Corporate Identity Theft: What It Is and How to Prevent It

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Corporate identity theft involves a fraudster impersonating a company to perpetrate fraud. Glenn Fratangelo of NICE Actimize shows you what tactics can look like and how to react to them.

Consumers aren’t the only ones targeted by fraudsters in identity theft schemes – businesses are just as vulnerable. Because businesses often only discover that a crime has been committed when significant losses begin to accumulate, there is a risk of massive monetary loss and their reputation, finances and credit have already suffered a severe blow from which it can be difficult to recover.

Company Reported Cases identity theft increased by 46% in 2020, according to the National Cybersecurity Society. The pandemic is a major driver, with fraudsters focusing on businesses rather than consumers due to larger bank account balances and higher credit limits.

Corporate identity theft involves a fraudster impersonating a company to perpetrate fraud. The tactic can resemble a classic phishing scheme, where a fraudster impersonates a business executive who urgently needs a wire transfer to a new or unknown account. Or it may involve setting up a merchant account in the name of a business, or the fraudster using malware to infiltrate business networks to obtain billing and billing information or financial account details via wires of discussing.

What is important to know is that any business is at risk of identity theft.

The Costs of Corporate Identity Theft and How to Counter It

That said, small and new businesses are among the most targeted because they often have weak anti-fraud systems and controls and less sophisticated infrastructure, allowing fraudsters to easily circumvent potential obstacles.

But any business is at risk for corporate identity theft.

We see different approaches being taken, such as long and short business fraud. Long-standing business fraud is where the business controlled by the fraudsters has a good reputation and good credit history (for example, it has a positive track record for on-time orders and payments and is a supplier of confidence). The company then changes business and places much larger orders, perhaps several in quick succession, but suddenly disappears without paying and sells the goods.

Short-term fraud involves the business controlled by fraudsters filing multiple rounds of fake accounts and appointing directors within a short period of time. The business is a new supplier to the victim’s business and obtains goods on credit, which are delivered to third-party addresses. The company then quickly disappears without paying and sells the goods.

What we see is that many fraud schemes manifest themselves as:

  • tax evasion: a fraudster uses tax subsidies to file fraudulent returns or obtain tax refunds;

  • Financial fraud: a bad actor opens new credit cards, lines of credit or loans in the company’s name;

  • Ransom Marks: A logo or company name is registered as a trademark, then a fraudster holds the company to ransom to give it up.

Some other tactics may involve setting up merchant accounts in a company’s name, phishing schemes to obtain a company’s credit information, and filing false documents to change the names of company directors to allow fraudsters to more easily open lines of credit with financial institutions later. on.

There are also challenges around umbrella company fraud, whereby fraudsters exploit temporary workers by reducing the amount of money they have to pay in taxes. There is no standard mini-umbrella fraud model, but this type of fraud is evolving as organized criminals attempt to hide their fraudulent activities from the tax authorities.

But that’s not all, other consequences can include:

Another concerning and emerging threat, as a by-product of the pandemic and extensive government stimulus programs, is the use of synthetic identities used in corporate identity fraud. This type of fraud requires patience on the part of the fraudster, as they must mature a fake ID or multiple IDs – often a synthetic identity consisting of both real and fake information – and create a company screen with fake employees and fake offers before moving on to take out a business loan, for example. This type of scam is time-consuming and complex, but the larger payments are worth it, as fraudsters can take out business loans for hundreds of thousands of dollars.

In summary, corporate identity theft can lead to even greater losses, especially given the complexity and scope of the infrastructure and network that fraudsters build to steal public funds.

This is a huge challenge for financial institutions (FIs) to overcome, but advanced technologies such as artificial intelligence (AI), machine learning and automation, along with huge amounts of data , have proven effective in solving the problem.

Data can authenticate identities and bridge information gaps, and advanced analytics ensure that risks can be effectively recognized and managed so that FIs can:

  • Facilitate identity intelligence, identity risk scores, and behavioral analytics for early and ongoing account monitoring;

  • Detect stolen or fake identities at the time of new account creation and throughout new account phases;

  • Identity verification flows can be orchestrated to increase customer account opening journeys across lines of business and products;

  • Make faster and more reliable risk decisions based on a unique identity risk score.

Another piece of the puzzle is to converge identity verification with entity resolution to get a more complete view of candidates and their relationships to accurately detect complex information, such as synthetic identities or manipulated characteristics. . The benefits of this approach also extend to customer due diligence (CDD), alert investigations, transaction monitoring and enhanced due diligence (EDD).

Fighting sophisticated fraud like corporate identity theft isn’t easy, but these approaches can deter fraudsters.

This editorial was first published in our Financial Crime and Fraud Report 2022which presents the innovation and development of best practices and instruments used by financial institutions in their fraud prevention activities, to improve the process of digital integration of their customers while fighting against financial crime.

About Glenn Fratangelo

Glenn Fratangelo, NICE Actimize’s Head of Marketing and Strategy, Enterprise Fraud Management, is a marketing leader with a deep understanding of technology markets, the creation and launch of technology products, services and alliances.

About NICE Actimize

NICE Actimize is the largest and most comprehensive provider of financial crime, risk and compliance solutions for regional and global financial institutions and government regulators. NICE Actimize provides cross-channel fraud prevention, anti-money laundering and transaction monitoring solutions that address payment fraud, sanctions monitoring, market abuse, due diligence with respect to customers and insider trading.


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