The Covid-19 pandemic has changed the financial profile of many consumers, in ways we never could have imagined just two years ago. The economic upheaval brought about by the pandemic has meant an uptick in the level of fraudulent activity recorded in new and already opened accounts.
With the cost of living in the UK on the rise and pay levels frozen as companies large and small try to recover from the impact, we are seeing changes in how and when fraud is occurring in Open Accounts.
During the earlier stages of the pandemic, less people were applying for credit or opening new accounts, meaning levels of detected fraud dropped dramatically. Accordingly, many businesses shifted focus. Fraud levels dropped, so priorities were moved elsewhere which meant many businesses stopped reviewing current customers, thus allowing fraud levels to rise again. In some circumstances, existing customers wouldn’t have committed fraud before the pandemic, may have been put under increased financial stress and hardship, and forms of fraud were viewed as a way to ease the pressure.
At the end of 2021 we started to see a rise again and, in some areas, dramatically so. And we aren’t just seeing fraud at the account opening stage, we are seeing a rise within accounts that have been open for weeks, months or even years.
Types of fraud in Open Accounts
We are seeing two main types of fraud happening in Open Accounts:
- Bust out fraud – Individuals may have taken out an account to ease financial pressures with no intent to repay
- Undetected account fraud – Increased financial pressure could mean a customer falsified information on an application form to gain more that they would be entitled to
The recent CIFAS report states that:
‘1 in 13 Brits admit to committing at least one form of first-party fraud in the last year, with those 16-34 the most likely to do so’.
With the fraud profile changing following the impact of Covid-19, businesses need to assess whether their current monitoring systems are effective in the detection of all types of fraud.
With application checks completed at a specific point in time, the ability to identify fraud is only as effective as the information available at the time. It is, unfortunately, possible for fraudulent applications to pass checks if fraudulent indicators weren’t available or weren’t deemed significant enough at the time. Fraudsters who pass the initial checks are then able to go on to exploit their accounts, leaving businesses exposed to sometimes considerable losses.
Regularly checking open accounts offers greater opportunity to capture potentially fraudulent activity once an account has been opened. Information which, if discovered further down the line, could have influenced the original decision. Regular monitoring and reviewing of account data allows businesses greater opportunity to detect fraud. Not only retrospectively capturing fraudulent applications, but also current fraudulent activity within existing accounts which may be occurring due to a change in circumstance.
A strong and secure defence package
Businesses need a strong and secure defence package, which allows you to check your current client book either as a one off, monthly or more regularly via continuous monitoring to enable you to keep ahead of fraud before it happens.
Protecting your current customers is equally as important, understanding their behaviour patterns and changes in circumstances to better detect fraud.
Through utilising a continuous monitoring solution, you can protect your current customers, identify potential fraudulent attempts, and review applications to minimise potential losses.
Find out more about assessing the risk of fraud on your active accounts.