What is new account fraud?

New Account Fraud Poses Hidden Threats at Onboarding

New account fraud can initially come cloaked in benign activities, lulling an organization into assuming it onboarded a legitimate customer.

A fraudster uses a stolen, false or synthetic identity to make it through standard verification processes and open a new financial account, such as for credit or banking. The new account fraud then typically occurs within 90 days of account opening.

According to the U.S. Federal Trade Commission, when comparing existing and new bank account fraud, new accounts represented 78% of identity theft reporting in the first half of 2024.

Organizations that want to grow their global customer base face the challenge of applying security measures that prevent fraudsters from opening new accounts while limiting friction for good customers during onboarding.

Defending Against New Account Fraud

It’s critical for organizations to quickly tell the difference between good customers and fraudsters during onboarding.

The analysis can start even before the account application is complete. Fraud detection measures can identify the geolocation of the IP address. The device ID can help determine a phone’s legitimacy.

Organizations also can create a profile based on how application information has been used in other instances across the internet. Does the phone number, email or mailing address seem genuine? How long has it been connected with the applicant?

Do the different data points sync up? Personal information changes over time, but the data should reflect normal life events. An unusual pattern might not represent fraud but could call for more scrutiny.

The fraud landscape can also offer valuable insights. Has there been a recent large-scale data breach? Is there an increase in fraud rates?

A Fraud Technology Race

Technology advancements have made it easier to fight unsophisticated forms of fraud. But fraudsters also take advantage of new technologies to create more elaborate schemes.

The proliferation of data breaches has led to widespread access to “fullz,” which are complete sets of identity data that can be used for account opening. That puts organizations in the position of integrating onboarding security measures commensurate with the fraud risk.

The technologies for identity verification and authentication are advancing rapidly and can provide protective layers to combat new account fraud. A data breach might expose a set of data, other sources can provide alternative information verification.

For example, a mobile ID number is less likely to be available for fraudsters because people are more reluctant to share that information. Mobile data – such as location, IP and use – also can be hard to forge..

Two-factor authentication with a mobile number or email address provides another security layer. Access to an entire account poses a greater challenge to fraudsters.

ID document verification is yet another layer of fraud prevention that demonstrates possession of a valid government-issued ID. Organizations can verify the information on the ID and add assurance by comparing the image on the document with a selfie and liveness check.

Flexible, Global Fraud Prevention

Fraud protection in a global digital market often requires multiple layers of security. That can place stress on an organization’s tech stack and resources because it’s critical to quickly adjust to new markets and attack vectors.

Flexible, sophisticated fraud detection technology can help global organizations overcome those challenges and keep pace in a fast-changing fraud environment. That cutting-edge technology can orchestrate data inputs, fraud signals and verification tools to ensure the right risk controls are in place for any scenario.

AI and machine learning can uncover sophisticated fraud patterns and provide robust global risk signals. That combination of risk indicators, consortium data and industry-specific machine learning models positions organizations to detect fraud while reducing friction for good customers at account opening and beyond.