AU10TIX's new report shows a rise in ID fraud in the payments sector

Wednesday 13 December 2023 12:31 CET | News

Israel-based identity verification company AU10TIX has released its Q3 2023 Global Identity Fraud Report which shows significant growth in ID fraud for the payments sector.

This report has identified significant trends in organised identity fraud based on millions of transactions processed across 249 countries from July to September 2023. It also revealed that professional fraud groups have changed their target from crypto to the payments sector. The study found that digital payments saw a concerning 56% increase in fraud, while the crypto industry, which has traditionally been a focal point for fraudsters, experienced an unusual 51% drop.


Crypto industry, payments, and financial regulations and fraudulent activities rates

AU10TIX credits the recent advancements in the crypto industry to the introduction of the EU Market in Crypto-Assets (MiCA) regulation in June. This new legislation is aimed at putting an end to the unregulated nature of the crypto market in the EU and instead establishing a regulatory framework that safeguards investors and consumers.

While the new regulations are aimed at the European Union and will not be implemented until 2024, many organisations and regions are already taking proactive measures to adopt stricter Know Your Customer (KYC) guidelines to comply with the upcoming legislation. As a result, it is becoming increasingly challenging for professional criminal organisations to carry out fraudulent activities in the cryptocurrency sector. Consequently, they are now turning their focus towards the less regulated payment sector.

During Q3, several sectors were analysed, and it was found that the payments sector was the most targeted industry by organised fraud groups, accounting for 51% of all financial fraud attacks. This is a significant increase from the 32% recorded in Q2. On the other hand, the crypto industry saw a decrease in attacks, responsible for only 23% of all attacks – down from 47% in Q2. These findings show that there is a clear correlation between regulatory frameworks and the prevalence of fraud.

Loopholes in identity verification 

According to the paper, North America experienced the highest number of payment sector attacks out of all regions. AU10TIX points out that the reason is that fraudsters are taking advantage of the economic recovery and increased spending. 

APAC was the second most targeted region. The report explains that it can be attributed to the increasing complexity of digital transactions involving diverse economies and cross-border payments. Moreover, this complexity poses challenges for identity verification, creating loopholes for fraudsters to exploit.

Further on, AU10TIX compares the frequency of different fraud modes, such as document number, personal data, face picture, image template, and facial image capture (selfie). The report indicates that fraudsters find it challenging to circumvent the selfie capture verification method, as fraud involving selfie capture represented less than 5% of all attacks across all regions. 

The fraud rate is three to ten times higher in identity security

According to an official statement from AU10TIX, there is a gap in identity security. Publicly available statistics on identity fraud only account for the attacks that traditional ID verification solutions can detect. As a result, the actual fraud rate is likely three to ten times higher. This is because modern-day fraudsters, often organized crime groups, use advanced technology such as AI and deep fakes to create false identities that are almost indistinguishable from real ones. Thus, a business's financial well-being and reputation may be severely impacted by the rise of sophisticated identity fraud. 

Moreover, the report points out that the significant increase in payment sector attacks, particularly in North America highlights the urgent need for strong legislative measures to protect consumers from fraudulent activities. Without stringent regulations, payment providers must elevate their KYC practices to fortify defences against escalating fraud risks. 

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Keywords: report, fraud management, identity theft, identity fraud, crypto
Categories: Fraud & Financial Crime
Companies: AU10TIX
Countries: World
This article is part of category

Fraud & Financial Crime


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