In Episode 8 of Digital Tells we speak with Suzanne Sando, Senior Fraud and Cybersecurity Analyst at Javelin Strategy and Research. BioCatch recently published a report written on our behalf by analysts at Javelin Strategy and Research titled New Account Fraud A Threat Down Every Avenue.

In this discussion, Suzanne discusses many aspects of new account fraud, including identity theft and synthetic identities, stimulus fraud, the rise of Buy-Now-Pay-Later (BNPL), money laundering and anti-money laundering compliance, and opportunities for financial institutions to address these increasingly hot challenges.

Peter Beardmore

BioCatch recently published a report written on our behalf by analysts at Javelin Strategy and Research. It's titled New Account Fraud A Threat Down Every Avenue. There's a link to the report in the show notes. And in the run up to the report's publication, I had an opportunity to talk with its principal author, Javelins Suzanne Sando. We talked about a range of topics from scams to mule accounts to buy now, pay later, and identity theft, all relating to the challenges institutions face when it comes to new account fraud and strategies for dealing with these challenges. If you're a regular listener to the podcast, you know that normally I script a narrative infused with clips from conversations I've had in preparation for each episode. But for this episode, we've decided to switch it up a little, mostly because I don't think there's really anything to improve upon Suzanne's commentary on all the topics we discussed. So here it is, my complete discussion with javelins. Suzanne Sandow, thanks for taking the time to talk with us today.

Suzanne Sando

Absolutely.

Peter Beardmore

So, Suzanne, let's get started with just some introductions. Can you tell us what you do and what your origin story is, how you got to where you are?

Suzanne Sando

Sure. I wish it was interesting in some of these Marvel movies I've been watching, but. So my name is Suzanne Sando. I am a senior fraud and cyber security analyst at Javelin Strategy and Research. And I've been there about two years prior to getting into the analyst role. I was actually doing a lot of behind the scenes coding work. So I worked for a major financial institution in the U.S. and I did a lot of payment systems, back end coding, worked a lot of personal information, a lot of private data. So I kind of have that technology background that I bring to this new analyst role.

Peter Beardmore

So you've been working on a number of reports. Javelin just released, a fairly large identity related study, and you're also soon to release. Probably by the time this podcast comes out, we will have released a paper that you've done that's been sponsored specifically by BioCatch can you tell us a little bit about both pieces of research?

Suzanne Sando

Sure. So the main identity fraud report, the larger report that you referenced, that's something that's in its 19th year and that we've been putting out. And, you know, we kind of take a look at all aspects of identity fraud, both traditional identity fraud and identity fraud scams. And we kind of look at the losses to financial institutions, the consumer impact. Where are the pitfalls? What are the things that some of these industry verticals can be doing better? What can consumers do better to try and mitigate some of this loss that's happening in tandem with what's going on in the world? You know, because obviously we've had a lot going on with the pandemic. I mean, that has just changed every single facet of life. And the report that you mentioned, that's kind of an offshoot of that larger report that I wrote for you guys for BioCatch that's more specifically targeted to new account fraud and how that has sort of taken off between 2020 and 2021.

Peter Beardmore

Okay. So let's jump right into new account fraud, which is going to be the focus of our conversation today. What are the overall trends related to new account fraud? What are the highlights?

Suzanne Sando

So 2021 was unfortunately just another year of record losses across the board. Overall, consumers lost 52 billion between identity fraud scams and traditional identity fraud, like, you know, account takeover, existing card fraud, and then, of course, new account fraud that we're going to talk about. And of that, 52 billion, 7 billion is attributed to new account fraud. So if you compare that with last year's losses of 3.2 billion, that's like a 109% increase in new account fraud losses for consumers. You know, I think new account fraud is so attractive to criminals because just the nature of our world and e-commerce and, you know, digital banking activities, it's not going to go away. We continue to get more and more digital centric as that technology advances. So that means that that, you know, attack surface for new account fraud just keeps growing, especially as our daily activities evolve from both, you know, like a necessity and a convenience standpoint. So once you give consumers that convenience, like opening accounts online, applying for loans online, it's so hard to take that convenience away without impairing the customer experience.

Peter Beardmore

Or impairing your revenue.

Suzanne Sando

Exactly. Exactly.

Peter Beardmore

As a as a lender or as a credit card issuer or what have you, for sure.

Suzanne Sando

You know, we've also noticed that, like, it's not just checking and savings accounts and, you know, credit accounts that are driving this growth. Criminals are going to be motivated by any single thing that puts more money in their pocket. So payday loans, mortgages, even car loans are appealing to criminals. They don't need to know every single piece of a legitimate account holders information. It's just enough to get that application approved and get that fast cash. And of course, like, you know, I mentioned the pandemic, and that's a part of, you know, what we do for these reports. We look at what's going on in the world. The government is not immune to these problems. You have government assistance programs like the Unemployment Assistance Paycheck Protection Program. They're all facing huge issues with fraud. I read recently, I think that it. The Department of Labor reported 163 billion had been, quote, improperly dispersed, which could mean many things. But one thing it for sure means is fraud. It means that a lot of these funds went to fraudulent sources and there's a high chance that this money isn't going to be recovered. So I think the thing to take away from this is that criminals are so crafty in their exploitation and the techniques and the lengths that they're going to go to commit fraud.

Peter Beardmore

Out of curiosity, you mentioned the Paycheck Protection Program and the unemployment assistance. I just saw a headline recently that talked about the DOJ was had been appropriated some X hundreds of millions of dollars for an investigation related to, I believe, unemployment fraud. Is that good money chasing, bad? I mean, is there anything that's going to come of that, given that those programs are effectively over at this point? What's to be gained by even chasing that do you know?

Suzanne Sando

You know, part of me thinks that it's sort of a goodwill type of situation where we're trying to make good on these funds that were supposed to go to consumers who were really in need, small businesses who really needed that aid. But the fact of the matter is, if you you know, there's that 163 billion I mentioned, there's a full report from the testimony from the Department of Labor about that, you know, those missing funds. And I believe they mentioned that 4 billion at this point had been recovered, but 4 billion out of 163 not great. So, you know, like I said, I think it's it's a goodwill we're trying, but it's probably going to come to a very not great ending.

Peter Beardmore

Just for clarity, you didn't mention those numbers, 52 billion and 7 billion in new account fraud? Are those global numbers or those?

Suzanne Sando

Those are good. Thanks for for asking that. Those are United States. Those are U.S. numbers.

Peter Beardmore

Okay, good. I just want to be sure.

Suzanne Sando

Sure.

Peter Beardmore

And so with the new account fraud, the identity specific new account fraud, do you have any sense for are these legitimate ID legit, these stolen IDs? Are these synthetic IDs? You know, what what are the what are the sources?

Suzanne Sando

Criminals are using all types of identities between actual stolen identities and synthetic identities to carry out this new account fraud. Some are legitimate consumers. They, you know, have had their information exposed in the data breach. And then it's sold on the dark web for extremely high prices. And then other identities are pieced together using some real consumer PII. And then fake information is kind of thrown in the mix to create that synthetic identity, which then ideally, ideally for the criminal (chuckles) ideally is untraceable back to a real person. So, you know, when it comes to. What… What it is that they're using? I think it always goes back to what's available. You know.

Peter Beardmore

Let's shift focus here a little bit. One of the big trends we hear a lot about