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Identity fraud management

In this post, we’ll take a more detailed look at identity fraud management. As well as looking at how your business can manage fraudulent attacks, we’ll also detail the common types of fraud, and outline the best fraud and identity management solutions and practices.

A header image for the blog announcing Veriff's 2021 Identity Fraud Report.
May 11, 2022
Blog Post
Fraud Prevention

Between June 2020 and June 2021, instances of identity fraud increased by 19%. Due to this, it’s clear that identity fraud is a serious cause for concern and that businesses must have proper fraud and identity management processes in place to counter this growing threat.

In this post, we’ll take a more detailed look at identity fraud management. As well as looking at how your business can manage fraudulent attacks, we’ll also detail the common types of fraud, and outline the best fraud and identity management solutions and practices.

How to manage fraudulent attacks

Fraudsters are always finding new ways to attack businesses and customers. In this ever-shifting landscape, it’s vital that you understand these emerging threats and that you deploy multi-layered security solutions that can help you fight them.

Today, online and mobile services have transformed the way that businesses interact with customers. However, while technologies have improved the customer experience and have brought businesses and customers closer together, they’ve also created loopholes that hackers and cyber criminals are attempting to exploit.

To counter these new and emerging threats, you need to have a fraud prevention strategy in place. However, before we look into identity fraud management solutions and best practices, we’ll first analyze the common types of fraud attacks your business could be exposed to.

Common types of fraud attacks

Most people mistakenly believe that all types of identity fraud are the same. However, this isn’t the case and several different forms of identity fraud occur regularly. To help you understand more, here’s an outline of the most common forms of fraud attacks:

Financial identity fraud

Financial identity theft is the most common form of identity theft. It occurs when someone uses another person’s information for financial gain. For instance, a fraudster may steal someone’s bank account or credit card in order to steal money or make a purchase.

Medical identity fraud

Medical identity theft is also becoming increasingly common. With medical identity theft, a fraudster will steal someone’s personal information and then receive medical care in their name.

Criminal identity fraud

Criminal identity fraud is when someone who has been arrested provides your information to law enforcement officials.

Although all forms of identity theft are tricky to spot, criminal identity fraud usually isn’t detected until a consequence arises. For example, victims may not notice that they’ve been a victim of identity fraud until a speeding ticket goes unpaid and a bench warrant is issued for their arrest by a judge.

Synthetic identity fraud

Synthetic identity fraud is committed when a fraudster creates a fake identity using a combination of fake and real information. For example, when committing synthetic identity fraud, a fraudster may use a real social security number but will also use fictitious information, such as false names and addresses that aren’t linked to that account.

Synthetic identity fraud is one of the fastest-growing financial crimes in the United States. It’s also closely linked to document tampering, which is a process where the physical properties of an official document are altered. This could include erasure, alteration, or substitution.

Child identity fraud

Child identity fraud is also incredibly serious. Of course, most children under the age of 16 don’t have a credit report. This means it’s possible for a fraudster to open a credit account in a child’s name and for this to go unnoticed for a period of years. In fact, it’s relatively common for a victim of child identity fraud to only learn about the activity when they apply for a job or a student loan.

Fraud management solutions and best practices

It’s clear that identity fraud is on the rise and businesses are vulnerable. But, how do you safeguard your business from this growing threat? Well, identity fraud management solutions can certainly help. Let’s take a look at the role fraud analytics, identity verification methods, and customer authentication methods can play in a successful fraud and identity management process.

Fraud analytics

Fraud analytics combines analytic technology and techniques with human interaction to help detect potentially improper transactions.

The process involves gathering and storing relevant data and mining it for patterns, discrepancies, and anomalies. By deploying fraud analytics, you can identify hidden patterns in data, enhance and extend your existing fraud and identity management efforts, and measure and improve your performance.

Identity verification methods

In addition to this, your business should employ the use of an identity verification solution. This way, you can ensure that your customers are exactly who they are claiming to be. Plus, you can also ensure AML and KYC compliance while also making sure that it’s still simple for honest customers to access your services.

Customer authentication methods

Finally, as part of your identity fraud management practices, you should also employ customer authentication methods.

Whether you use password authentication, biometric authentication, multi-factor authentication, or certificate-based authentication will depend on the services you’re providing and the sensitivity of the data someone is trying to access. However, each method can help ensure that data remains secure.

How to prevent fraud attacks

Fraudsters will attempt to attack businesses in a number of different ways. However, to prevent fraud attacks against your business, you should:

Have a thorough understanding of legal and regulatory obligations

The legal and regulatory obligations of your business will be determined by its location and purpose. If you’re a gatekeeper and you’re subjected to anti-money laundering (AML) and know your customer (KYC) regulations, then it’s important you know these inside out. Not only will this ensure you’re compliant, but it will also give you more insight into how criminals may attempt to target your business.

Know your customers and your suppliers

Even if you don’t need to meet stringent KYC obligations, you should still ensure that you know who your customers are. This way, you’ll find it much easier to spot any business request or transaction that looks wrong for that customer or supplier and may be fraudulent.

Identify vulnerabilities

By analyzing how a fraudster may target businesses, you can then test your systems and processes to reduce risk. You should also regularly review and update the systems you use to further eliminate vulnerabilities.

Get expert help

Finally, consider whether your business may need professional or legal advice. By planning for the worst-case scenario, you can ensure your business is properly equipped for the fight against fraud.

Download our identity fraud report

As the world continues to evolve digitally, there’s no doubt that identity fraud is on the rise. In our most recent report, we found that identity fraud now makes up close to two-thirds of all fraud incidents globally and has doubled compared to 2020. 

If you’re interested in taking a more in-depth look at fraud trends and want to improve your understanding of the global state of fraud, download our 2021 Identity Fraud Report today.