined average loss of $1,343. In total, identity theft victims lost a whopping $15.4 billion in 2014. Beyond money lost, identity theft can negatively impact credit scores. While credit card companies detect a majority of credit card fraud cases, the rest can go undetected for extended periods of time. A criminal’s delinquent payments, cash loans, or even foreclosures slowly manifest into weakened credit scores. Victims often only discover the problem when they are denied for a loan or credit card application. Last year, Experian found that these types of fraud take the longest time to resolve. Identity theft doesn’t just impact victims financially; it also often takes a significant emotional toll. A survey from the Identity Theft Research Center found that 69 percent felt fear for their personal financial security, and 65 percent felt rage or anger. And, almost 40 percent reported some sleep disruption. These feelings increased over time when victims were unable to settle the issue on their own, according to the report, which can result in problem as work or school, and add stress to relationships with friends and family. Thankfully, consumers are getting smarter about the best ways to protect their information, like using monitoring services or following security best practices. How are you protecting yourself against identity theft? Learn more about our Identity Protection Services

Did you know that identities can shift (for better or worse) in just 30 days? To succeed in today’s multichannel, mobile environment, businesses must have a broader, more dynamic identity management strategy that includes: Identity proofing: Point-in-time verification (e.g., account opening) Authentication: Ongoing verification (e.g., account login) Identity management: Continual monitoring throughout the Customer Life Cycle Minimize your identity fraud risk, increase customer engagement and provide a satisfying customer experience by shifting to a strategy focused on identity relationship management. >>The three pillars of identity relationship management  

Experian has been selected as one of the leading players in the fraud detection and prevention space in Juniper Research’s Online Payment Fraud strategies report.

Experian defines how businesses should approach Identity Relationship Management for identity and devices to enable better fraud protection through our latest perspective paper, The 3 Pillars of Identity Relationship Management: How organizations can reduce risk and increase engagement.

Fraudsters invited into bank branches The days of sending an invitation in the mail have for the most part gone by the wayside. Aside from special invitations for weddings and milestone anniversaries, electronic and email invitations have become the norm. However, one major party planner has refused to change practices — banks inviting fraudsters into their banking centers. As a fraud consultant I have the privilege of meeting many banking professionals, and I hear the same issues and struggles over and over again. It’s clear that the rapid increase of fraudulent account-opening applications are top of mind to many. What the executives making policy don’t realize is they’re facing fraud because they’re literally inviting the fraudsters into their branches. Think I’m exaggerating? Let me explain. I often encounter bank policymakers who explain their practice of directing a suspicious person into a banking center. Yes, many banks still direct applicants who cannot be properly verified over the phone or online into their banking center to show proof of identity. Directing or inviting criminals into your bank instead of trying to keep them out is an outdated, high-risk practice — what good can possibly come of it? The argument I typically hear from non-fraud banking professionals: “The bad guys know that if they come into the bank we will have them on film.” Other arguments include that the bad guys are not typically bold enough to actually come into the banking center or that their physical security guards monitor high-traffic banking centers. But often that is where bank policies and employee training ends. Based on my years of experience dealing with banks of all sizes, from the top three global card issuers to small regional banks, let me poke a few holes in the theory that it is a good deterrent to invite perpetrators into your banking center. Let’s role-play how my conversation goes: Me: “When an underwriter with limited fraud training making the decision to direct a suspicious applicant into a banking center, what is the policy criteria to do so?” Bank policymaker: (typical response) “What do you mean?” Me: “What high-risk authentication was used by the underwriter to make the decision to extend an invitation to a high-risk applicant to come into the banking center? If the applicant failed your high-risk authentication questions and you were not able to properly identify them, what authentication tools do the branch managers have that the underwriters do not?” Bank: “Nothing, but they can usually tell when someone is nervous or seems suspicious.” Me: “Then what training do they receive to identify suspicious behaviors?” (You guessed it …) Bank: “None.” (I then switch to the importance of customer experience.) Me: “How do you notify the banking center in advance that the suspicious applicant was invited to come in to provide additional verification?” Bank: “We do not have a policy to notify the banking center in advance.” Me: “What is considered acceptable documentation? And are banking center employees trained on how to review utility statements, state ID cards, drivers’ licenses or other accepted media?“ Bank: “We do not have a list of acceptable documentation that can be used for verification; it is up to the discretion of the banking center representative.” Me: “How do you ensure the physical safety of your employees and customers when you knowingly invite fraudsters and criminals into your banking center? How do you turn down or ask the suspicious person to leave because they do not have sufficient documentation to move forward with the original application for credit? If a suspicious person provides your employee with a possible stolen identification card, is that employee expected to keep it and notify police or return it to the applicant? Are employees expected to make a photocopy of the documentation provided?” The response that I usually receive is, “I am not really sure.” I hope by now you are seeing the risk of these types of outdated practices on suspicious credit applications. The fact is that technology has allowed criminals to make fairly convincing identification at a very low cost. If employees in banking centers are not equipped, properly trained, and well-documented procedures do not exist in your fraud program — perhaps it’s time to reconsider the practice or seek the advice of industry experts. I have spent two decades trying to keep bad guys out of banks, but I can’t help but wonder — why do some still send open invitations to criminals to come visit their bank? If you are not yet ready to stop this type of bad behavior, at the very least you must develop comprehensive end-to-end policies to properly handle such events. This fraud prevention tactic to invite perpetrators into banks was adopted long before the age of real-time decisions, robust fraud scores, big data, decision analytics, knowledge-based authentication, one-time passcodes, mobile banking and biometrics. The world we bank in has changed dramatically in the past five years; customers expect more and tolerate less. If a seamless customer experience and reducing account-opening and first-party fraud are part of your strategic plan, then it is time to consider Experian fraud solutions and consulting.