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How to Stop Account Takeover
by Julie Conroy-McNelley
Account takeover is one of the more prevalent forms of identity theft. It occurs when a fraudster obtains an individual's personal information (account number and social security number usually suffice), and changes the official mailing address with that individual's financial institution (FI). Once accomplished, the fraudster has established a window of opportunity in which transactions are conducted without the victim's knowledge.
As detrimental as this can be to consumers, the businesses and financial institutions actually suffer the greatest loss.
- According to Meridien Research, while the victim suffers an average loss of $808, businesses and FIs absorb about $18,000 in fraudulent charges per victim.
- Celent Communications recently published statistics showing institutions average losses of about $2.7 billion per year since 1998, a figure that is expected to grow to over $8 billion by 2004.
Account takeover is becoming increasingly prominent and is a growing point of financial exposure for FIs, businesses, and consumers. Reducing exposure is best accomplished through a combined approach of Process, Consumer Education, and Technology.
- Process: Scrutinize internal processes surrounding customer address-change procedures. In addition to confirming identity using data points such as account number and social security number, use an additional token, such as pet's name, or parent's anniversary-something not readily available to a fraudster.
- Consumer Education: Educate customers about identity theft risks. Provide verbal and written communications that explain simple steps that can be taken to minimize potential exposure such as:
- Putting a lock on their mailbox;
- Shredding receipts that contain account information, as well as pre-approved credit-card offers and billing statements;
- Reviewing billing statements thoroughly for unauthorized charges; and
- Periodically check credit bureau statements for irregularities.
- Technology: Unfortunately, regardless of steps taken on the Process and Education fronts, determined fraudsters still manage to find ways of perpetrating this crime. Technology is a necessity for catching account takeover before a loss is allowed to occur. An effective solution must detect unusual and unauthorized address changes, as well as suspicious characteristics or events that may be indicative of account takeover. The transaction pricing for these tools is generally low, and the offset to risk exposure considerable.
Fraudsters will exploit the easy targets. Is your institution doing all it can to minimize its exposure? The ROI will come not only in the savings reaped by lower fraud losses, but also in the minimization of reputation risk-no institution wants to appear in the headlines as the latest victim of identity theft and account takeover rings.
Early Warning Systems Boilerplate (formerly PPS)
For over a decade, Early Warning Services, LLC (formerly Primary Payment
Systems) has been an industry pioneer by facilitating cooperation and
information sharing among financial services organizations as a
best-practice means to help prevent fraud losses and safeguard the financial
assets of those organizations and the consumers they serve. A suite of
services delivers this intelligence to where it is needed most resulting in
billions of dollars in loss avoidance each year.
For more information, please visit www.early-warning.com.
Author:
Julie Conroy-McNelley
Primary Payments Systemsâ (PPS)
707.793.7629
jmcnelley@primarypayments.com
First published on BankersOnline.com 1/13/03
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