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    Fraud & Cyber Security | 3 min read

    How to Find Those "Red Flags" of Identity Theft

    It seems that rarely a day goes by that we don’t catch wind of a case of identity theft. According to an estimate by the FTC1, around nine million Americans’ identities are stolen each year. And with so much jargon like skimming, fraud, and phishing, it’s not surprising that many consumers don’t know what to look out for. With fraudsters developing new schemes every day, the fraudulent use of identities to establish credit and banking accounts promises to challenge consumers and financial institutions alike for years to come.

    Most financial services organizations must comply with the “Red Flags Rule,” established by government regulatory agencies. The rule was designed to help businesses fight identity theft fraud by requiring them to have a program to actively look for warning signs of fraudulent activity in everyday operations. This seems like a fairly simple task, but it’s easier said than done with the large amounts of customer information your staff sees in a typical day.

    While it may be impossible to completely avoid your customers being exposed to the risk of identity theft, here are three red flags typically noted with fraudulent accounts to help you and your team spot identity theft more easily:

    1. Use of fraudulent identification documents

    Fraudulent identification documents are forms of government-issued identification—like a driver’s license or passport—that may have been physically altered. They may have an address or other information that doesn’t match what you have on file for that customer.

    When reviewing identification provided by your customers, make sure you and your team are actively looking for discrepancies. All information, including the address, the spelling of their full name, etc., should be consistent. If it’s not, then you must follow your institution’s protocol for reporting that information.

    There are several commercial guides available to help your staff determine the legitimacy of government-issued identification documents. Seek out free resources such as the Law Enforcement Guide to False Identification and Illegal ID Use, prepared by the Pacific Institute for Research and Evaluation. Although it was designed to fight underage drinking, many of the concepts in the guide are useful to anyone assessing the legitimacy of identification documents.

    2. Suspicious Personal Identifiable Information (PII)

    If a customer gives you their current address, and that address doesn’t match anything on their credit report, this is a red flag that should prompt you to investigate further. Specifically, in SWBC’s compliance department, we use LexisNexis to investigate individuals’ identities.

    While some of these tools are not actually checking Social Security Administration records, they can give information such as the approximate year and state of issuance. This information—while limited—could be enough to identify fraudulent activity.

    3. Unusual account activity

    If a consumer changes information such as their address or phone number(s) and shortly after maxes out existing credit, requests new or additional credit, and/or requests the addition of other users to the account, additional due diligence may be necessary before allowing access to funds.

    Fraudsters may also attempt to open new accounts online using stolen information. If a consumer attempts to open a new checking or savings account with a high balance and wishes to access the funds right away, this may be a red flag. Limiting the amount someone can deposit to open new accounts online and placing holds on new account funding may help your institution limit fraudulent new account openings and mitigate losses associated with this type of fraud.

    These three red flags can be spotted when you and your employees are aware and diligent. The tactics and resources outlined in this post are a small portion of all that’s available to you as you work to prevent identity theft from victimizing your institution and your customers.

    What red flags do you and your staff watch for? And, what methods do you use to uncover fraudulent information/activity? Please share them with us in the comments below so others can learn from your successes!

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    1. https://www.ftc.gov/tips-advice/business-center/guidance/fighting-identity-theft-red-flags-rule-how-guide-business#targetText=Red%20Flags%20are%20suspicious%20patterns,the%20possibility%20of%20identity%20theft.&targetText=For%20example%2C%20if%20a%20customer,red%20flag%E2%80%9D%20for%20your%20business.

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    Fraud & Cyber Security

    Elizabeth Cardenas

    As a payments compliance manager, Elizabeth Cardenas is responsible for identifying fraud and money laundering concerns in electronic cash management (ECM) to support SWBC's Payments clients. Elizabeth is CAMS certified, has a bachelor's degree in modern languages and linguistics from the University of Texas at San Antonio and is fluent in Japanese and proficient in several other languages.

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