How Can You Get “Fraud Fit” in 2024?

Every year, millions of people across the globe start the year committed to getting in shape. Eat better, go to the gym, meditate – there are endless ways to fortify oneself and get leaner, stronger, and just generally healthier. The right mindset and a pair of running shoes provide a good start, but those who truly stay committed do so because they have a plan. Charting a course for achieving fitness goals may be one of the most important aspects of staying disciplined in your quest, and it’s the difference between those who are still going to the gym in the summer months versus those who have gone back to evenings on the couch with a pint of Ben & Jerry’s by February.

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A similar approach can help you achieve fitness across your organization’s fraud strategy. In the same way, if you want to build muscle, agility, and mental alertness for your personal health, you can extend those practices to your enterprise’s systems and data sources. Yes, you can fortify them against attacks by making them stronger and more nimble, but just like with your physical well-being, there’s no magic pill. It will require some work but with a sensible plan, the right support, and a goal-driven mindset, you can most certainly make your organization fraud fit in 2024.

What Does “Fraud Fit” Look Like?

Don’t worry, this isn’t about building six-pack abs or training to do an ultramarathon in the Sahara. Fitness is about building a plan, developing discipline, sustained commitment, and ultimately it’s about improvement.

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For some, the act of getting into shape is about feeling better or maybe losing a few pounds. Others want to build muscle mass or improve their overall agility. Some want to build up to competing in a triathlon. No matter how you slice it, getting “fit” is all about making a series of changes in order to achieve a better overall state of well-being, and to avoid the negative repercussions that come from being perpetually, well, unfit.

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In our enterprises, being “fraud fit” means that our systems and processes are girded against threats and are agile enough to adapt to new fraud types. It requires a combination of awareness, planning, discipline, and fortitude. Rather than a simple plan, it’s a combination of mental, physical, and emotional changes that govern how they operate their overall approach to the security of their customers, data, and processes.

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Just as a fit and agile athlete is better equipped to navigate obstacles, a fraud-fit organization can swiftly detect and thwart fraudulent activities. It's about more than just preventing an attack; it's about ensuring that your organization is in optimal shape to handle the unexpected, adapt to new challenges, and emerge stronger after every encounter with potential threats.

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Being fraud fit is undoubtedly a lifestyle rather than a tactic. Just as a marathoner doesn’t buy a new pair of running shoes the day before a race and hopes she doesn’t get blisters, fraud teams know they have to build their defenses and fitness levels through a series of steps. They must then commit to certain actions and habits, and then constantly adapt to maintain (and increase) their level of fortification. 

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With this guide, we hope to equip your organization with the necessary tactics to improve your strength, agility, and endurance required to outpace the fraudsters who are looking to beat you every chance they get. 

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The first step is to wake things up, stretch the organizational muscles, and get the blood flowing. Yoga pants are optional. A fraud-fighting attitude is not. Let’s get to work!

Step 1: Warm-up: Understanding the Threat Landscape

Understanding the current threat landscape is the starting point for any effective fraud prevention strategy. You and your team have to know what you’re getting into, and while you might think you’ve got this covered, there’s a good chance you need to reassess the current state of fraud, where it’s coming from, and whether or not you’re currently prepared for it. Think of it this way: the first time you go for a jog, you have to know the conditions and environment, get the right equipment, and know what you’ll be facing. Ignore all of this and you’ll be back on your couch nursing a pulled hamstring for weeks. 

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Fraud teams should start by actively engaging in comprehensive research and analysis. This involves staying informed about emerging fraud trends, techniques, and technologies – try a regular diet of FrankOnFraud, updates from the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), or data insights from the Federal Trade Commission. By closely monitoring industry-specific threats, the team can anticipate evolving tactics and develop proactive measures to counteract them.

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It’s also important to remember that you’re not in this alone. Studies show that fitness goals are more regularly met when people have workout partners. Similarly, you should seek ways for your organization to participate in information-sharing networks and collaborate with industry peers, because it fosters a collective awareness of current fraud challenges. This might include engaging with cybersecurity communities, attending fraud-related conferences, and participating in forums, all of which provide valuable opportunities to gain firsthand knowledge and perspectives on the evolving threat landscape. The Association of Certified Fraud Examiners hosts a variety of events across the globe, and the annual RSA Conference has, for the past 30 years, been a favored event for those seeking insights into fraud prevention tactics.

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A thorough understanding of the threat landscape requires continuous learning and adaptation. Fraud prevention teams should also invest in ongoing education for team members, ensuring they develop (and hone) the necessary skills to identify and combat emerging threats. Simulating real-world fraud scenarios through regular training exercises enhances the team's ability to respond swiftly and decisively when faced with actual incidents.

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Just as athletes like to get health-related baselines to assess improvement, fraud teams should prepare to conduct regular risk assessments as a way of understanding the threat landscape in practical terms. By systematically evaluating potential vulnerabilities and assessing the risk associated with new products, features, or partnerships, the team can make informed decisions about implementing additional safeguards or adjusting existing protocols. This approach ensures that the company remains well-prepared to address potential threats before they escalate.

Step 2: Cardio: Initiate Continuous Monitoring and Analysis

Ready to increase your heart rate? Good, because it’s time to begin continuous monitoring and analysis of your data, transactions, and processes.

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Monitoring and analysis are at the core of an effective fraud prevention strategy. Implementing real-time monitoring systems for transactions and user activities gives your team the insights it needs to detect and rapidly respond to potential threats as they unfold. By leveraging advanced monitoring tools, fraud prevention teams can keep a vigilant eye on every transaction and user interaction, enabling accurate identification of suspicious behavior.

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Regular data analyses further fortify the defense against fraud. The team must conduct thorough and systematic examinations of data to identify anomalies and patterns that may indicate fraudulent activities. This involves scrutinizing large datasets to uncover deviations from established norms and recognizing trends that may signify potential threats. The analysis process is dynamic, requiring adaptability to the evolving tactics employed by fraudsters.

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Getting into shape is easier when you perform the activities that are proven to be most effective at helping you achieve your goals. Powerlifting will help you gain muscle, but it may not be the best strategy for losing weight. We have to apply the same type of thinking to our fraud prevention. 

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One of the most effective means of identifying and preventing fraud has proven to be adopting a phone-centric approach to digital identity verification. Phone attributes, encompassing factors like the device's location, type, and historical activity, play a pivotal role in this method. Through continuous monitoring and analysis of these attributes, a digital fingerprint for the device is crafted, facilitating the detection of anomalies that may signify fraudulent behavior.

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Equally important is the examination of customer behavior attributes, which includes scrutinizing transaction patterns, login frequency, and typical usage behaviors. This scrutiny provides valuable insights into individual user activities, contributing to a more nuanced understanding of potential risks.

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The incredible synergy of phone and customer behavior attributes allows organizations to establish a comprehensive understanding of user interactions, significantly enhancing the accuracy of fraud detection. This approach employs a multi-dimensional analysis and results in a formidable challenge for fraudsters attempting to mimic legitimate user behavior convincingly. By intertwining these attributes, organizations can fortify their defenses, creating a robust and sophisticated framework for combating potential fraudulent activities.

In addition to real-time monitoring, the team must regularly analyze historical data to identify trends and patterns indicative of potential fraud. This type of retrospective analysis aids in refining prevention strategies, allowing the team to stay one step ahead of fraudsters by understanding their evolving tactics.

Step 3: Agility Training: Accelerate & Fortify the Account Onboarding Process

Now it’s time to engage your core and start working your quick-twitch muscles. Strengthening the account onboarding process is one of the single most important ways for a company to build its fraud prevention muscle, but it has to be done with an emphasis on speed and agility.

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Speed is the pivotal factor for both consumers and companies alike. In a realm where virtually everything online unfolds within a matter of seconds, consumers anticipate swift approval for new credit cards, bank accounts, and various online services. Companies, aiming for rapid customer growth, share this preference for immediacy. The key to achieving unparalleled speed lies in minimizing the friction that can impede the identity verification process.

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Leaders in fraud prevention and customer experience acknowledge the significant economic value inherent in delivering a seamless onboarding experience. The faster the process, the sooner new customers can engage with services and contribute to spending. However, it is essential to recognize the inherent tension: while a frictionless onboarding experience is desired, preventing fraud and safeguarding valuable data and intellectual property necessitates a rigorous digital identity verification process, historically associated with some level of friction.

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Success in new account opening and achieving customer experience excellence hinges on the deployment of a comprehensive engine fortified with multiple checks to effectively combat fraud. This centralized system evaluates vital identity factors, empowering informed decision-making through a series of checks and verifications. Opting for a single decision engine enables organizations to adopt a thorough approach to identifying and thwarting fraudulent activities, highlighting solutions such as the Prove Pre-Fill^® form pre-population solution and Prove Identity^® digital identity verification solution, which are both trusted by leading banking and financial services brands to strengthen their identity verification and fraud prevention processes.

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Consolidating identity checks into a unified decision engine enhances organizations' capabilities to detect and prevent fraud more effectively. This holistic approach offers a robust defense against sophisticated fraud schemes, such as money mules, by considering a broader array of indicators and patterns. This complexity makes it arduous for fraudsters to exploit vulnerabilities within the system, especially evident in the rise of money mule activities, where fraudsters employ their bank accounts or create new ones dedicated to fraudulent purposes, often evading typical identity verification checks and complicating the tracing of funds acquired from scams or account takeover attacks (ATO).

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Early account monitoring is the most effective and proactive measure during the new account application process to identify fraud. This strategy involves vigilant tracking of user activities and interactions right from the initial stages of account creation. By closely monitoring these activities, financial institutions can discern unusual patterns or behaviors that may signal fraudulent activities before they escalate. This approach is particularly crucial during the onboarding process, where potential fraudsters may attempt to exploit vulnerabilities, emphasizing the importance of early detection and intervention.

Step 4: Cross-Training: Be Prepared for Every Type of Fraud

Much like yoga pants, fraud is not a one-size-fits-all proposition. There are many different types – and new ones constantly being created – and their attack vectors manifest in different ways. 

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The complexity of fraud arises from the vast array of strategies employed by fraudsters, who adapt their approaches based on the specific vulnerabilities and opportunities they encounter. Tactics such as identity theft, synthetic identity fraud, application fraud, bot attacks, and social engineering are all used in different ways to perpetrate fraudulent activities.

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And what makes it even more complex is that the changing landscape of technology and security measures makes it non-uniform. Think of it like the human body, where environment, diet, amount of exercise, type of exercise, and genetics all play roles in determining your overall level of fitness. Those things are not static, and you can never fully tell what the impact will be when one element changes. Similarly, as businesses implement new technologies and enhance their fraud prevention tactics, fraudsters respond by innovating and evolving their methods. This adaptability makes it challenging to devise a universal solution that effectively addresses all potential fraudulent scenarios.

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There’s also the implications of motivation – why are fraudsters attacking, and what do they seek? Is it purely for financial gain, or do they want to expose sensitive information? Some consider themselves as modern-day Robin Hoods, while others just want a quick payout. You’ll find the same dynamic at the gym, where some are motivated to lose weight, while others just want the most massive biceps possible. Understanding these diverse motivations is crucial in comprehending the complexity of fraud and devising the right prevention strategies.

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Irrespective of what drives them, gaining access serves as the initial and pivotal step for fraudsters, prompting their concentration on the account opening phase. Businesses, in their eagerness to acquire new customers, frequently prioritize swiftness and user-friendly processes over robust verification. The key tactics employed by fraudsters to secure access encompass:

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• Identity theft: This is the theft of an individual's personally identifiable information (PII) from various public sources, enabling the impersonation of the individual during the account onboarding process.
• Synthetic identity fraud: This involves the creation of a fictitious identity by amalgamating genuine and falsified customer information. Fraudsters utilize these synthetic identities to open accounts, posing a challenge for detection due to potential mismatches with existing individuals.
• Application fraud: Fraudsters submit false or manipulated information during the account application process to secure approval, exploiting vulnerabilities in identity verification systems and potentially circumventing cybersecurity checks.
• Bot attacks: In this type of attack, fraudsters utilize previously breached or stolen PII to empower an automated script in the account opening process.
• Social engineering attacks: Relying on psychological manipulation, these attacks deceive individuals into divulging PII. Scammers leverage this personal data to manipulate account opening processes in their favor, exemplified by methods like phishing.

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An adaptive mindset allows fraud teams to recognize emerging patterns, swiftly respond to evolving tactics, and rapidly implement measures that address the intricacies of each distinct fraud attack. By embracing a “cross-training” type of approach, fraud prevention teams can fortify their defenses against the multitude of challenges presented by the continually evolving landscape of fraud.
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Step 5: Strength Training: Develop a Plan for New AI-Based Attacks

Artificial intelligence is kind of like the pill that every athlete wants – it makes you stronger, gives you more endurance, and there are seemingly no limitations to the amount of work it can enable. But AI comes with some unwanted side effects.

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AI has become a tool that empowers cybercriminals to devise increasingly sophisticated fraud schemes that counteract the vulnerabilities fraudsters exploit in the continuously evolving elements of artificial intelligence-driven fraud. These include:

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Social Engineering Tactics

In the realm of cybersecurity, fraudsters employ social engineering tactics to psychologically manipulate individuals, leading them to divulge sensitive information or commit security errors. Several common forms of social engineering include:

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• Phishing: Phishing, a prevalent form of identity theft, involves cybercriminals sending seemingly legitimate emails or messages to deceive users into revealing personal information, such as passwords or credit card details.
• Vishing: A variation of phishing, vishing utilizes voice communication to impersonate legitimate entities and extract confidential data over the phone, adding an auditory dimension to the deception.
• Business Email Compromise (BEC) Scams: Fraudsters compromise business email accounts to impersonate employees or executives, targeting financial transactions or sensitive data, thereby exploiting the trust associated with professional communication.

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AI-Powered Social Engineering

The integration of artificial intelligence (AI) has changed how social engineering attacks are perpetrated. AI enables criminals to automate the creation of personalized, convincing, and highly effective messages, which enables them to deploy a higher volume of attacks with increased success rates, all within a shorter timeframe.

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Password Hacking Evolution

AI, because it works so rapidly and with such massive amounts of data, is perfectly adept at password hacking, where it empowers hackers to guess passwords more effectively, posing a significant threat to the security of online accounts and systems. These sophisticated algorithms facilitate quicker and more accurate guessing, necessitating a renewed emphasis on robust password management practices.

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AI-Driven Deepfake and Voice Cloning Schemes

AI's manipulation of visual and audio content has given rise to deepfakes and voice cloning, enabling cybercriminals to impersonate individuals with incredible realism. These deceptive techniques are employed to create fabricated content, which quickly helps fraudsters induce stress, fear, or confusion when distributed through social media platforms and other channels.

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Prior to the widespread adoption of AI systems, many depended upon a digital identity framework that created a significant vulnerability. The existing internet model for identity verification depended on credentials such as personal information, which were already susceptible to spoofing or purchase. The advent of AI technology has exacerbated this issue, providing criminals with the capability to counterfeit faces, voices, and various biometrics. In this current landscape, there is a heightened urgency to address and rectify the existing digital identity gap. The solution lies in advancing privacy-preserving, consumer-consented, robust identity verification, and authentication processes to thwart fraudsters and prevent them from attaining unprecedented influence. It is critical to strengthen ongoing efforts and establish a more secure foundation for digital identity in order to safeguard against the escalating threats facilitated by AI advancements.

Step 6: Maintenance: Fortify Your Defenses

Are you feeling stronger and fitter already? You’re doing great work, and while it’s been challenging, it’s already paying off. Check your team and your fraud activity; do you feel more in control? 

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It’s safe to say that you’ve built a foundation for fitness, but now you need a plan to maintain it. Don’t let all this work go to waste, and fight the urge to fall back into old habits. You’ve put so much work in, and now is the time to ensure that you, your team, and your organization truly are fraud fit. 

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There are a few best practices for how to do this, and they can all be done as a collaborative effort across your team (consider this as something like team training for a Tough Mudder but with less dirt).

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The first step involves establishing a culture of perpetual fraud awareness within the organization. Regular briefings and discussions keep the team abreast of emerging fraud tactics, fostering a collective sense of responsibility. You’ll see our prescription for a fraud fitness diet on page __. This checklist should be reviewed and you and your team should ensure that there is ample attention paid to using these tactics to maintain awareness and establish the right mindset across your team.

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Of course, monitoring and all aspects of continuous vigilance have to become embedded into your organization. This will help to ensure that your organization is making the most out of its data investments and that your digital identity verification approach is delivering accurate, trustworthy results. Building the muscle of keen observation will help your team identify potential threats before they escalate, and it may be your best deterrent against fraudulent activities.

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Also, this is sometimes overlooked, but it’s important to become comfortable with the technology you’re applying to the task of fraud-fighting. It’s easy to become enamored with “gear” or technology tools (and trust us, more isn’t always better), but great athletes know which tools they need and they have an informed understanding of how to use them. You’ll want to use a digital identity verification solution as the foundation of your fraud prevention efforts, so make sure you’re intimately familiar with how it can facilitate both better fraud capture and improve the customer experience. 

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In the midst of all this work, make sure your team conducts scenario-based testing, simulating real-world threats to refine their responses. These simulations serve as invaluable lessons, uncovering vulnerabilities and strengthening their defenses. The dynamic risk assessment approach becomes their compass, guiding them through the shifting landscapes of risk thresholds and refining models to reflect the current threat environment.

Working With Your Team of Elite Fraud Athletes

Your fraud team is capable of guarding the essence of your organization – its data, customers, processes, and all the essential elements that define your business. The concept of fitness is more than just building and strengthening. It’s about disciplined and rigorous adherence to goals for the purpose of improvement. If you can create this type of culture and instill these behaviors – and you most certainly can – you’ll discover that your organization will be almost impenetrable in the face of current and new fraud threats.

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Your team is ready to get into shape.

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