Last Updated on 16 Feb 2024

Emily’s Nightmare: New Account Fraud

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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.

But how does new account opening fraud really happen?

Let's review the same story for Emily as a victim of identity theftEmily, 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.

But What is fake account fraud?

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.

This type of fraud can result in severe consequences such as:

  • Financial losses
  • Conduct illegal activities and damage to credit scores
  • Lengthy recovery process for the victim
  • Ruin the user trust

What are the fraud prevention solutions for Emily's case?

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:

  • Regularly Monitor Financial Statements

    Keep a close eye on bank statements, credit card statements, and other financial transactions to quickly detect any unauthorized activity. She is entitled to one free credit report from each major bureau annually.

  • Use Two-Factor Authentication (2FA)

    Enable 2FA on her online accounts for an added layer of security, making it more difficult for fraudsters to gain unauthorized access.

  • Protect Personal Information

    Emily should be cautious about sharing personal information online. Avoid responding to unsolicited requests for sensitive details.

  • Implement Credit Freezes

    Consider placing a credit freeze on her accounts to restrict access, preventing fraudsters from opening new accounts in your name.

  • Educate herself

    Stay informed about common phishing tactics and social engineering techniques. Be skeptical of unsolicited communications requesting personal information.

  • Report Suspicious Activity Promptly

    If she suspects fraud or notices unauthorized account activity, report it to her financial institution and relevant authorities promptly.

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.

The ultimate security measure: Using behavioral biometrics for new account fraud prevention

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.

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