The Case for a Fraud Investigation Network

For fraud investigators, an effective way to identify organized fraud rings is to look for a lot of activity associated with a particular communication endpoint, like a mailing address, phone number, IP address, or email address. This is commonly referred to as velocity.

Velocity is a natural byproduct of financial institutions sharing inquiry data as part of a consortium network. Being part of the network allows each institution to use the velocity of key data elements to assess the likelihood of new-account fraud or account takeover.

A page from the credit bureau playbook
Right now, financial institutions are sharing inquiry data that is consumer-initiated. In other words, the data only becomes part of the network because a consumer (or fraudster) is applying for a new DDA or changing contact information on an existing one.

Credit bureaus, on the other hand, could not provide value if they only used data from consumer-initiated transactions to assess credit risk. Rather, they need performance information that is based on what the credit issuers are experiencing, i.e. what they have learned about the consumer’s payment behaviors.

At a conceptual level, it is possible that the shared network philosophy used by credit bureaus can be used by financial institutions to mitigate new-account fraud and account takeover.

Institutions sharing investigative efforts and insights
There would be tremendous value in financial institutions sharing what their fraud investigators have learned about the validity of an address, phone number, or email during the course of their investigations. For this newly imagined network to work as intended, investigative insights would have to be reported immediately, as organized fraud rings tend to attack several institutions in rapid succession.

Additionally, sharing the investigative insights would have to be easy so as not to create any additional operational burden on the fraud investigative unit. Also, the number of institutions contributing must be sufficiently large to create a network effect that captures ring activity as well as single fraud attacks. Finally, the network must be able to provide insight about what happened prior to the new inquiry as well as some level of ongoing monitoring that alerts the investigator to subsequent suspicious activity.

Nationwide reach
For financial institutions, being part of a nationwide Fraud Investigation Network would be like having your own investigation unit made up of thousands of expert investigators. In the course of keeping fraud out of their own banks and credit unions, investigators would benefit from – and provide benefit to – their industry peers.

Let’s say an investigator, through careful and thorough research, determined that an account-opening attempt was suspected fraud and marked it as such in their case management system. By marking the account-opening attempt as fraud, key identity (non-FCRA) elements and associated communication end points associated with this suspicious application are tagged within the system. Now, if the fraudster makes another attempt, the suspicious address, phone number, or email address will trigger a message that essentially warns all investigators in the network that one of their peers found there was a fraud associated with those elements, or at a minimum, they were highly suspicious. Here’s an example of the network benefit:

  • A bad actor applies for a new bank account online at Bank X on November 1
  • A fraud investigator at Bank X reviews the application and then dispositions the case as “Suspected Fraud” on November 1
  • This new-account application included an email of, a phone number of (612) 555-1234, and a mailing address of 465 Sycamore Street
  • The same bad actor, or a criminal associate, applies for another new account and this time it is at Bank Y. They use the same phone number of (612) 555-1234
  • That new account application at Bank Y is immediately recognized as being associated with suspicious activity based on the phone number
  • Thanks to the efforts of the investigator at Bank X, Bank Y was quickly able to thwart the fraud attempt
  • The next day, an investigator at Bank Y uncovers an unrelated fraud attempt, marks the case as “suspicious,” and thereby returns the favor to Bank X

This is how you beat fraud
Phil Jackson, former professional basketball player, coach, and NBA executive famously said, “The strength of the team is each individual member. The strength of each member is the team.” This quote perfectly captures the fraud investigation network concept we envision for financial institutions. When fraud-fighters come together to win, fraudsters will increasingly find they are fighting a losing battle.

If you have thoughts or ideas about this concept, please contact me. We would love to hear from you.


Full News Feed

Welcome to Kevari!

CLICK HERE to read more about Kevari.