I’ve been developing identity fraud detection technology solutions for almost 35 years. With that background, I feel confident predicting that the identity fraud industry is at an inflection point. I believe 2022 will be a defining year in the identity fraud detection fight, but unfortunately, the “bad guys” have a leg up in technology innovation.
Over the next two weeks, I’ll be posting a series of blogs with my thoughts on the five most game-changing identity fraud developments in 2022. These are not intended to be profound predictions. Rather, these developments have been building for some time, in numerous ways. In this series of posts, I will examine how the battle against the bad guys is evolving and how the good guys (like you) can fight back.
What are Imposter Scams?
A more low-fi version of digital identity fraud, an imposter scam involves a dishonest person tricking consumers into sending them money. For example, imposters scam consumers by telling them they won a prize and have to pay fees to receive it, or owe money to the IRS, have committed a crime and have to pay a fine, or even act as tech support and work to help with a problem on the consumer’s computer. The victim is then asked to buy a gift card, wire money, or add money to a crypto or bank account. The demand deposit account (DDA) account is generally set up as a synthetic identity, stolen identity or money mule.
The Impact of Imposter Scams on Consumers
The most recent annual FTC report indicated that imposter scams were the second highest complaints tracked by the FTC and the highest fraud type. In 2020, one in five consumers were impacted, with a total of $1.228B lost in 2020. That’s double the 2019 rate of one in ten affected, with a total of $667M in losses. This fact was a distance second to the massive increase in ID Theft complaints from 2019 to 2020.
The telephone is still the preferred method for imposters to reach their victims. Eight in ten (79 percent) of the adults surveyed by AARP said they were first targeted and/or victimized by an imposter scam via phone. Granted, this data may be skewed by age, but all indications are the phone is the tool of choice for imposter scams.
To receive and move money around, imposter scammers use everything from crypto, gift cards, DDA, Savings accounts and payment apps like Zelle, Venmo and Cashapp. Because of the broad consumer education about the use of gift cards by scammers, we predict that use of crypto and bank DDA and savings accounts will increase by imposters in 2022.
Fraud Trend to Watch For: Myself and others believe this sharp increase is tied to credit washing, and that the real headline here is how imposter scams are finding new outlets—especially those scams attacking the young and old. The FTC report coming out in 2022 will probably reflect another doubling in the number of consumers and dollars impacted. We’d even go out on a limb here and suggest that these numbers will triple.
How to Combat Imposter Scams & Synthetic Identity Fraud
For our part, Socure is working with retail banks and fintechs to identify synthetic fraud at DDA and Savings accounts origination. We are helping each test the best ways to combine identity signals with account transactions later in the life cycle, in order to identify these types of imposter scams earlier. To learn more about how imposter scams and other synthetic fraud trends are impacting industries, including surprising results from an in-depth impact analysis, download the Synthetic Identity Fraud Attacks: How Banks and Fintechs Are Fighting Back.
This is the third of five fraud trends I’ll be writing about in the coming weeks. Get the full list (plus one bonus prediction) in my new white paper, Six Predictions for Battling Fraud.
Mike Cook is VP of Fraud Solutions Commercialization at Socure and works alongside Data Science, Product, Sales and the Fraud Investigation team to help ensure solution optimization across all the markets Socure serves. Mike has been an innovator in fraud, identity, and credit risk for almost 35 years and has created several patents for identity risk technologies.