[Editor’s note: This is a guest post from Tim Dubes, Vice President of Marketing with Ocrolus, a cloud platform for analyzing financial documents based in New York.]
Mirroring the growth in online lending volume over the past half-decade, there has been an acceleration in fraudulent account takeover. According to a pymnts.com report, account takeovers jumped 300% year over year in 2017, and have continued to rise ever since. The trend was particularly pronounced in the lending space; lenders lost $4 billion from account takeover last year, according to Javelin Strategy and Research.
To combat this type of fraud, online lenders need to learn what account takeover entails from a tactical perspective and the tools that are available to combat nefarious activity.
Online Lending Fraud: Account Takeover
Account takeover is a form of financial identity fraud where a fraudster uses some combination of a victim’s PII and ultimately access to an associated financial account to secure a loan and then steal the funds. Fraudsters apply for a loan in the victim’s name, transfer the funds into the victim’s account, withdraw the money and then disappear.
Account takeover can be riskier than other forms of identity fraud, but it comes with several built-in advantages for fraudsters looking for a fast return for their efforts. Unlike synthetic identity fraud, for example, the account takeover perpetrator does not need to build a new identity and associated accounts, or even establish a long-tail financial history to commit the fraud. The fraudster is essentially taking over a person’s identity, pre-existing accounts, and credit history to illicitly funnel money into a safe haven, using the victim’s account as a pass-through vehicle.
Account takeover is facilitated like many other types of identity fraud: a bad actor obtains sensitive information, such as bank account numbers, usernames or passwords, and other key credentials from personal contacts, malware, phishing, or other violations of a victim’s privacy. The fraudster takes out a loan in the victim’s name, and routes the funds into the victim’s legitimate account.