Fraud Predictions For This Year

Posted by Jeff Pelliccio on Apr 30, 2018 9:00:00 AM

In ICS insights, Job Trends

There will be a lot of fraud in 2018. Hopefully, that doesn't come as a huge shock to you. It really shouldn't. After all, fraud has been steadily climbing for 25 years. It's not showing any signs of a decline for the foreseeable future. For example, let's consider card fraud, which has risen $1.5 billion annually since 1990. It's now a $31 billion annual scamfest.

Apparently, “what goes up must come down” has no bearing on fraud trends. Card fraud is going through the roof and into the atmosphere, even despite the industry's best efforts. Fortunately, 2019 will hopefully see less fraud. Let's take a look at the major drivers behind credit scam artists.

Fraud Drivers for 2018:

So why will there be more fraud in 2018? It stems from the rush to get new technologies out to consumers and give consumers fast access to cash. Consumers will have awesome products and great service, but with more risks. The fraud squad recruits on a terrifying scale, seeking access to your hard-won credit.

Fraud has graduated from a cottage industry to a full-blown industrialized commodity. Fraudsters are successfully using the same methodology to find and hack new victims. The three trends driving this year's fraud fest include better connectivity for the fraud squads, faster access to cash, and the war between online and traditional banks to get their hands in your pockets. Let's take a look at the top 10 predictions for fraud in 2018.

1. Fraudsters Will Recruit Ordinary People for Fraud Squads

Fraud doesn't have the stigma it once did, and defrauders are seldom caught. When they are, few see convictions, let alone time in jail. Law enforcement is simply too strapped with violent crimes to investigate credit fraud claims.
Fraud has sadly become a side job for some people. People use their computers to make money on weekends and late at night. It's almost like a game where you can win big. Fraud apprenticeships are a way to get free downloads, services, and iPhones. It's a way to get something for nothing. Who doesn't love that?

YouTube, Reddit, and other sources are full of tutorials on how to commit fraud. On the dark web, a bustling marketplace surrounds the fraud industry. Once someone learns how to commit fraud for a freebie, they typically share their knowledge with others. Think about it. If you didn't have any scruples, would you prevent your daughter, niece, uncle or grandpa from getting the same reward?

This problem will spread to epidemic proportions in 2018. Hopefully, you won't fall victim to fraud yourself.

2. Check Fraud Rate Will Rise as Overall Usage Declines

Although check usage is way down, check fraud hasn't decreased and will not do so this year. Annual losses from check fraud remained flat or rose year-over-year for the past decade. That's despite a steady fall in the frequency of check use.

The drivers of check fraud go beyond a simple scam. Digital scams against Americans are on the uptick as more people take their financial dealings online for convenience. Checks are gifts from heaven for scammers. Since checks take days to clear, scammers can defraud victims out of thousands of dollars.

So, unless you've completely torn up your last check ever, be aware of the predilection of thieves for this archaic form of payment. Fraudsters like it too. In 2018, legitimate checks will keep declining, but that won't keep the fraud squad at bay. A growing number of scams will lead the way toward a $7 billion trade in counterfeit, forged or stolen checks.

3. Application Fraud Will Increase

Chip cards make fraud harder and criminals are changing tactics. There could be up to 150 million fraudulent new accounts in 2018.

Keep your eye on application fraud, especially for retail or auto and lending. The conception of artificial identities is creating a whole new brand of identity theft which is better disguised, and harder to detect.    Couple that with the large-scale data breaches and there is a perfect storm brewing for very high levels of application fraud.

4. P2P and Fast Payments Can Lead to Higher Fraud Losses

Venmo, PopMoney, Google Wallet, Zelle, Facebook and Apple messengers are striving to get consumers to send cash through their services.  More than $120 billion was sent digitally this year and may tally $244 billion by 2020.

Banks are treading new ground with person-to-person services, making fraud trends hard to predict. Fraud rates will range from negligible to 400 basis points at most firms.  There are too many variables in the nascent P2P payments that make them vulnerable.

In 2017, Nacha rolled out a fast payment platform.  The app's wild success turned into 10 million ACH payments delivered the same day. The increased fraud rate hasn't yet been reported, but you can bet it's coming. Faster payments lead to faster fraud.

In 2018, person to person and Same Day ACH will be poked and prodded until fraudsters figure out how to make money off them.

5. Even More Breaches Will Shake the World

2017 brought massive data breaches. We learned that 3 billion Yahoo accounts were hacked. Then, 140 million Equifax customers had their data stolen. In 2018, even larger incidents are likely, and they could cost even further damage. Here's food for thought, what if fraudsters breach the IRS databases or the medical records of hospitals and other large providers? Your data may never be safe as long as fraud remain unaddressed.

Whatever data is targeted, a breach seems inevitable. No company that deals in web-based data is immune. You are likely to see more shocking fraud cases this year.

6. Money Mules and Sleeper Accounts

People are sometimes unwittingly recruited for what seems like real employment, but it's a setup for fraud. They are called money mules, and fraud squads use so-called sleeper accounts to steal billions from banks. The market for bank drops and mature sleeper accounts will skyrocket this year. Such accounts can be farmed out to receive and send money at a higher frequency than new accounts. When scammers can't purchase a legitimate account from the dark web, they use mules or unsuspecting victims to help them steal money.

The uptick in person-to-person payments and same day bank transfers through sleeper accounts is a critical piece of the scamming puzzle for fraud squads.  They require a number of aged accounts to transfer small amounts that don't draw attention.  Expect a rise in sleeper accounts and money mules based on the unique landscape and opportunities these fast transactions depict.

7. Cryptocurrency Bubble and Shady Dealings

A single bitcoin worth six cents in 2010 hit $17,000 last year. Is this whole industry based on fraud? It certainly attracts plenty of fraudulent activity. Whether the whole concept will turn out to be sham is a decision for destiny to decide.

Every bubble eventually bursts and is followed by a series of massive fraud schemes. Consider the mortgage bubble, bust. These all had associated fraud charges. Expect cryptocurrency to see the same volatility this year.

8. Digital Identities at Risk

Your SSN does not protect you. Instead, use a digital identity. This is a new technology capability that can help you cut your reliance on credit.  This is one way you can proactively select your privacy, or not. Digital driver’s licenses and credentials for mobile devices is a likely target for future campaigns. It's more important than ever to stay vigilant and alert. 

The UN and World Bank started an initiative to provide everyone on the planet a free ID by 2030. This would allow you to keep your Social Security number free from tampering. In the UK, the government wants to do it faster. 

In 2018, digital identities will gain traction. This means that you will be using according to companies' preferences.  With all the data breaches that have occurred, the government, as well as companies, want secure ways to identify clients.  The social security number is a holdover from simpler times when transactions occurred on paper and took days or weeks to complete not a fraction of a second.

9. Machine Learning to Solve Fraud Issues

Machine learning is used by banks, investors and financial institutes, who are pouring a ton of money into research and development aimed at preventing and solving fraud. PointPredictive is one of many companies that try to solve car loan fraud. Another is Actimize, which attempts to prevent bank attacks by scammers.

More of these boutique services will crop up as innovation in machine learning increases. These fraud solutions will hopefully improve our safety. 

10. The Rise of The Chief Fraud Officer

You've never heard of a Chief Fraud Officer? That's not surprising. However, fraud preventive requires more than a back-office presence to raise awareness and vigilance.  With fraud rising and data breaches making headlines, the threat presented by fraud requires a critical role in a C-level position. Thus, the last prediction is for the rise of the Chief Fraud Officer among leading corporations.

Use This Knowledge to Your Advantage

Don't go into your next interview, meeting, job, or panel uninformed. You need to know these trends to stay relevant and efficient in your role. You may be stuck with a company that refuses to see the writing on the walls. If that's the case, there are plenty of companies that would be happy to have you and your talents. When you're ready to look for a job that uses your skillset for positive change, call ICS. We have plenty of clients who are looking for candidates who are going to improve their company's standing in fraud. Click below to start the search for a more meaningful job.

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