Are Fraud Rings Lurking in Your Portfolio?

When we talk to customers about fraud trends, many times they refer to processes and policies they have in place to catch fraud patterns they have identified in the past. However, the conversation always turns to those sophisticated actors, especially fraud rings, where the traditional fraud detection strategies don’t yield the same results. What factors have enabled fraud rings to successfully proliferate and what steps should your business take to avoid this evasive fraud challenge? Our blog takes a brief look into considerations that can help you proactively uncover fraud rings before they impact your portfolio.

Fueled by a combination of innumerable data breaches, mass migration to digital commerce and technology advances, fraud rings have solidified their place as a formidable, yet equally nimble opponent. The 2020 Federal Trade Commission Consumer Sentinel Network Data Book reports that New Account Credit Card Fraud increased 48% and New Account Bank Fraud increased 87% while existing account fraud decreased by 9% in a year-over-year analysis.¹ The criminals behind fraud rings leverage a level of sophistication and planning of how each PII element is shared and used within applications to remain under the radar and go undetected. Often, when a loss tied to fraud ring activity is finally detected, it is written off as a credit loss and not tied to fraudulent activity, further complicating fraud defense strategies that take a traditional, more retroactive approach.

To get a better view into the seismic and systematic rise of fraud rings in recent years, we analyzed half a billion applications from 2019 and 2020 and uncovered numerous networks of suspicious behavior totaling over 30,000 potential fraud rings. By assessing fraud rings from a multi-dimensional approach, our evaluation uncovered common behavior activities and identity signals that indicate activity tied to fraud rings, including:

• The relationship between SSN and address
• Address migration
• Contact field crowding
• Distinct email patterns
• Crowding on landline phones across multiple addresses

Our analysis also looked into common patterns and traits that fraud rings share. Our findings pointed to characteristics that included:

• The majority of fraud rings we detected are smaller in size. The average ring identified in our study contains 13 identities and averages 50 applications.
• On aggregate, these smaller rings contribute to costly damage and ongoing fraud losses.
• Fraud rings typically target three main industries: bankcard, wireless and retail card industries, with wireless carriers being hit the hardest.

Across our research, the level of organization, coordination and structure behind successful fraud rings emerged as a universal theme. Fraud rings are adept at carefully nurturing a stolen or synthetic identity to build viable identity personas and credit histories that evade detection by traditional fraud prevention tools. Constant identity evolution and organized collusion embolden fraud rings to escalate their attacks on your business and continually raise the level of damage they inflict on your portfolio. Proactively stopping fraud rings from entering your customer ecosystem demands a dynamic fraud defense that is underpinned by precise and near real-time identity risk perspective.

Find out how to strengthen your fraud strategy and better detect fraud rings.

To explore some of the key findings from our analysis, please download the whitepaper, Where Evasion Ends: Proactively Uncovering Fraud Rings Before They Impact your Portfolio.

Source
1. Federal Trade Commission Consumer Sentinel Network Data Book, https://www.ftc.gov/reports/consumer-sentinel-network-data-book-2020