Fraudsters constantly find ways to overcome security measures taken by companies. Among the most targeted are financial institutions.
Detecting fraud can be hard, especially if you are not aware of them. The best protection is to strengthen security through authentication. Aside from traditional verification processes, adding passwordless authentication can help.
New Account Fraud (NAF)
One type of fraud that you should be aware of is New Account Fraud (NAF). It targets different payment accounts using mobile and/or digital channels. These include debit or credit cards, demand deposit accounts (DDAs), online merchants, and card not present (CDP) accounts.
Fraudulent activities have increased through the years. In 2018, new accounts with credit card fraud were up 4%. New fraudulent mobile accounts increased by 28%. New fraudulent bank accounts had a 12% rise.
Use of Identity
There are two ways of using identity for NAF attacks. First, the fraudsters steal legitimate identities. Second, they create synthetic identities.
What is the difference?
Legitimate identities include data sourced from data breaches, phishing, and/or hacking. These will be used to open accounts. Thus, using the name of the victim. The fraudsters will pretend to be the person whose identity they have stolen. They often do this to bypass authentication, intercept communications from financial institutions, or conduct deposits and withdrawals to establish a pattern that will convince the financial institution that they are the owners of the account.
After gaining the trust of the financial institution, they will conduct other activities. They may apply for loans, request credit limit increases, make purchases, withdraw funds, transfer money, or generate fraudulent checks. All of these will be done without the knowledge of the legitimate account holder.
Meanwhile, synthetic identity is a made-up identity. Fraudsters can fabricate an identity using completely fictitious information. They can opt to manipulate an identity using modified real personally identifiable information (PII). Another way is identity compilation, wherein fraudsters combine real and fabricated PII.
The synthetic identity will be used to build credit. They will apply for a bank account or credit card. This way, they can bypass the identification and verification process. They will create a username and password for online transactions. Then, they can start committing payment fraud.
While fraudsters use technology to conduct NAF attacks, financial institutions can also use it to their advantage. Improve cyber security to prevent being a victim of fraud. What you can do is by including multiple layers of security. Doing this makes it more difficult for fraudsters to bypass. Include different technologies, such as passwordless authentication, biometrics authentication, and even OTP.