Fraudsters unite! A look at the rise of collusive fraud networks

Field evidence and industry reports point toward one clear fact—fraud is becoming a team sport. More fraud is committed by teams of pros working together to commit fraud. And that's bad news for banks.

Why? Because teams can generate larger, more damaging fraud losses. Their schemes tend to be more sophisticated and better-planned than the work of fraudsters working alone on quick-hit attacks. Their work can be harder to detect. And collusive fraud covers all fraud types—from new account fraud to employee fraud. A lot of times, it means cross-channel fraud, and most banks struggle to find it, much less shut it down completely.

Consider these recent stories:

• 15-person ring commits new account fraud, HELOC fraud, mortgage fraud and wire fraud.
• Gangs such as the Crips, Armenian Power Gang and the Mexican Mafia are turning to identity theft and bank fraud. Stolen identities gives thieves the ability to open new accounts, deposit counterfeit or altered checks and withdraw the money.More here.
• Use of "money mules” is on the rise.

It's clear that organized crime doesn't mean bands of goodfellas. Fraudsters may simply share a country of origin, zip code, cell phone number, computer, or neighborhood. They may do suspicious things, like change their address right after opening an account. They may reveal sketchy access patterns, like multiple accounts accessed from the same IP address. Or they may make suspicious deposits or withdrawals. But they all want one thing-your bank's money.

So what can be done? Addressing the problem of collusive fraud requires identifying high-risk groups, detecting and linking suspicious clusters of accounts, and shutting them down-early and thoroughly. A partial shut down can make remaining fraudsters go wild, racking up even more losses.

New fraud detection strategies need to be focused on protecting your deposit accounts-particularly from new account fraud. After all, collusive behavior accounts for nearly 50% of new account fraud. Only then can you protect your customer base from victimization and your banks from eroding profits.

Fraud is a business. When the going gets tough, the tough get together. They figure out how to exploit your policies and loopholes. And they pool their collective fraud smarts to get your bank's money.

Yes, networks of fraudsters are on the rise. Has your organization been a victim of collusive fraud? Are you seeing more fraud by teams and networks? How are fighting it? Tell me about it-so we can work together to stop collusive fraud.

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