Identity Orchestration Unleashed: Two Fraud Experts Explain How to Elevate Fraud Defenses

Kelley Vallone
February 21, 2024

Prove hosted a wide-ranging conversation about strengthening fraud efforts in a webinar with Mary Ann Miller (Prove’s Vice President of Client Experience) and Freddy Arthur (EMEA Fraud Strategy Leader for NICE Actimize). The insights from these two experts were drawn from their vast experience as fraud fighters but applied a special focus on trends they’ve seen over the past year. 

Several studies were conducted in 2023 that bore significant insights into recent fraud activity in the financial services sector and other vertical markets. Miller and Arthur evaluate these findings and provide context for how fraud teams can quickly establish ways to minimize risk in the face of new fraud techniques and strategies. 

Here are some highlights from Miller and Arthur’s webinar, Identity Orchestration Unleashed: Elevate Your 2024 Fraud Defense.

A Look Back at Fraud in 2023

While there was no slowdown in fraud activity in 2023, there was important progress made towards greater awareness of the problem. Especially noteworthy were the actions of the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury, which released a recent report underscoring the imperative for banks and financial institutions to adopt heightened digital identity verification and authentication measures.

In the webinar, Miller and Arthur provided detailed insights from The FinCEN Identity Project scrutinized millions of Suspicious Activity Reports (SARs) submitted by banks and various financial entities, and revealed that among the 3.8 million reports examined, 42%, equivalent to $212 billion, were linked to identity-related issues. This project validated the need to enhance the accuracy and reliability of individuals' online identities through the use of biometrics, behavioral analysis, and multi-factor authentication to ensure that user accounts are not fraudulent or malicious. In their discussion, Miller and Arthur offered other measures that will help counter identity theft and unauthorized access, safeguarding sensitive information, and maintaining the integrity of online interactions. 

Miller suggested that moving into 2024, fraud leaders need to take a forward-looking approach to business and industry developments. In terms of strategy and planning, she indicated that a proactive stance in adapting to emerging trends and leveraging opportunities is mandatory if organizations are to get serious about stopping fraud. Whether it involves adopting new technologies, refining business models, or reevaluating marketing strategies, this forward-thinking approach enables companies to stay agile and resilient in the face of evolving market conditions. 

Preparing for Fraud in 2024

Miller’s emphasis on strategy and planning underscores the importance of being prepared for future challenges and capitalizing on emerging opportunities to ensure sustained success in 2024 and beyond.

Of special note is that New Account Fraud (NAF) has become a significant threat to all digital businesses, especially in the financial services sector. To combat NAF effectively, Miller and Arthur explain, organizations need a disciplined approach to employing fraud signals and digital identity fraud detection mechanisms. Their signals must rely on technology that can accurately identify fraudulent activity such as irregular login locations, unusual transaction patterns, and discrepancies in user information. Digital identity fraud detection methods need to be able to analyze vast amounts of data and detect anomalous behavior associated with fraudulent activities, which will help fraud teams fortify the overall security of online transactions and account creation processes.

A particularly interesting observation from Arthur is the need for early account monitoring and fraud detection – the earlier, in fact, the better. But beyond just identifying fraud, the most effective type of approach is one that improves detection accuracy while also reducing abandonment rates for digital bank onboarding. 

The two experts pointed out the importance of the customer experience and went into detail about how and why fraud teams and customer teams need to combine efforts in the coming year. The main reason is because of account abandonment. Even though banks are putting their best effort into stopping fraud, too much friction in the process frustrates new customers and is a major cause for them opting out of the process.

As part of the webinar, Miller and Arthur discussed how banks and other financial institutions can improve customer satisfaction and contribute to the overall success and adoption of digital banking services, ensuring a smoother and more efficient onboarding process for users… all while reducing fraud.

Getting Better at New Account Monitoring

Part of the success of new account opening and customer experience excellence, said Miller and Arthur, is the necessity of a comprehensive engine with multiple checks to combat fraud effectively. This type of centralized system assesses important identity factors and makes informed decisions based on multiple checks and verifications. Relying on a single decision engine allows organizations to implement a comprehensive approach to identify and thwart fraudulent activities. Miller pointed to the Prove Pre-Fill® digital identity solution and the Prove Identity® digital identity verification solution as examples of solutions that banking and finance brands rely on. 

By consolidating identity checks into a unified decision engine, organizations enhance their ability to detect and prevent fraud effectively. This comprehensive approach provides a more robust defense against sophisticated fraud schemes like money mules and other types of fraud, as it considers a broader range of indicators and patterns, making it harder for fraudsters to exploit vulnerabilities in the system. One need only look at the rise of money mule activity to see how fraudsters use their own bank accounts or open new ones solely for the purposes of fraud. This type of activity usually avoids typical identity verification checks, making it challenging to trace funds acquired from scams or account takeover attacks (ATO).

Miller emphasized how early account monitoring is the most effective and proactive measure in identifying fraud during the new account application process. Early account monitoring involves closely tracking user activities and interactions from the initial stages of account creation. By doing so, financial institutions can identify unusual patterns or behaviors that may indicate fraudulent activities before they escalate. This approach is particularly crucial during the onboarding process, where potential fraudsters may attempt to exploit vulnerabilities. 

A Phone-Centric Approach for Fraud Teams

These two experts determined that using a phone-centric approach to digital identity verification is the most effective method for identifying and eliminating fraud. Phone attributes may include factors such as the device's location, the type of phone used, and its historical activity. Analyzing these attributes helps create a digital fingerprint for the device, enabling the identification of anomalies that might indicate fraudulent behavior. Similarly, considering customer behavior attributes, such as transaction patterns, login frequency, and typical usage patterns, provides valuable insights into individual user activities. By combining phone and customer behavior attributes, organizations can establish a more comprehensive and nuanced understanding of user interactions, allowing for more accurate detection of potential fraud. This approach leverages a multi-dimensional analysis, making it challenging for fraudsters to mimic legitimate user behavior convincingly.

The importance of a holistic view and utilizing peer profiles for risk assessment is rooted in the understanding that fraud prevention requires a comprehensive understanding of the entire ecosystem. A holistic view involves considering various risk factors and elements simultaneously, such as user behavior, transaction history, and device attributes. This approach allows for a more nuanced risk assessment, identifying potential fraud by recognizing patterns and anomalies across multiple dimensions. Because of the ubiquity of phone ownership and usage, using phone intelligence enhances this holistic approach by comparing an individual's behavior against that of their peer group. By establishing normal behavior patterns within a specific context, such as geographical location or demographic group, organizations can better identify abnormal or suspicious activities. 

How Fraud Teams Can Stay Ahead of the Game in 2024

Integrating digital identity signals into monitoring systems is an important step in enhancing fraud detection capabilities for fraud teams. By constantly assessing relevant data, organizations can identify suspicious activities and mitigate risks associated with mule and first-party fraud. Early account monitoring is a key strategy in managing potential threats, offering a preemptive approach to safeguarding financial transactions. Leveraging fraud and identity risk signals in real-time not only strengthens the defensive mechanisms but also acts as a powerful deterrent, enabling swift action to prevent scams before they materialize. A comprehensive and dynamic approach to fraud prevention is imperative, combining advanced technology, vigilant monitoring, and rapid response mechanisms to ensure the security of digital transactions.

We encourage you to watch the replay of Mary Anny Miller and Freddy Arthur’s webinar, Identity Orchestration Unleashed: Elevate Your 2024 Fraud Defense, and learn how you and your organization can prepare to beat fraud in the coming year and beyond.

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