Emily’s Nightmare:
New Account Fraud

New account fraud as a type of identity theft

Imagine waking up to a series of alerts from your bank, thanking you for opening new accounts you never applied for. This was the reality for Martin, a regular guy who suddenly found himself in the middle of identity theft and new account fraud.

Martin's story is far from unique. In recent years, the frequency and sophistication of new account fraud have surged, posing a significant threat to consumers and financial institutions alike.
The Federal Trade Commission (FTC) reported a nearing $8.8 billion losses in 2022, over 30% higher than in 2021. The leading contributors to these losses were investment scams, followed closely by imposter scams.

Let's review the same story for Emily as a victim of identity theft

Emily, a young professional, wakes up to a barrage of emails and notifications confirming credit cards, loans, and online shopping accounts—all opened without her knowledge. Shocked, Emily discovers she is a victim of new account fraud.

An identity thief, armed with her personal details, has created numerous fraudulent accounts, leading to financial chaos.

The fraudster's online purchases leave Emily with mounting debt, and her credit score takes a severe hit. Attempting to secure a car loan becomes impossible due to the damaged credit history resulting from the unauthorized activities.

Amidst stress and anxiety, Emily navigates the challenging process of disputing the fraudulent accounts. Filing police reports, completing affidavits, and endless paperwork become part of her daily routine.

The long road to recovery involves working closely with credit bureaus, implementing credit freezes, and monitoring accounts with high vigilance.

Despite eventual success in resolving the fraud, Emily's trust in online transactions is shattered. Her advocacy for better cybersecurity practices reflects the lasting impact of the new account fraud nightmare on her financial and emotional well-being.

New account opening (NAO) fraud, also known as account opening (AO) fraud and fake account, is a form of identity theft where criminals use stolen personal information to create unauthorized accounts, credit cards, or loans in the victim's name.

In the prevention of new account fraud, two key players are involved. The first is the victim, and the second is the business where the fraud occurred.

Both the victim and the business need to undertake essential activities to deter fraud. On Emily's part, she can:

But all these activities need actions from Emily that are time consuming and error prone. On the other hand, the fraudsters constantly update their methods in a game of cat and mouse.

So, it is more efficient and scalable for a society if businesses take action to reduce the chances of fraud.

Companies can deploy account fraud prevention tooling, such as CrossClassify, for automated detection and prevention of suspicious activities using machine learning and AI.

The ultimate security measure is to analyze every user's behavior online to assess the risk and decide what extra information to ask for on every action.

That's how Google and Microsoft decide when to ask for a 2FA code, or a captcha, or even a password reset for business emails.

This approach is called "behavioral biometrics" and it is a lot of hard work to develop and fine-tune but the good news is that it is available as a service.

It gives companies a risk score for every user session with a recommended decision to approve or block a user’s access upon taking every action, such as opening a new account.

This helps individuals financially and emotionally by reducing the chances of becoming victims of new account fraud, without burdening them with heaps of manual work.