In 2018, banks lost $3.4 billion to new account fraud. This is when scam artists open new accounts to draft checks or spend money from lines of credit with no intention of repaying the funds. To protect your financial institution from new account fraud, you need tools in place that look for the following red flags.
1. Frequent Weekend Deposits Before Bank Holidays
To increase the float time on fraudulent deposits, many perpetrators of new account fraud make deposits on Fridays or Saturdays before bank holidays. This schedule gives them ample time to make withdrawals before the deposited checks are returned.
2. Deposits of Fraudulent Checks
To artificially inflate the balance in their new accounts, scam artists often deposit fraudulent checks. This includes stolen, forged, and counterfeit checks as well as checks drawn on fraudulent accounts from other financial institutions. Often, to avoid detection, scam artists don’t make these deposits immediately after opening new accounts. Instead, they wait a few months.
3. Withdraws Immediately After Deposits
Similar to check-kiting schemes, new account fraud often involves making withdrawals at the same time or immediately after deposits. By the time the deposited check is returned to your bank, the scam artist has disappeared with their cash and left you with an overdrawn account.
4. Name and Social Security Number Don’t Match
If a credit bureau search shows a different name associated with the Social Security Number (SSN) than the name listed on the application, you may be dealing with fraud.
As you know, many people have multiple names associated with their credit bureau records. This can happen due to name changes related to marriage or divorce, but people often get fake names associated with their records. For instance, if someone doesn’t change their name after getting married, they may receive mail with their first name and their spouse’s last name, and although it is not real, this name may appear on their credit bureau report.
These types of discrepancies are to be expected, but a major difference between the name on the new account paperwork and the name associated with the SSN on the credit bureau reports is almost always a sure sign of new account fraud.
5. Established SSN With New Name and Address Info
Generally, credit and identification info is established shortly after someone obtains an SSN, but if someone is applying for an account with an established SSN that shows name and address info added in the last six months or more recently, they are likely using an SSN stolen from a baby or child.
6. Primary Identification Issued in Last 60 Days
If the scam artist is impersonating a real person, they may have gone to the Department of Motor Vehicles (DMV) to obtain a fraudulent photo ID. Be careful about accepting new account applications from anyone who has a photo ID issued in the last 60 days.
Unless they recently moved to the area, most people have photo IDs that are older than six months. Note that scam artists also tend to use state-issued IDs that are not driver’s licenses because they are easier to obtain.
7. Cash for the Opening Deposit
Using cash for the opening deposit does not always indicate fraud, but it can be a red flag. To avoid detection, criminals may start with a small cash deposit. Then, after the account has been open for a couple of months, they will start depositing fraudulent checks.
In contrast, legitimate customers are more likely to deposit a paycheck or set up automatic deposits from their employers.
8. Mail Drop Addresses
Mail drop companies provide addresses to their customers, without verifying their background, and scam artists like to work with these companies because they provide a layer of anonymity and keep the address holder’s identity a secret. If a new account holder uses a mail drop address, you should take additional steps to verify their identity.
9. Nonlocal Home and Business Addresses
Legitimate banking customers generally open accounts in the same areas where they live and work. If you’re processing a new account application with nonlocal addresses, a scam artist may be involved.
10. Discrepancies Between the Address on Applications and IDs
With a lot of new account fraud, the address on the application does not match the address on the ID. This happens when the scam artist gets a photo ID in the victim’s name and address but with the scam artist’s photo.
To avoid detection, the scam artist provides their own address or a mail drop address on the application so that the victim doesn’t receive any correspondence about the new account. Unless the new account holder has recently moved and can provide proof of doing so, the address on their ID should always match the address on the new account application.
11. Older Than 25, With No Financial History
By the time someone is 25 years old, they should have a history of financial activity on their credit bureau report or at other banks. If someone over this age tries to open an account and you cannot find any history on them, they may be committing fraud.
12. Request for a Large Number of Temporary Checks
Sometimes, new account fraud can involve writing a lot of bad checks from the new account, and to get their cash as quickly as possible, these scam artists may request an unusually large quantity of temporary checks. Additionally, you should pay attention to the temporary checks that are cashed on new accounts. If they are deposited in another account owned by the account holder, fraud is likely.
13. Unverifiable Email Addresses
New account fraud is eight times more likely to happen with accounts opened online than in the branch, and often, when scam artists open new accounts online, they use all of an identity theft victim’s real credentials with the exception of their email address. By using the victim’s real name, address, and SSN, the scam artist avoids detection related to many of the points listed above.
However, to ensure the victim doesn’t receive any emails about the account, these thieves often use a fake email address. Signs of fraud include an email address that cannot be verified, an email address that the victim has no record of using in the past, or the same email address used on several new account applications.
To safeguard your assets and your reputation, you need fraud solutions that help you detect and prevent fraud across all transactions including when someone is opening a new account, and we can help. Contact us at SQN Banking Systems today, and we will tailor a real-time fraud prevention solution to meet the unique needs and risks of your financial institution.