Understanding (and overcoming) digital identity fraud attacks is key

In 2022, digital fraud is expected to see a significant increase compared to 2021, with the global attack rate increasing by 20% year-on-year. This growth continues to reflect early signs seen in 2021 as more and more economies resume normal operations after shutdowns due to the pandemic.

Much of the world was beginning to envision a post-pandemic future, although many Asian countries did not lift their international travel restrictions until mid-2022. Cyber ​​criminals were already taking advantage of the growing opportunities, as seen in the latest LexisNexis Risk Solutions Cybercrime Report,

The start of the year saw an increase in fraudulent attacks, particularly targeting countries such as Singapore that were traditionally less affected. Various scams, including traditional account takeover through phishing and sophisticated authorized push payment fraud, became regular news. Reports of massive scam centers and syndicates in Asia and Eastern Europe confirm that scams have evolved into the latest form of organized, borderless digital crime.

Dr. Stephen Toplis, Vice President of Market Planning, International Fraud and Identity, LexisNexis Risk Solutions

As the scale and complexity of fraud increases, so does our understanding of the complex challenges these attacks pose. Stephen Toplis, vice president of fraud and detection strategy for LexisNexis® Risk Solutions, emphasizes that it is more important now than ever to classify fraud into distinct types.

Toplis highlighted an increase in new, specific types of fraud attacks during the pandemic, such as those targeting financial aid related to the pandemic. Simultaneously, many more traditional forms of cheating were markedly reduced.

“We believe the reason behind this trend was that many cheaters themselves were as affected or distracted as non-cheating individuals were during the pandemic restrictions,”

Toplis said.

For example, if I were doing these attacks from home, I would probably have my family around me all the time. This condition will make it more challenging for me to engage in activities like before when people are looking over my shoulder.”

Toplis attributed the recent proliferation of scam centers, particularly in the Asia Pacific region, to the period after the pandemic ended, when such activities were not banned or restricted.

“All of these factors contributed to the reduction in fraud levels during the pandemic,” he summarized. “However, as economies reopened and restrictions were eased around the world, we saw an increase in digital attack rates.”

How fraud attempts in the Digital Identity Network® are classified by LexisNexis customers. LexisNexis Risk Solutions Cybercrime Report 2022

As the rate of digital fraud continues to rise, cyber criminals are becoming increasingly sophisticated. This is a significant challenge for many organizations, as they find themselves unprepared to deal with unfamiliar attacks.

“Traditionally, organizations would rely on a single fraud model to detect and prevent digital fraud,” Toplis explained. “This approach was based on the assumption that fraud was relatively simple and typically involved one or two specific types of attacks.

“As fraud becomes more sophisticated, we have recognized the need for multiple models. Each model is designed to target specific types of scams, allowing us to leverage machine learning techniques to optimize their performance,” Toplis said. “Using historical data, we can train detection models to identify known patterns of fraud and also identify any anomalies that may indicate emerging fraud attacks.”

Cyber ​​criminals take advantage of new and inexperienced digital users as well as organizations moving into the digital space with new services in search of vulnerabilities and opportunities. However, research shows that anyone can fall victim to a well-crafted scam. Toplis emphasized that everyone involved in the value chain should step up their efforts and actively combat fraudsters.

“An organization and the public are not enough by themselves. We all need to work together as a team,” Toplis said.

LexisNexis® Identity Misuse Index. LexisNexis Risk Solutions Cybercrime Report 2022

He highlighted that organizations can promote education and this can be done at the government or regulatory level to educate end users about scams. He also stressed the importance of organizations taking more specific measures to prevent digital fraud attacks. For example, they may send targeted messages to customers clearly stating that as a bank, they will never ask customers to transfer money to another account or share their passwords.

From a technology perspective, organizations should strive to go beyond their existing solutions. Toplis highlighted that although authentication is effective at validating users, they can still be tricked into authenticating fraudulent transactions.

“Since we are discussing digital channels here, it is important to have a layer of identity that checks for digital intelligence,” Toplis said. “By analyzing the digital intelligence surrounding a transaction, from the moment a user logs in to the moment they initiate a transfer or make a purchase, we can determine if it is in fact a customer or not.

“If their behavior appears unusual, organizations can send a highly specific message to the customer rather than a generic warning message during that digital interaction, which people may start to ignore if they hear it over and over again.”

Considering the rapid growth of digital payments, especially in Asia, with a variety of methods such as digital wallets and QR codes, Toplis believes the challenge lies with organizations that are rapidly adopting new digital payment methods. present the methods. It is critical for these organizations to prioritize fraud detection and incorporate digital intelligence models into these new offerings.

Mobile apps have become the preferred medium for digital transactions. LexisNexis Risk Solutions Cybercrime Report 2022

According to LexisNexis Risk Solutions Cybercrime Report, Mobile apps have emerged as the preferred channel for digital transactions, especially in emerging markets such as Asia. The report notes that LexisNexis® Digital Identity Network® analyzed nearly 80 billion digital payment transactions, more than three-quarters of which originated through mobile channels.

Initially limited to a small number of SuperApps, a large number of organizations are now expanding their customized in-app offerings. They are building an interconnected ecosystem within their apps, aiming to provide a seamless experience where there is no need for customers to navigate outside the app.

Toplis counters by stressing the importance for organizations to consider all the different channels through which they interact with their customer base, with the widespread adoption of mobile apps in particular or mobile usage in general. He stressed on the need for organizations to establish a standardized fraud detection approach across these various channels.

“With multiple channels and touchpoints available to your customers, from an organizational perspective, it is essential to maintain a 360-degree view of your customers from a digital perspective. This enables you to track potential attacks and intervene effectively, ensuring that the attack does not cause customer harm.”

Toplis explained.

As fraud attacks increased, organizations responded by focusing more on building trust with loyal customers. LexisNexis Risk Solutions Cybercrime Report 2022

Given the broad and expanding landscape of such attacks, it becomes important to classify the different types of digital frauds. By effectively identifying and isolating trusted customers, organizations can streamline their analysis and focus on the remaining incidents to determine which ones are potential attacks. This approach helps to prioritize fraud detection efforts and enhances the ability to identify and respond to fraudulent activities.

According to data analyzed by the Digital Identity Network®, this level of trusted ‘teamwork’ with customers is particularly high in the financial services sector. Additionally, an analysis of fraud classifications by region reveals substantial disparities. For example, third-party account takeover was the most prevalent fraud classification in the Asia Pacific region, while third-party chargebacks were prominent in Latin America and identity theft was a major concern in North America.

Toplice pointed out that organizations in the UK have already implemented fraud detection measures, digital intelligence and multiple layered factors of authentication. This proactive approach has forced fraudsters to focus their efforts on a specific type of scam, namely the authorized push payment scam.

“As a result, many of those authentication layers could be bypassed because the victims were authenticating the transactions themselves. This is why authorized payment scams have become a major attack seen in the UK and EMEA today.”

They said.

“If we compare it with Asia, we can see a clear difference in approach. Many Asian organizations have traditionally relied more on authentication methods, with less emphasis on the use of digital intelligence for fraud detection. As a result, scams that allow fraudsters to take over customer accounts can still be highly successful, even as authorized fraud is on the rise.”

Toplis said.

Fraud classification by sector. LexisNexis Risk Solutions Cybercrime Report 2022

cyber crime report The increasing prevalence of mule accounts was also noticed. These accounts facilitate the receiving of stolen funds and the quick transfer of those funds across different banks and borders.

As digital fraud scams and attacks continue to grow, the use of mule accounts is also on the rise, sometimes involving account owners who are unaware that their accounts have been used for fraudulent activities. going. However, with the advanced capabilities of the digital identity network, organizations can see the patterns of the mule account network in multiple dimensions. For example, these networks can be investigated on the basis of linked payment flows or digital identities.

“We may see a single digital identity that has access to multiple accounts, providing a more comprehensive way of identifying the mule network than just following money flows,” Toplis said. “This capability is built on existing fraud prevention capabilities. Therefore, we are now able to develop mule detection strategies that enhance fraud prevention efforts.

According to Toplis, the concept of the Digital Identity Network is to combine data-driven incident analysis, fraud prevention and global digital intelligence. It achieves this by creating a digital identity that dynamically evolves and adapts.

“Over time, we may see that risky digital identities can be associated with multiple events, which can increase the risk level in both your fraud model and your Mule model,” Toplis said.

“It shows that one model does not fit all. You have to have flexible systems where you can build multiple models using this global anonymous digital intelligence – focus on different types of fraud as well as new identities,” Toplis said.

LexisNexis Risk Solutions will host a webinar on August 15, during which Stephen Toplis will discuss key findings from the Cybercrime Report. Please take a moment to register for this free webinar by clicking here.

To learn more about the Digital Identity Network’s findings, along with detailed insights and solutions on global fraud, patterns and risks of attacks across various critical touchpoints, download the full LexisNexis Risk Solutions Cybercrime Report 2022.