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 give thieves the ability to open new accounts, deposit counterfeit or altered checks and withdraw the money.
• Use of "money mules" is on the rise.

It's clear that organized crime doesn't mean bands of goodfellas, though there is some evidence that traditional organized crime figures are in the game as well, especially Eastern European. Fraudsters may simply share a country of origin, zip code, cell phone number, computer, or neighborhood. It appears that they may be loosely related, and groups change in their makeup over time. Regardless of how they are connected, they need to control their fraud operations, and in the process 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 phone. Open multiple accounts with the same funding source or make suspicious deposits or withdrawals. But they all want one thing-your customer'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 shutdown can tip off remaining fraudsters causing them to execute their plan enmasse, racking up even more losses.

Collusive behavior accounts for nearly 50% of new account fraud.More sophisticated schemes like on-line account takeover are often performed by organized fraudsters (from virtually anywhere in the world). New account fraud detection strategies need to be focused on protecting your bank from organized fraudsters. Only then can you protect your customer base from victimization and your bank 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 to the money.

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