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TheMobileBuzz

Phone-number-change fraud on the rise

fter conducting extensive research on tens of chip cards and terminals as one catalyst that has driven
thousands of customer phone number changes fraudsters to take the leap to fraudulent opening of new
in the financial services sector, anti-fraud firm accounts.
A ID Insight Inc. identified an alarming trend
involving fraudsters who manipulate phone numbers to "After five years of relatively small growth or even
leverage account takeover schemes. decreases in fraud, this year's findings drive home that
fraudsters never rest and when one area is closed, they
"Criminals have recognized that when large money adapt and find new approaches," Pascual stated, noting
transfers are requested or other out-of-pattern account that after reaching a low point in 2014, account takeover
activity takes place, financial institutions are much more incidence and losses rose notably in 2016, with losses
likely to place an outbound call or text to their customer to totaling $2.3 billion.
confirm the legitimacy of the requested account action,"
ID Insight stated. Fraud tip-offs
ID Insight identified the following fraud indicators and
Using an abundance of hacked personal data available on the remedial actions that can reduce phone-number-
the black market, fraudsters are able to pose as legitimate change fraud:
account holders and change customer contact information,
ensuring fraud alerts and other communications sent • Geographic distance: The greater the distance
never reach victims as account takeover activities take between the geographic area of the new and old
place. phone numbers, the greater risk of fraud. A similar
correlative risk occurs when a new area code does
Other research confirms ongoing threats associated with not match that of the customer's current mailing ad-
leaked data circulating among criminals. "The rise of dress.
information available via data breaches is particularly
troublesome for the industry and a boon for fraudsters," • Carrier type: Switching from landline to wireless
said Al Pascual, Senior Vice President, Research Director or vice versa demonstrates more risk than chang-
and Head of Fraud & Security at Javelin Strategy & ing numbers for the same type of carrier service.
Research. "To successfully fight fraudsters, the industry Prepaid phone numbers and VoIP lines are consid-
needs to close security gaps and continue to improve, and ered higher risk than landline or postpaid mobile
consumers must be proactive too." phones.
Mobile channel adds pressure • Urban versus rural: Changing phone numbers
from a rural area to an urban center represents
From the data collected, ID Insight was able to determine more of a red flag than rural-to-rural or urban-to-
patterns that help distinguish legitimate phone number urban phone number changes.
changes from fraudulent ones in various scenarios. It then
developed a predictive model which combines individual • Area code/exchange: Confirming that phone num-
risk indicators fraud investigators can apply to prioritize bers have been issued to U.S. locations with a basic
phone number changes based on perceived risk levels, a validation check of the area code and exchange is
timely development as more financial institutions shift to highly advisable.
mobile channels.
• Phone number verification: When the consumer
"The mobile phone is a critical channel for bank customers name can be cross-associated with the phone num-
and financial institutions that rely on mobile banking, ber through an independent verification source,
online account opening and mobile wallet applications for fraud risk is greatly reduced.
convenience," said Adam Elliott, co-founder and President
of ID Insight. "Having controls in place to ensure the • Ported: As more phone customers choose to retain
phone number in the customer profile actually belongs to existing phone numbers when changing service
the legitimate customer is critical for reducing fraud risk, providers, recently ported numbers are a point of
which is why we added phone number screening to our risk and require a higher level of scrutiny.
portfolio of anti-fraud solutions." • Business phone numbers: A change from a resi-
dential phone number to a business number or to
The 2017 Identity Fraud Study released by Javelin Strategy a new number associated with a check-cashing
& Research drew similar conclusions. The study identified outlet, is highly indicative of fraud according to re-
the U.S. migration to EMV (Europay, Mastercard and Visa) searchers.

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