{"id":16534,"date":"2024-01-11T14:55:41","slug":"mitigating-the-threats-of-the-increasingly-prevalent-first-party-fraud","title":{"rendered":"Mitigating the threats of (the increasingly prevalent) first-party fraud"},"content":{"rendered":"

\"firstA <\/span>recent study<\/span><\/a> published in 2023 showed that the number of first-party fraud cases is increasing. First-party fraud is similar to the more well-known \u2018third-party fraud\u2019, but instead of using another person\u2019s identity, it uses a person\u2019s own identity to manipulate financial details such as payslips and bank account balances and to falsify important documents for one\u2019s benefit.<\/span><\/p>\n

The main reason for this increasing trend in first-party fraud is the difficulty of its detection by banks, insurance companies, healthcare providers, and educational institutions. Using one’s own identity makes this practice more convincing than third-party fraud. Hence, first-party fraud is also known as \u201ctrue name fraud\u201d.<\/span><\/p>\n

How first-party fraud can potentially cost your business<\/b><\/h3>\n

In the financial sector, up to 70% of all credit card fraud is attributed to first-party accounts. This costs the industry over <\/span>US$132 billion annually<\/span><\/a>.<\/span><\/p>\n

Anti-fraud expert Frank McKenna, in a webinar called \u201c<\/span>The Rise of First-Party Fraud and Other 2023 Trends to Watch<\/span><\/a>\u201d, explained that first-party fraud is often one of the many underlying reasons for the business loss of credit companies. Applicants use fabricated documents which include altered bank account balances, transaction amounts, and other financial details. Approximately 50% of Small and Medium-Sized Business loan documents were found to have signs of first-party fraud.<\/span><\/p>\n

First-party fraud is widespread due to the increasing number of fake document templates available online. Moreover, social media facilitates fraudsters in selling these templates and sharing counterfeiting techniques.<\/span><\/p>\n

Infiltration into merchant systems<\/b><\/h3>\n

First-party fraud also targets business clusters, including e-commerce. This type of fraud costs merchants up to <\/span>$50 billion annually<\/span><\/a>, according to data.<\/span><\/p>\n

The modus operandi involves exploiting loopholes in a company\u2019s policies, which is also known as refund fraud. For example, a fraudster orders a laptop online. After it has been delivered, he contacts the merchant\u2019s call center, claiming to have never received it. Even large-scale merchants can fall for this scam and process an unbefitting refund.<\/span><\/p>\n

It is difficult to assume the intentions of these fraudsters since this type of fraud is committed by seemingly real customers using their own identities.<\/span><\/p>\n

Mitigating fraud with due diligence<\/b><\/h3>\n

There are several mitigation measures that businesses can take to minimize the risk of fraud, as follows:<\/span><\/p>\n