Why fraud is getting more sophisticated

Dimitrie Dorgan, senior fraud specialist at Onfido, explores why fraud is getting more sophisticated, and how organisations can prevent it

Fraudsters have come a long way in the digital age, assisted by a unique context. Over the last five years, consumers and businesses have increased the adoption and provision of digital services, and cyber criminals have had more opportunities than ever to conduct nefarious activities. In fact, there have been growing concerns over a ‘fraud epidemic’ engulfing the UK, accelerated by the economic impact following the global pandemic.

While a rise in the volume of fraud is widely discussed, its sophistication has also increased. So, as consumers and businesses have and continue to adapt to a more digital-first world, how have fraudsters raised their game?

The changing face of fraud

In 2020, at the height of the pandemic, online fraud was dominated by opportunists taking advantage of an unprecedented situation. A surge in basic or ‘unsophisticated’ fraud attacks indicated a rise in first-time fraudsters. As a global identity verification company, we saw attackers trying their luck but fail with information on an identity document that doesn’t match the sign-up details, or identity documents that fail for data validation.

In the business world, the equivalent shift at the start of the pandemic meant pivoting models or embracing more digital tactics to stay ahead or stay afloat. This attitude was reflected in the activity of attackers looking to take advantage on a bigger scale. We saw opportunists target specific marketing events, such as when a business offers sign-up bonuses or when there was a spike in a certain market, for example, crypto. A sign of this type of fraud is receiving large numbers of the same document type or repeated information, such as an email address.

To combat the rise in such fraud tactics, businesses formulated a more organised response, whether by adopting technology more strategically or catching up with concepts such as hybrid working. Unfortunately, this evolution was mirrored by the fraudsters.

While the general identity fraud rate remained consistently high last year, Onfido’s 2022 Fraud Report found a concerning 57% year-on-year increase in sophisticated fraud, perpetrated by criminal groups and fraud rings. It took some time for these organised fraudsters to adapt, but now that they have, we are seeing an increase in more coordinated attempts and more advanced techniques.

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Getting inside the mind of the fraudster

Generally speaking, fraudsters take the path of least resistance. This means they are likely to target documents such as ID cards or passports which are easier to replicate. As demonstrated by amateur criminals early in the pandemic, there was a high volume of fraud attempts, but with obvious errors such as missing letters and other obvious signs signified fraudulent documents. In fact, the average ID fraud rate increased from 4.1% in October 2019, to 5.8% in October 2020.

Last year, National Identity Cards were the most frequently attacked document type, but this year, passports have moved firmly into the crosshairs. ID cards typically include personal information on both the front and back of the document compared to a passport which only includes this information on one page. This points to a shift in fraudsters’ behaviour, who are increasingly targeting one-sided documents and looking for attacks that require less effort and maximum reward.

Signs of sophisticated fraud

In comparison to the efforts of amateurs, sophisticated fraud is more difficult to detect and often undertaken by criminal gangs who run large scale operations. The threat landscape over the last year has been defined by an increase in the number of these organised attacks, as the perpetrators have the resources to conduct advanced tactics such as deepfakes, 2D and 3D masks, or even coercion.

Often, sophisticated fraud can be indicated by fraudsters re-using the same information on multiple occasions. For example, techniques like creating verified accounts with fake documents, to then use in subsequent attacks, points to more organised activity. Subtler signs, such as incorrect fonts, the wrong photo printing technique, or imitated security features, can only be picked up by advanced document analysis.

Criminal gangs and fraud rings are most commonly behind these types of attacks, as a higher volume of attempts – perhaps enhanced by automation – means a higher chance of success.

Particular tell-tell signs may also indicate, such as using the same background in every submitted photo of the ID or selfie – a sign that fraudsters are attempting to attack a business en masse.

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Translating knowledge into prevention

Understanding criminal tactics is crucial to protecting against them. Data discrepancy, Photoshop templates and document duplication are more common with sophisticated fraud rings, so cross-referencing information like country of origin or passport number with other data in the document will often highlight mistakes.

Traditionally, businesses rely on knowledge-based authentication or signals, such as device IP, phone number or credit databases, to trust a new user. However, these can expose them to fraud because mass data breaches have left huge amounts of personally identifiable information available for sale on the dark web.

To combat this, businesses need to have robust authentication methods in place. For example, layering identity processes helps them build a strong assurance in their users’ real identities. And as fraudsters get more advanced, combining an individual’s ID card with their physical biometrics is more effective than document checks alone – particularly when videos are included in the verification process to prove the attempt is being carried out by a ‘present’ human.

As we’ve seen from the analysis of criminal habits, they are more likely to move onto an easier target if faced with robust defences. It’s been a busy year for these fraudsters – with 17% more breaches in the first nine months of 2021 than in the entirety of 2020 – but as they adapt, a strong defence increasingly means spotting more advanced techniques than it does holding firm against a deluge.

Written by Dimitrie Dorgan, senior fraud specialist at Onfido

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