Document fraud has increased dramatically in recent years. In fact, according to the U.S. Treasury’s Financial Crimes Enforcement Network, check fraud, alone, was reported 350,000 times in 2021 and 680,000 times in 2022. The prevalence of document fraud can partially be explained by instability caused by the COVID-19 pandemic as well as technological advancements that make it easier to alter documents with increasingly realistic results. That said, technological advancements are also being used to combat document fraud in new and better ways. The following will summarize key takeaways from the Fraud Magazine article, “Detecting Document Fraud,” by Dustin J. Eaton, CFE, and Theodore Colon, J.D.
Opportunity to Commit Document Fraud:
According to the article, a variety of factors have contributed to an increased opportunity to commit document fraud. Notably, the increased sharing of sensitive information online during the COVID-19 pandemic, newfound access to federal money via pandemic relief programs, and economic uncertainty have all created opportunities for fraud to occur.
During the pandemic, people and organizations began to rely on online platforms more than ever before, using them to complete a variety of tasks that required the sharing of sensitive information. This made it easier for fraudsters to access, steal, and use this information for illegal purposes. Individuals and organized groups also took advantage of government relief funds, falsifying documents to collect money that they did not qualify to receive. Desperation caused by economic downturn and uncertainty also compelled individuals to rationalize and commit fraud, often for the first time.
Types of Document Fraud:
Given the fact that document fraud is on the rise, what should organizations be watching for? The article defines three major categories of document fraud. These include counterfeits, forged/altered documents, and fake documents. Counterfeits are documents that mimic authentic documents authorized by an issuing authority. Forged or altered documents are authentic documents that are altered without the consent of the original owner or issuer. Fake documents are not created to mimic a genuine document. That said, they contain information that is designed to deceive or mislead a victim. Fraudsters often use fraudulent checks, government issued IDs, pay stubs, invoices, and tax forms for personal gains.
Preventing Document Fraud:
The article recommends utilizing a variety of risk management tools to prevent document fraud. Importantly, the authors stress the importance of pulling data from multiple sources in order to verify authenticity. They recommend choosing or creating risk management tools that include the following features:
Document forensics: Digital document forensic tools can be used to detect earlier versions of a document, inconsistent fonts, software used to create a document, and discrepancies between documents.
X-ray and metadata analyses: These tools use artificial intelligence to detect changes to documents. They can determine who created a document and when it was created or modified. They can also determine what software was used to create a document and can detect and describe embedded text.
Template detection: Fraudsters often sell or use templates to create falsified documents. Template detection tools can identify when seemingly genuine documents have been created using a template.
Blocklists or watchlists: Blocklists and watchlists contain information about individuals known to have committed fraud. A new customer’s information can be compared to this information to weed out repeat offenders.
Two-way matching: Text recognition software can be used to identify discrepancies between documents. For example, a fraudster may try to provide information that does not match what is found on submitted documents.
Network or database detectors: Network or database detectors screen new documents for fraud indicators by comparing them to a large archive of both fraudulent and authentic documents.
To close, the authors highlight the importance of staying informed and adapting your fraud detection and prevention policies to address emerging concerns. As always, information and policies should be effectively communicated with all members of an organization so that everyone can do their part to combat fraud. Don’t forget, most fraud of all types is detected via a tip. Regularly educating your employees on the existence of your independent hotline will encourage them to “say something” when they “see something.”
Want to learn more about modern methods being used to commit fraud? See our article here.