GRC & Fraud Software Journal

ID Insight’s recent research uncovered seven key indicators of account takeover fraud tied to phone numbers, which led the company to develop a predictive model to help institutions verify the legitimacy of phone number changes when confirming transactions.

In the company’s research of tens of thousands of customer phone number changes in the financial services space, it detected interesting patterns that distinguished legitimate phone number changes from changes to create fraudulent phone numbers.

ID Insight took the lessons learned from this research to develop a predictive model that combines individual risk indicators that help fraud investigators prioritize their queue and work the phone number changes that are most suspicious.

Criminals have recognized that when large money transfers are requested or other out-of-pattern account activity takes place, financial institutions are much more likely to place an outbound call or text to their customer to confirm the legitimacy of the requested account action.

By verifying the legitimacy of phone number changes, financial institutions are able to reduce the risks and constraints that may be holding them back from more fully utilizing the mobile channel.

The analysis uncovered the following key indicators in phone numbers that signal an elevated risk of fraud:

Geographic distance

The greater the distance between the new phone number and the old phone number, the larger the risk. Likewise, there is an elevated risk for cases where the new area code is located a large distance from the customer’s current mailing address.

Carrier type

Changing from a landline to wireless, or wireless to landline often indicates a higher risk of fraud than going from a wireless number to another wireless number. Certain types of carriers, such as prepaid phone numbers and voice-over-IP (VOIP) lines, are much riskier than landlines or postpaid mobile phones.

Urban versus rural

A change in phone number from a rural location to one that is tied to an urban center indicates a higher risk than a rural-to-rural or urban-to-urban change.

Area Code/Exchange

A basic validation check of the area code and exchange confirms that the phone number has been issued to a U.S. customer.

Ported

Local number portability allows customers to retain their phone numbers when changing service providers. New phone numbers that have been recently ported require a higher level of scrutiny.

Business phone numbers

A change from a residential phone number to business. For example, a new phone number that is tied to a check-cashing outlet is highly indicative of fraud.

Phone number verification

When the consumer name can be associated with the phone number through an independent verification source, the risk of fraud is greatly reduced.

 

Phone Change Fraud a Growing Problem

ID Insight, whose industry-leading anti-fraud solutions include address and identity verification tools for banks and credit unions, developed a new phone screen solution in response to the growing problem of fraudsters manipulating phone numbers as part of account takeover schemes.

Using an abundance of hacked personal data available on the black market, criminals pose as legitimate account holders and change the customer’s contact information, ensuring fraud alerts and other bank communications are sent unwittingly to the perpetrator and paving the way for complete control over their accounts before the victim knows it is happening.

“The mobile phone is a critical channel for bank customers and financial institutions that rely on mobile banking, on-line account opening and mobile wallet applications for convenience,” said Adam Elliott, founder and president of ID Insight.

“Having controls in place to ensure the phone number in the customer profile actually belongs to the legitimate customer is critical for reducing fraud risk, which is why we added phone number screening to our portfolio of anti-fraud solutions.”

For more information on IDInsight’s new solution, go here.