Fraud Detection Is About Connecting The Dots
Johnny Bravo??
Helping Landlords Combat Fraud | Exposing Fraudster Tactics | Synthetic Fraud & Identity Theft Detection
Here for the latest trends, insights, and tips to help property managers and rental operators find the best possible residents in a changing landscape.
Fraud detection has taken on a new meaning in the post covid era.
With the massive jump to digital-first interactions (…thanks covid lockdowns) fraudsters today have an opportunity like no other to take advantage of easy targets.
Landlords that either have no dedicated fraud detection system or rely on antiquated techniques and solutions to spot fraudsters are the targets they are looking for.
And whether you’re a traditional multifamily operator or focused on single-family homes, there is nothing more stress-inducing than seeing pictures of your property on Craigslist the next day.
But it’s not just about updating your technology to detect fraud, you have to create a process that can holistically look at your applicants to find the nuances that fraudsters can’t avoid. A solution that can "connect the dots" of a fraudster's activity.
You’re looking for a literal web of lies.
What's great is that there has been a litany of new fraud detection systems that have hit the market over the last few years as a direct response to the skyrocketing amount of fraud seen in the rental real-estate space.
These are just a few examples of the approach these newer fraud detection systems take when trying to identify fraudsters. And while these types of technology and services are valuable; and obviously do detect fraud sometimes, a key aspect that is often missed is that they are only looking at one characteristic or "dot" of a fraudster's behavior.
They simply can't look at, recognize, or build the full picture for you.
When it comes to fraud, especially synthetic fraud…it can still be missed by these services for reasons that aren’t readily apparent.
Synthetic fraud is unique in that it is using a mix of real data, stolen data, and at times even made-up data.
You may think that a fraudster is using completely fabricated information when applying for an apartment, but that is not always the case. In fact, a fraudster very well may be using their own, or an otherwise legitimate ID or address. They might be using a real pay stub. Or even their real past lease history.
But that’s not the full story, even though that chapter of their history checks out.
As the saying goes, these fraud detection systems are “missing the forest for the trees”. In most respects, they are often siloed and can’t help you connect the dots.
In fact, often (but not always) they don’t even know that there are other dots available to complete the picture.
A facial recognition to document matching service is not going to look at or care about a phony IP address.
An income verification service won’t even know or care if that individual’s address has been linked to a known fraud ring.
A true fraud detection system looks to “connects the dots”. It gives you context to that individual.
It will look at all the available data to see through that literal web of lies. It will not only look at the information but will be able to cross-reference it against other known data on that individual.
?? Face and ID match. Check.
?? ID and Home address match. Check.
?? Device says it's from NY, but the IP address says it's in Indonesia.
Building A Better Fraud Detection System
There are obviously many ways to approach this part of your business but here are two ways that seem to work well.
By using a system that can:
Connect The Dots
This is an almost all-in-one solution that can look at the information provided by that applicant and goes further and/or deeper into the data.
Here's the thing about today's fraudsters. They are smarter, better equipped, and significantly better at exploiting weaknesses.
But they can't fake EVERYTHING. Especially how an individual's data points or "dots" connect to each other in a normal person's daily life.
Stealing or creating these data points is the easy part for them. Making sure they match up to create a cohesive identity is much harder.
That is what a solution like this is trying to evaluate. What are the dots and what picture do they make?
Layered Approach
The key here is that not only are you not relying on only one service, but you also are not relying on one single method of detecting fraud.
Here’s one way to approach it in three layers.
Identity Verification
This is focused on verifying the information the applicant provides against multiple comprehensive sources of consumer and fraud data to answer the question “Are they who they say they are”.
Best to look at credit and non-credit information in this case.
Device Verification
Does the IP address match where the device "says" it's from? Is the device what it says it is? Any unusual browser behaviors? Is this likely to be a burner phone?
Identity Authentication
This is the final step in the process where knowledge-based questions or “out of wallet” questions are used as well as one-time passcodes to authenticate that individual.
We've all come across these types of questions:
Don't Miss The Forest For The Trees
While there are a lot of great technologies associated with fraud detection on the market now, having a robust, holistic fraud detection system is more about connecting the dots of a fraudster's trail rather than simply catching them with a fake ID.
Each piece of a fraud solution should connect the dots by analyzing all available data and cross-referencing it against other known identifiers to spot the nuanced characteristics of a fraudster's behavior.
Johnny, can you help me?
Maybe, let's chat. If you're running into issues where fraud is a problem, or you want to make sure your screening solution is finding you only the best possible residents; reach out or comment below.
Looking at buying a property, and concerned the current/past owner just let "anyone" in? I can help with that too.
Disclaimer: The statements, views, and opinions expressed above and related articles represent my own and not necessarily those of my employer. Additionally, none of this information can be considered advice for your specific and unique situation nor is it updated for timely or regulatory accuracy. Please consult your own counsel and abide by all laws, rules, regulations, and ordinances that pertain to your property.
Thank you for reading this far. I appreciate you.
Photo by?https://www.connectthedots101.com/