Stopping New Account Fraud — From Application to First Transaction
- Fraudsters build synthetic digital identities and exploit weak onboarding
- This makes every application into a potential new‑account attack
- Dynamic verification, behavioral analytics, and AI‑driven checks are essential to spot bot activity and identity reuse
One of the major components of fraud are drop/mule accounts -- particularly when it comes to new accounts and check fraud. In fact, according to NICE Actimize's 2024 Fraud Insights report, new accounts experience 17X higher fraud rates.
However, new-account fraud is not just an onboarding problem; it begins the moment a criminal starts filling out an application, often after carefully building a trail of “legitimate” digital identities that can fool traditional controls.
A recent PaymentsJournal's article delves into how new account fraud is being perpetrated. Fraudsters first open non‑financial accounts (such as email and social media profiles) that require little or no true identity verification, then leverage those accounts to appear legitimate to banks. Because many institutions still rely on static checks — IDs, names, dates of birth, and previous addresses that can be bought or generated with AI — synthetic identities can slip through and establish accounts that look real.
Stopping New Account Fraud -- Before Sign Up to First Activity
The article notes that many financial institutions have not implemented identity verification, citing concerns over customer privacy—particularly the use of customer images in AI models—and the possibility of creating additional friction in the user experience.
While the article also recommends live video checks, where applicants hold an ID next to their face and perform prompted actions, there are other technologies that can offer better protection. They include behavioral analytics, a technology that flags bot‑driven applications by monitoring how forms are completed, including typing speed and repeated reuse of the same identity elements across multiple submissions.
If a new account manages to slip past the first line of defense, additional technology layers can protect financial institutions from fraud -- particularly check fraud. This includes consortium data for check deposit fraud detection. However, FIs need to ensure that they participate in the right consortium that provides the most robust data.
At the recent OrboGraph Innovation Conference and Check Fraud Roundtable, OrboGraph and Viewpointe formally announced a partnership to create the Anywhere Consortium, an open, collaborative initiative built on data sharing between banks of first deposit (BoFD), paying banks, payment processors, and technology providers. Its mission is simple yet powerful: neutralize check fraud through collective intelligence, image forensics, and data transparency across the financial ecosystem. For more info, email marketing@orbograph.com.
Combatting check fraud is a collaborative effort and financial institutions do not need to go at it alone. As Jennifer Pitt, Senior Analyst in Fraud Management at Javelin Strategy & Research, notes:
“What a lot of financial institutions don’t realize is they don’t need to start from scratch,” Pitt said. “A lot of the tools vendors offer are able to fit into their existing tech stack. They can just put them on top of solutions they already have."
By partnering with fintech providers, financial institutions can implement advanced tools that prevent check fraud from the moment an account is opened through the point at which funds might otherwise be lost.