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 past few weeks, I’ve been 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’ve been examining how the battle against the bad guys is evolving and how the good guys (like you) can fight back. This is the last post in the series, but you can find the others in the series linked at the end of this post.
A Rapid Increase in Identity Fraud Attacks: How is the Government Responding?
The COVID-19 pandemic brought about substantial change for almost every industry and organization in the world, including the public sector. The U.S. government saw a massive increase over the last few years in the number of fraud attempts to entitlement programs, stimulus packages, and tax scams. The government has taken notice, and that attention will only ramp up in 2022.
Consider these efforts already underway by the U.S. government:
- White House action: In May 2021, the White House launched an initiative on Identity Theft Prevention and Public Benefits. The initiative is designed to bring a whole-of-government approach to stopping criminal syndicates before they can prey on relief funds that belong to the American people, and helping individuals who have experienced identity theft recover money that belongs to them.
- Joint Financial Management Improvement Program (JFMIP): The JFMIP is a collaboration between government agencies—such as the Department of Treasury, the Office of Management and Budget, the Office of Personnel Management, and the U.S. Government Accountability Office—working to evaluate what could be implemented in terms of identity verification to mitigate the instances of identity fraud/improper payments realized through the pandemic. It is expected that they will release a report with recommendations for improving identity verification programs at other agencies sometime in Spring 2022.
- Paycheck Protection Program (PPP) fraud: Researchers concluded that around 1.8 million of the program’s 11.8 million loans—more than 15 percent—totaling $76 billion had at least one indication of potential fraud.
- Unemployment fraud: The U.S. Department of Labor Inspector General Office in late March estimated that at least $89 billion of the estimated $896 billion in federal unemployment program funds could be paid improperly, with a significant portion attributable to fraud. This is based on a historic improper payment rate of at least 10%. Others have estimated that the losses to unemployment fraud could exceed $400M, or 50%.
- Government imposter scams: While not a financial impact to the federal government, bad actors heavily use IRS, SEC, DOJ, and FBI guises to perpetrate scams against consumer victims. Each of these agencies is paying a great deal of attention to these scams and working to educate consumers.
- Department of Justice: In October and November of this year, U.S. law enforcement took action to address 4,750 money mules who operated in every state in the country. These actions more than doubled the number of actions taken during last year’s effort.
- Internal Revenue Service (IRS): Following its annual IRS Security Summit in late October, the IRS reminded families, teens, and senior citizens about the continued importance of protecting personal and financial information. The Security Summit works to protect taxpayers from criminals that file fraudulent returns for refunds.
- Department of Homeland Security (DHS): DHS reported that terror organizations exploit synthetic identities to launder money as well as obtain cell phones, airline tickets, and false identification documents needed to acquire passports. These events won’t show up as a financial loss to the bank with an open synthetic account.
- Financial Crimes Enforcement Network (FinCEN): FinCEN has recognized the negative impacts of synthetic and other types of internet-enabled fraud schemes and has issued new Anti-Money Laundering (AML) and Countering the Financing of Terrorism National Priorities recently, which call out the need to better manage synthetic fraud.
- The Boston Federal Reserve: The Fed partnered with industry experts earlier this year to define synthetic fraud and are currently building out tools to help deploy the synthetic definitions and optimal fraud labeling across the industry.
Government Partnerships and Anti-Fraud Progress in 2022
Fraud Trend to Watch For: With all of this activity, combined with concern and governance for entitlement and consumer and business stimulus programs, the U.S. government is highly motivated to cultivate additional partnerships with industry leaders in 2022.
In 2022, Socure will be focused on bringing identity verification best practices and industry-leading identity verification solutions to the public sector. Late this year, the company hired Matt Thompson as SVP & General Manager of our effort to build and lead the newly developed Public Sector Solution group at Socure. We’re excited to work even closer with this sector—check out what we’re already doing to deliver quick online access, reduce fraud losses, ensure inclusivity, and protect program integrity with the most accurate and inclusive identity platform for building trust and reducing losses in the digital government.
This is the last post in our fraud trend series. If you missed earlier trends to watch for, check out the full list at the end of this post (I’ve also collected the full series in this Six Predictions for Battling Fraud white paper, along with a a other bonus upcoming fraud prediction). No matter what fraudsters throw at the digital world in 2022, Socure will be ready—here’s to a fraud-free future!
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.
2022 Identity Fraud Prevention: What You Need to...
Identity fraud has never been more rampant. Fraudsters are exploiting open...
MeridianLink Live! 2022: Fraud and Compliance Trends for...
MeridianLink, one of the nation’s most respected consumer loan origination system...