Enrollment fraud is rapidly becoming the new face of identity fraud in financial institutions across the US. Estimates show that enrollment fraud could result in eight billion dollars in lost revenue by the end of 2018, and further jeopardizes the safety of other customers. But what is enrollment fraud, and how can you spot it? Here’s a basic overview of what this type of fraud looks like, and what you can do to prevent it.
What is enrollment fraud?
Also known as New Account Fraud (NAF), enrollment fraud is another form of financial identity fraud. The cybercriminal typically uses another person’s information (typically a social security number) to open an online bank, loan, or credit account. A savvy cybercriminal will use a different address so that their victim never sees any mail from the fraudulent account. Typically, the fraudster will start by making small deposits and withdrawals from the fraudulent account in the first 30 days, often at the end of the week or before a long weekend to give them longer to return funds to the account. Sophisticated cybercriminals will often appear to be legitimate customers by presenting a myriad of supporting documentation and credentials.
What does enrollment fraud look like?
These identity fraudsters will often deposit checks that are forged or with funds drawn from other fraudulent bank accounts. Every few days, the criminal will shuttle funds back and forth between accounts. Usually, you can spot a fraudster if they request an immediate (large) cash withdrawal or a suspiciously high number of temporary checks. Often, they’ll appear to have no prior financial history, even if they’re over the age of 25.
What You Can Do
Of course, some fraud detection can happen in-person once your staff is trained to look for enrollment fraud as part of their KYC due diligence. Having customers come into your institution to open an account automatically reduces the number of false accounts being created. If your staff cannot verify the account holder (for example, there are two names and addresses linked to the same social security number) or if they’re using recently issued identification and do not live in the same geographical area as your institution, a manager should be alerted.
Of course, a fraudster may appear to be no different than any other account holder on the surface level. Therefore, you should look into AML technology (anti-money laundering) and advanced checking account verification systems. They’ll allow you to better verify bank account holders and will alert you to suspicious activity immediately.
When in doubt, consult with a company that specializes in bank account verification software and cybersecurity. Fraud changes constantly, so it’s important to have an ally who can keep up with trends and changes in financial crime.