The Green Sheet Online Edition

July 10, 2017 • Issue 17:07:01

The Mobile Buzz:
Phone-number-change fraud on the rise

After conducting extensive research on tens of thousands of customer phone number changes in the financial services sector, anti-fraud firm ID Insight Inc. identified an alarming trend involving fraudsters who manipulate phone numbers to leverage account takeover schemes.

"Criminals have recognized that when large money transfers are requested or other out-of-pattern account activity takes place, financial institutions are much more likely to place an outbound call or text to their customer to confirm the legitimacy of the requested account action," ID Insight stated.

Using an abundance of hacked personal data available on the black market, fraudsters are able to pose as legitimate account holders and change customer contact information, ensuring fraud alerts and other communications sent never reach victims as account takeover activities take place.

Other research confirms ongoing threats associated with leaked data circulating among criminals. "The rise of information available via data breaches is particularly troublesome for the industry and a boon for fraudsters," said Al Pascual, Senior Vice President, Research Director and Head of Fraud & Security at Javelin Strategy & Research. "To successfully fight fraudsters, the industry needs to close security gaps and continue to improve, and consumers must be proactive too."

Mobile channel adds pressure

From the data collected, ID Insight was able to determine patterns that help distinguish legitimate phone number changes from fraudulent ones in various scenarios. It then developed a predictive model which combines individual risk indicators fraud investigators can apply to prioritize phone number changes based on perceived risk levels, a timely development as more financial institutions shift to mobile channels.

"The mobile phone is a critical channel for bank customers and financial institutions that rely on mobile banking, online account opening and mobile wallet applications for convenience," said Adam Elliott, co-founder and President of ID Insight. "Having controls in place to ensure the phone number in the customer profile actually belongs to the legitimate customer is critical for reducing fraud risk, which is why we added phone number screening to our portfolio of anti-fraud solutions."

The 2017 Identity Fraud Study released by Javelin Strategy & Research drew similar conclusions. The study identified the U.S. migration to EMV (Europay, Mastercard and Visa) chip cards and terminals as one catalyst that has driven fraudsters to take the leap to fraudulent opening of new accounts.

"After five years of relatively small growth or even decreases in fraud, this year's findings drive home that fraudsters never rest and when one area is closed, they adapt and find new approaches," Pascual stated, noting that after reaching a low point in 2014, account takeover incidence and losses rose notably in 2016, with losses totaling $2.3 billion.

Fraud tip-offs

ID Insight identified the following fraud indicators and the remedial actions that can reduce phone-number-change fraud:

• Geographic distance: The greater the distance between the geographic area of the new and old phone numbers, the greater risk of fraud. A similar correlative risk occurs when a new area code does not match that of the customer's current mailing address.
• Carrier type: Switching from landline to wireless or vice versa demonstrates more risk than changing numbers for the same type of carrier service. Prepaid phone numbers and VoIP lines are considered higher risk than landline or postpaid mobile phones.
• Urban versus rural: Changing phone numbers from a rural area to an urban center represents more of a red flag than rural-to-rural or urban-to-urban phone number changes.
• Area code/exchange: Confirming that phone numbers have been issued to U.S. locations with a basic validation check of the area code and exchange is highly advisable.
• Phone number verification: When the consumer name can be cross-associated with the phone number through an independent verification source, fraud risk is greatly reduced.
• Ported: As more phone customers choose to retain existing phone numbers when changing service providers, recently ported numbers are a point of risk and require a higher level of scrutiny.
• Business phone numbers: A change from a residential phone number to a business number or to a new number associated with a check-cashing outlet, is highly indicative of fraud according to researchers.

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