First Party Fraud - Pulling Back the Curtain on a Pervasive and Misunderstood Threat
Transcript of First Party Fraud - Pulling Back the Curtain on a Pervasive and Misunderstood Threat
Evolution of Conventional Fraud
1st Party Fraud“The business is the victim”
3rd Party Fraud“The customer is the victim”
Reason 1: Advances in Technology
Reason 2: Consumer Awareness Reason 3: Regulatory Environment
Emergence of New Threats
Bust Out
Credit
Repair
Synthetic
Identity
Identity
Theft
Counterfeit
Lost or
Stolen
Third
Party FraudFirst
Party Fraud
Credit
Fraud
Hybrid
New Account Screening Process
Confidential and Proprietary 5
1. Application3. Losses or Exposure
2. Authentication
Customer
Screening
Breakdowns
Transactional Value Chain
Extract Funds Move Funds Leverage Funds
Establish Identity Establish Merchant Establish Pattern
Transaction
All transactions perpetuate the scheme
Every single transaction is designed to serve multiple purposes
Organized Ring stole over $200MM
ALASKA (USA)
CANADA
UNITED STATES AMERICA
MEXICO
GREENLAND(DENMARK)
ICELAND
FARCA ISLANDS UNITED
KINGDOM
FRANCE
VENEZUELACENTRAL
AFRICAN
REPUBLIC
DEMOCRATIC
REPUBLIC
OF CONGO
ALGERIA
NIGERMALI
CHAD
SUDAN
ERITREA
TUNISIA
MAURITANIA
WESTERN
SAHARA
SENEGAL
GUINEA
LIBERIA
NAMIBIA
ZIMBABWE
ANGOLA
ZAMBIA
BOTSWANA
SOUTH
AFRICA
KENYA
TANZANIA
CONOGO
CABON
CAMEROON
NIGERIA
BURKINA
FASO
COLOMBOA
GUYANA
SURINAME
FRENCHGUIANA
ECUADOR
PERU
BOLIVIA
BRAZIL
PARAGUAY
ARGENTINACHILE
URUGUAY
BELIZEA
HONDURAS
NICARAGUA
GUATEMALA
SALVADOR
COSTA RLCA
PANAMA
HAITI
DOM.
CUBU
BAHAMAS
G.B.
SIERRA L.LVORY
COAST
TOGO
BENION
LES.
SWA.
MADAGASCAR
MALAWI
BU.
SWI.
GARMANYBEL.
NORWAY
DENMARK
ETHIOPIA
JAM.
MOZAMBIQUE
SOMALIA
LIBYA EGYPT
SAUDI
ARABIA OMAN
FRANCE
IRAQ IRAN
SYRIA
TURKEY
AFGHANISTAN
INDIA
TURKMENISTAN
UZBEKISTAN
KAZAKHSTAN
SRI LANKA
JORDAN
CYP.
GREECE
LTALY
BUL.
BOS.
HUN.
AUS.
SWI. M.
UKRAINE
POLAND
GARMANY
KUWAIT
QATER
M.
HOL.
MOROCCO
PORTUGAL SPAIN
RUSSIA
MONGOLIA
C H I N A
I N D O N E S I A
A U S T R A L I A
BHUTAN
BANGLADESH
MYANMAR
SRI LANKA
N.KOREA
S.KOREA
JAPAN
TAIWANLOAS
THAILAND
CAMB.VIETNAM
MALAYSIA
BR.
PAPUA
NEW-GUINEA
NEW-ZEALAND
RW.
SWEDEN
EST.
BELARUSLIT.
LAT.
FINLAND
SLO.
S.
A.
7,000 Synthetic Identities
25,000 Credit Cards
169 Bank Accounts*
1,800 Mailing Addresses
80 Fraudulent Merchants
Scope
AL, AZ, CA, CT, FL, GA, ID, IL, IN,
IA, KS, KY, ME, MD, MI, MS, MO,
NJ, NY, NC, OH, PA, TX, UT, VT,
VA, WA, and WI
28 States
The United States, Canada,
Romania, Pakistan, India,
United Arab Emirates, China,
and Japan
8 Countries
ROMANIA
PAKISTAN
INDIAUAE
Impacted Industries
Vulnerable
Populations
Government
Services
IRS, SSA, GSA,
Medicare/Medicaid,
Fannie Mae, HUD,
AAMVA, etc.
Healthcare
Group Purchasing
Organizations
(GPO’s),
Healthcare
Providers,
Hospitals,
Pharmaceutical
Companies, etc.
Financial Services
Consumer and
Business:
Auto, Credit Card,
Mortgage, Merchant
Processors and
Retailers
Insurance Industry
Auto, Medical, and
Personal Liability
Providers
Implications of New Risks
Regulatory Reputational Operational Financial
• Compliance Violations, Fines, Sanctions, etc.
• Abuse of Protected Classes
• Increased expense due to redundancy of effort
• Significant Fraud or Credit Losses
Understanding the Risks
Data BreachesChild ID Theft
Money
Laundering
Know-Your-
Customer (KYC)
Terrorist
Financing
Organized
Criminal
Syndicates
Exploitation of
gaps in current
controls
First Party Fraud Challenges
Manipulation of
Consumer Protection
Legislation
Lack of Universal
Definitions
Credit vs. Fraud
Organizational Silos
Consumer Appetite
Inadequate Verification
Tools