Application fraud using synthetic identities on rise in APAC region

Six in ten banks in Asia Pacific say that they are experiencing application fraud using synthetic identities according to a recent poll by FICO, and a further one in five banks say that the number of fraudulent applications for credit cards now sits between five to 10 percent of all applications.

“Identity fraud was a growing problem in 2017,” said Dan McConaghy, president of FICO in Asia Pacific . “As prevention technologies have improved to stop activities such as card skimming, criminals are now stealing identities or constructing ‘fake people’ to get real credit cards.”

Synthetic identity fraud is where new identities are made by blending elements from multiple individuals, making the uncovering of fraudulent transactions more complicated. Scammers take these new identities and apply for accounts to build validity for these new personas. Products such as pre-paid credit cards, utility bills and personal loans have all been used as a starting point to build credibility and credit-worthiness in a process that can take the criminal many months, sometimes years.

FICO’s survey also found that 44 percent of banks believe that social platforms and mobile apps are the most likely to suffer a data breach. “The availability of personal information online via social media platforms and mobile apps has made it easier for culprits to mix fake and real personal information,” said McConaghy .

With all of this data available to criminals to try and apply for credit cards fraudulently, it wasn’t surprising that dealing with application fraud was the key priority for four in ten banks in 2018 .

The survey also reveals that half of banking respondents reported an increase of 25-50 percent in card testing. This is an activity where criminals test the fraud rules of the banks to check what limits and which purchase categories will result in the blocking of a card rather than an approval. A further quarter of respondents said it was even higher at 50-100 percent . This growth demonstrates the increasing sophistication of organized fraud rings.

When asked about the key obstacles to tackling more fraud, four in ten banks said the key reason was a lack of budget. The second most popular reason was that the fraud department was dealing with too many false positives.

FICO surveyed 37 executives from financial institutions across the region at the annual FICO Asia Pacific Fraud Forum held in Bangkok, Thailand in October 2017.