Do you see what I see?

August 30, 2009 by Guest Contributor

By: Heather Grover

In my previous blog, I covered top of mind issues that our clients are challenged with related to their risk based authentication efforts and fraud account management. My goal in this blog is to share many of the specific fraud trends we have seen in recent months, as well as those that you – our clients and the industry as a whole – are experiencing.  Management of risk and strategies to minimize fraud is on your mind.

1. Migration of fraud from Internet to call centers – and back again. Channel specific fraud is nothing new. Criminals prefer non-face-to-face channels because they can preserve anonymity, while increasing their number of attempts. The Internet has been long considered a risky channel, because many organizations have built defenses around transaction velocity checks, IP address matching and other tools. Once fraudsters were unable to pass through this channel, the call center became the new target, and path of least resistance. Not surprisingly, once the industry began to address the call center, fraud began to migrate, yet again. Increasingly we hear that the interception and compromise of online credentials due to keystroke loggers and other malware is on the rise.

2. Small business fraud on the rise. As the industry has built defenses in their consumer business, fraudsters have again migrated — this time to commercial products. Historically, small business has not been a target for fraud, which is changing. We see and hear that, while similar to consumer fraud in many ways, small business fraud is often more difficult to detect many times due to “shell businesses” that are established.

3. Synthetic ID becoming less of an issue.  As lenders tighten their criteria, not only are they turning down those less likely to pay, but their higher standards are likely affecting Synthetic ID fraud, which many times creates identities with similar characteristics that mirror “thin file” consumers.

4. Family fraud continues. We have seen consumers using the identities of members of their family in an attempt to gain and draw down credit. These occurrences are nothing new, but   sadly this continues in the current economic environment. Desperate parents use their children’s identities to apply for new credit, or other family may use an elderly person’s dormant accounts with a goal of finding a short term lifeline in a bad credit situation.

5. Fraud increasing from specific geographic regions. Some areas are notorious for perpetrating fraud – not too long ago it was Nigeria and Russia. We have seen and are hearing that the new hot spots are Vietnam and other Eastern Europe countries that neighbor Russia.

6. Falsely claiming fraud. There has been an increase of consumers who claim fraud to avoid an account going into delinquency. Given the poor state of many consumers credit status, this pattern is not unexpected. The challenge many clients face is the limited ability to detect this occurrence. As a result, many clients are seeing an increase in fraud rates. This misclassification is masking what should be bad debt.

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