The Green Sheet: Experts spot second surge of COVID-related fraud
Tuesday, November 3, 2020 – Criminal investigators are warning consumers to be especially cautious when applying for loans and shopping online. The Federal Trade Commission issued a series of directives on its website in response to escalating attacks by criminals posing as contact tracers, Payroll Protection Plan (PPP) lenders, auto traders and philanthropic organizations. These malicious attacks exploit concerns for health, safety and financial wellbeing, FTC representatives stated.
Noting that legitimate contact tracers would normally request health information but not money, the FTC is urging people not to respond to texts, emails or calls about government checks, contact tracing or test kits in the Avoid Coronavirus Scams section of its website. “Hang up on robocalls,” the FTC wrote. “Scammers are using illegal robocalls to pitch everything from low-priced health insurance to work-at-home schemes.”
The FTC is also warning against clicking on links in emails claiming to be from the CDC or WHO, advising recipients to delete the email and go directly to www.coronavirus.gov or www.usa.gov/coronavirus for the latest updates. Do your homework when it comes to donations, they added, and never use cash, gift cards or wire transfers to donate money.
Neil Smith, head of business development and partnerships at Forter, noted that fraud itself is nothing new, but the ways in which it is perpetrated can change. “Social engineering and account takeover have been around for forever,” he said. “People need to be sensible about what they’re doing. For example, if an offer sounds too good to be true, it is probably not true.”
Use this sensibility check when transacting online, offline and in physical stores, Smith advised. It’s easy to get caught up in the fast-moving digital world. Consumers need to hold service providers accountable by asking the right questions and using a modicum of common sense.
Service providers can mitigate fraud by collaborating across the global commerce ecosystem, Smith added. “One of the important messages I want to get across is to work as a network, work as a partnership,” Smith said. “You’re stronger in numbers; you’re stronger together.”
Smith noted that Forter partnered with FreedomPay to close gaps among service providers, merchants and financial institutions. This new partnership will enable merchants, payment providers and banks to fight fraud together, aggregating data and linking digital identities across global industries and geographies, he stated.
Analysis of fraudulent PPP transactions by the Bank Policy Institute found a disproportionate number of loans under investigation by the Department of Justice involved fintech companies.
In an article titled, “Scammers Steered Clear of Large Banks: An Analysis of the DOJ’s Reported,” BPI analyst Paul Calum noted that approximately three-fourths of the DOJ’s case load has to do with an internet bank or fintech in combination with other lenders; the remaining cases are evenly divided among large banks, community and regional banks, and credit unions.
“The fraud that did occur was much more pronounced at fintech firms and internet banks than at the nation’s largest banks, which had very few fraud cases,” Calum wrote. “We also find that most allegedly fraudulent loans at community and midsize banks were to borrowers with no prior relationship with the bank, including loans originated through fintech-related marketplace platforms.”
Calum emphasized that quantifiable data from DOJ reports indicates most fraudulent loans originated by fintechs were made to borrowers with no previous history with banks, including those originated through fintech-related marketplace platforms. This underscores the need for prior relationships between prospective borrowers and their online lenders, he added.
Reducing false positives
Angela Whiteford, chief marketing officer at Forter, pointed out banks and merchants must find ways to authenticate first-time borrowers and customers, many of whom are transacting for the first time due to COVID-19 restrictions.
“Currently, transaction volumes for new online customers are two times greater than pre-COVID levels,” Whiteford said. “This presents tremendous opportunity for merchants to take advantage of new revenue streams and build strong customer lifetime value, but these new users are also five to seven times more likely to get falsely declined.”
Whiteford went on to say that machine learning, predictive fraud research and modeling can help merchants distinguish between fraudsters and legitimate customers. “Even if the merchant has never seen a new user before, we have, and we provide the necessary data and tools to facilitate a real-time decision on the legitimacy of a transaction based on digital identity behind the transaction,” she said.
Read the original article on The Green Sheet.