While often more convenient for customers, digital account openings offer numerous fraud opportunities for criminals. Over recent years, new account fraud has become easier to perpetrate and harder to detect due to more sophisticated technology, generative artificial intelligence (AI) and widespread availability of personally identifiable information (PII) on the dark web. In 2024, reported losses from new account fraud hit $6.2 billion (Off-site), more than doubling versus a decade ago.
How does new account fraud occur? Criminals may use stolen real identities or fake identities — either stolen or synthetic — to open new bank accounts with malicious intent. Criminals can monetize these new accounts by making unauthorized purchases or withdrawals; obtaining credit with no intention of paying back the loan; receiving and transferring illegally obtained funds; depositing forged, stolen or counterfeit checks; or making purchases and later disputing them (e.g., chargeback fraud).
The result for financial institutions: direct financial losses, higher operational costs because of the time needed to investigate or close fraudulent accounts, damaged organizational brands and loss of customer trust.
What are three things financial institutions can do to fend off new account fraud?
- Improve fraud mitigation tools
- More robust and sophisticated use of identity verification, device assessment and transaction monitoring
- Information sharing about scams and fraud
