Preventing new account fraud can be a costly and destructive problem for both consumers and organizations. The losses are not just the fees charged to fraudulent accounts – they also leave victims with poor credit scores from unpaid loans taken out in their name and often with a hacked email address that can lead to phishing attacks. For merchants, the losses can be even more severe: in 2020 alone, identity fraud caused by falsified new accounts cost US businesses around $43bn.

Defending Your Business: Strategies to Prevent New Account Fraud

In a world where entire legitimate identities can be bought on the dark web for as little as $20, it is increasingly easy for criminals to open new accounts without the victim’s knowledge. As such, it is critical that banks prevent this type of fraud, particularly in the first 30 days after an account is opened – when it is most likely to happen.

Traditionally, FIs have relied on documents and checks to prevent new account fraud, such as cross-checking utility bills against a person’s driving license or assigning a risk score based on a person’s social media presence or email addresses. However, the most effective way to prevent new account fraud is to use a behavioral biometric solution that monitors a person’s normal online behavior and compares it against known criminal behaviors.

Using this approach, it is possible to detect patterns of suspicious behavior that can be indicative of fraud, such as repeated failures of password reset requests or high levels of transfers in/out of the account that would not make sense based on salary data. This can help FIs to spot potential fraudsters and teach their staff how to spot mobile deposit fraud so that it can be stopped quickly.