New Account Fraud

New account fraud involves fraudsters creating accounts using false identities, which can be entirely fabricated, obtained through identity theft, or a combination of real and fake information. The intention behind this crime is to make their identity harder to detect and evade culpability. The financial impact of new account fraud is significant, with nearly $7 billion of US consumers’ money lost to such attacks in 2021, as reported by Javelin Strategy and Research.

Fraudsters employ various tactics to open fraudulent accounts, making it challenging to identify them based solely on the data they provide. Three common methods include:

• Invented Information: The fraudster creates fictitious names and addresses during the account opening process and may generate a new email address solely for this purpose.
• Synthetic Information: In this approach, fraudsters steal certain documents to pass account opening checks. They may combine real ID information with a fake email address, leading to synthetic ID fraud, which is rapidly growing as a form of financial crime in the US.
• Stolen Identity: In this scenario, the fraudster impersonates another person entirely, known as an account origination attack. They gather information about their target, create a fake identity using that data, and open an account with it. This tactic is common in financial services, where attackers apply for loans or make unauthorized purchases.

New account fraud is often attempted at scale, with fraudsters using both manual methods and bots to try various techniques repeatedly to open multiple accounts successfully. However, this pattern can be leveraged against them by identifying similarities between fraudulent account opening attempts, helping to detect and prevent such fraudulent activities. Staying vigilant and implementing robust security measures are essential to protect merchants and consumers from the growing threat of new account fraud.