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How to Prevent and Fight Financial Identity Fraud: The Cybersecurity Expert’s Guide

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Have you ever wondered how cybercriminals worm their way into your financial life?

How do they cause chaos and snatch up your personal info? 

Well, worry not. This article will show you how to prevent and fight financial identity fraud. 

We’ll uncover the importance of preventing financial identity fraud. And equip you with cybersecurity experts’ tips. 

So, grab your digital armour and read on. 

Note: In this article, when we mention bank account, we refer to your customers’ and your business’s bank account.

What is Financial identity fraud? 

passport size vector image of a girl with multiple login credentials in this blog on financial identity fraud

Identity fraud occurs when someone assumes your (your customers’) identity. They may open credit card accounts, take out loans, or drain your bank account. 

Identity fraud has become an ever-present threat in the realm of financial services.

From stealing credit cards to making up fake identities.  These cybercriminals are endlessly finding new ways to trick and hurt yours and your customers’ finances. 

This next part is crucial. Read on.

How can I tell if my business has been a victim of financial identity fraud? 

infographic of signs of identity fraud on this blog on financial identity fraud

Imagine this.

You’re running your business. But there could be a sneaky predator causing havoc behind the scenes. 

How can you spot the danger? Here’s how.

Look out for these telltale signs of financial identity theft:

  • Unfamiliar transactions, strange charges or withdrawals on your financial statements.
  • Unexpected and unexplained drops in your business’s credit score.
  • Inquiries from financial institutions about accounts or services you never requested.
  • Trust your gut. If something feels off or doesn’t seem right, it’s worth investigating.

Knowledge is your best defence against financial identity fraud. Stay informed, be watchful, and promptly respond to any suspicious activity.

Check out :Top 18 Cybersecurity Statistics for 2023 That May Make You Question Your Online Safety

Remember, there are various types of identity fraud. And to save your business from identity fraud, you need to know them. 

What are the different types of financial identity fraud that can affect my business?

an infographic showing common types of financial identity fraud including Business Account Takeover, Phishing and social engineering, data breach

Financial identity fraud comes in many forms. Each type has a unique danger to your business’s financial stability.   

Let’s dive into financial identity frauds and explore its various manifestations.

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1. Business Account Takeover (ATO) fraud

Fraudsters manage to break into your business accounts with this type of fraud. They hack your systems or steal login credentials.

Once inside, they transfer funds to offshore destinations. It is then nearly impossible to trace the theft.

2. Synthetic identity theft

In synthetic identity theft, fraudsters combine accurate and fabricated information. With this information, they create new identities. 

They use these synthetic identities to open fraudulent accounts. They could also secure credit in your business’s or customers’ name. 

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Fabricated identities often appear legitimate. That’s why synthetic identity theft is hard to detect.

3. Phishing and social engineering attacks

In these tactics, fraudsters manipulate your customers or individuals within your organisation. They do it through deceptive emails, phone calls, or messages. 

They aim to trick people into revealing sensitive information. They could ask for login credentials or financial data. 

This can then be used for fraudulent purposes.

4. Account hijacking

This identity theft involves a crafty imposter infiltrating your business’s or customers’ online accounts. This includes email, banking, or payment platforms. 

Once inside, fraudsters can manipulate transactions, divert funds, or steal valuable information.

5. Business identity theft

In this type of fraud, criminals steal your business’s or customer’s identity. They do it to obtain credit, secure loans, or make purchases. 

They use your company’s or customer’s name, address, and other identifying information. Once inside, they engage in illicit activities.

6. Data breaches

It involves fraudsters accessing your business’s sensitive data without permission. 

Let’s say a hacker infiltrates your company’s database, stealing customer credit card information.

They sell the data to criminals. These criminals then make unauthorised purchases or create counterfeit cards.

Also, know these: 8 essential holiday security tips that every business owner should be aware of.

Your customers suffer, and the trust in your business crumbles. Meanwhile, you become entangled in legal battles and experience financial losses.

How do fraudsters obtain personal information?

Ever wondered how fraudsters manage to get their hands on personal information? Let’s uncover ways they obtain such data and gain insights into their tactics. 

Knowing their tactics, we can safeguard ourselves from identity theft and fraud.

1. Debit or credit cards

vector image of a credit card and a thief stealing it in this blog on financial identity fraud

These cards are handy for buying things online or over the phone. And that’s why fraudsters want to get their hands on them.

Fraudsters try to steal card info by “skimming” at ATMs. 

Also learn: What Are Application Security Risks? (Definition, Consequences, Prevention, And Best Practices)

They can install a sneaky device in the ATM. This device reads and copies the information from the magnetic strip on the back of your card.

Tricky, right? But don’t worry, there are some signs to watch out for. 

If you notice strange objects attached to the ATM, someone might have tampered with it. Similarly, a keypad sticking out could be a sign of interference.

Always cover your PIN when you use the ATM to keep your card safe.

2. Phishing emails and fake websites

Amazon phishing scam | A login page of Amazon with fake website URL in this blog on financial identity fraud

Let’s talk about phishing. It’s when hackers send fake emails that look real. 

They trick you into thinking it’s from someone you trust, like the government. 

These misleading emails might ask you to reply with personal info. Those emails even have a virus that tries to steal stuff from your computer.

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But don’t worry, you can outsmart these phishing tricks.

Never share personal information via email. Only share it when you’re confident it’s from a trusted source.

3. Public Wi-Fi

infographic showing signs of suspicious public Wi-Fi network

When you’re connected to public Wi-Fi, fraudsters take advantage of this. 

They secretly stay nearby or hide. And wait for an opportunity for someone to share personal information on unsecured websites. 

They also target individuals who use public Wi-Fi connections.

Imagine you’re at a café and choose to purchase online on an unsecured website. You enter your credit card details. And someone nearby captures every keystroke you make.

You enter their trap.

To protect your privacy, always log out of public Wi-Fi before you make important purchases online. 

4. Data breach 

Hackers use this tactic to obtain personal information by breaking into your system. 

They can use this information to pretend to be you and make unauthorised purchases. They can also even mess with your bank account.

5. Buy information from third-party sources 

Fraudsters can buy information from someone inside the company. This could be an employee who has access to applications for credit.

This employee might get tempted to sell that information to the highest bidder. 

Let’s say you apply for a credit card. And an employee at the company decides to sell your info to a fraudster. 

The fraudster now possesses your name, address, and social security number. They have all the necessary details to impersonate you.

They can open accounts in your name or make purchases without your knowledge.

Why should you combat identity fraud? 

Here are some key reasons why it’s crucial to combat identity fraud: 

  • You can safeguard your hard-earned money and customers’ finances.
  • You can prevent negative impacts on your credit score. The credit score is vital for future financial opportunities.
  • You can prevent emotional distress and protect your emotional well-being.
  • You’ll safeguard your reputation. Fraudsters use your identity to engage in criminal activities. Taking action helps protect your good name.
  • You’ll maintain a secure economic environment in your financial systems. Combatting identity fraud helps maintain trust in financial institutions.
  • Fighting identity fraud not only benefits you. It also helps protect others from falling victim to this pervasive crime.

Still not convinced about taking identity fraud seriously? 

Well, hold on tight because these eye-opening stats will make you think twice:

  • Over 14 million people fell victim to identity fraud in the United States in 2020. 
  • The total amount lost due to identity fraud reached $56 billion in the United States in 2020. 
  • On average, victims of identity fraud spend around 200 hours and roughly $1,000 to resolve the issues caused by fraudsters.

How do you prevent identity fraud in your financial institution?

Let’s walk through expert-recommended steps to prevent and fight financial identity fraud.

1. Protect your customer’s sensitive data.

You build your customers’ trust when you safeguard their personal information. 

What’s more? Protecting their sensitive information ensures their financial well-being. 

“Implementing robust data protection measures prevents unauthorised access to customers’ sensitive data. This mitigates the risk of identity fraud.” – Cybersecurity Expert Sarah Thompson

Here’s what you can do to protect customers’ sensitive data.

  • Encryption and secure storage
  • Regular data security audits
  • Employee training and awareness

2. Creating data protection policies

Data protection policies are a security blanket. They help protect sensitive information in your financial institution.

These policies ensure that customer data is out of reach from unauthorised individuals.

Cybersecurity expert David Johnson gave a piece of advice on this.

“Having clear and comprehensive data protection policies helps in safeguarding customer data. It minimises the risk of unauthorised access or misuse.”

Here’s how to establish effective data protection policies:

  • Conduct a data inventory
  • Develop data protection policies
  • Implement security measures.
  • Regularly review and update policies

3. Set customer identification rules

Ensuring you know your customers’ identity prevents sneaky identity fraud. So, ensure only the real deal can access your financial services. 

Verifying their identities can lower the chances of any shady business happening. And keep both your institution and your customers safe and sound.

Cybersecurity expert, Emily Adams, highlights the significance of customer identification rules. 

Emily states, “Implementing robust identification measures helps verify customers’ identities. This makes it harder for fraudsters to gain unauthorised access.”

Here are some steps to set effective customer identification rules:

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What are the steps to recover from identity fraud? 

an infographic showing how to recover from financial identity fraud

Going through identity fraud can be unsettling. But don’t worry. There are things you can do to bounce back and take control of the situation. 

Let’s dive into the recovery process with the help of cybersecurity expert Sarah Thompson. 

Sarah’s got some great advice to share with us.

1. Act promptly – report the incident and obtain an identity theft report

Take action once you discover any signs of identity fraud.

 “The first step in recovering from identity fraud is to act quickly,” advises cybersecurity expert Sarah Thompson. 

Contact the appropriate authorities. This includes your local police department or the Federal Trade Commission (FTC). 

Then, report the incident and obtain an identity theft report. This report will help in the subsequent steps of the recovery process.

2. Notify relevant institutions – freeze compromised accounts and open new ones

Contact your banks, credit card companies, and loan providers. And let them know about the identity fraud that’s happened. 

Sarah says you must notify these institutions about the fraudulent activity you’ve encountered. 

Work closely with them to freeze or close any compromised accounts. And don’t forget to open new accounts with extra security measures.

By taking this step, you’re ensuring the fraudsters won’t access your accounts anymore.

3. Review and dispute fraudulent transactions – provide supporting documentation

Thoroughly review your financial statements, credit reports, and other relevant records. You can track unauthorised transactions or accounts opened in your name. 

If you identify any fraudulent activity, follow this guidance provided by Sarah: 

“Dispute these transactions with the respective institutions and provide them with supporting documentation.” 

This way, you’ll initiate removing fraudulent charges and restoring your financial records.

4. Monitor your credit – stay vigilant for suspicious activity

Make it a habit to keep tabs on your credit reports. Obtain them from the major credit bureaus like Equifax, Experian, and TransUnion.

Sarah recommends looking out for suspicious activity or foreign accounts you didn’t authorise. 

If you spot anything suspicious, don’t waste time and report it immediately to the credit bureaus. They’ll guide you through the steps to sort out any problems. 

By monitoring your credit, you stay ahead and catch ongoing fraud attempts.

5. Consider identity theft protection services – additional monitoring and assistance

Consider enlisting for identity theft protection services to give yourself extra peace of mind. 

These services go the extra mile by closely monitoring your personal information. And offering support in case you encounter any identity fraud problems. 

It’s like having a guardian angel watching over your identity. 

How can you use SMS to fight identity fraud?

Looking to amp up the security in your financial institutions? Why not use good old SMS as a nifty security tool? 

Let’s check out some cool ways SMS can keep things safe and sound:

  • Two-Factor Authentication: Using OTP 2FA for online verification is very effective in ensuring the identity of your customers.
  • Transaction alerts: You can send SMS notifications to customers to alert them of suspicious transactions. This way, you quickly identify and report any fraudulent activity.
  • Password reset verification: Use SMS to verify and authorise password resets. This way, only authorised individuals have access to sensitive accounts.
  • Account activity confirmation: Confirmation SMS is an extra layer of security. It protects you from unauthorised changes.
  • Identity verification: Use SMS for identity verification processes. The verification SMS will confirm your identity when you respond to a specific SMS message.

Consider partnering with SMSCountry as your trusted SMS provider for added peace of mind.

With our trusty SMS API, you can effortlessly send those all-important authentication codes.

Integrating SMSCountry SMS API into your application is a breeze. Especially when setting up OTP delivery to your users. 

Here’s the scoop. Get started by signing up to use our API and snagging your Auth keys. 

If you run into any trouble, don’t fret. Our tech and customer support team are ready to lend a helping hand. You can also get all you need from our API documentation

Now you’re all set to level up your application’s security with seamless OTP delivery. 

SMS best practices for the most effective results

Here are some SMS best practices to maximise your results:

  • Keep it short and sweet: Craft concise and to-the-point messages that quickly convey your message.
  • Personalise when possible: Address recipients by name to create a personalised touch.
  • Use a clear call-to-action: Clearly state what you want recipients to do. Whether it’s clicking a link, replying, or taking another action.
  • Optimise timing: Send SMS messages at the appropriate time.
  • Test and optimise: Continuously test different approaches. This includes message content and timing to identify what works best for your audience.
  • Respect regulations: Ensure compliance with applicable laws and regulations. This includes obtaining proper consent and providing opt-out options.
  • Maintain a clean database: Regularly update and cleanse your contact database. This ensures accurate and up-to-date recipient information.

What’s the future of cybersecurity in the financial sector? 

Let’s take a closer look at the future of cybersecurity in the financial sector:

  • Advanced AI and machine learning: These technologies will analyse vast data. They will identify patterns and proactively respond to potential attacks.
  • Biometric authentication: Traditional passwords and PINs are becoming less secure. The future will see increased adoption of biometric authentication methods. This includes fingerprint or facial recognition. This will provide a more secure and convenient way of verifying identities.
  • Blockchain technology: Blockchain, the technology behind cryptocurrencies like Bitcoin, offers enhanced security features. Its decentralised nature makes it difficult for hackers to tamper with transaction records. Financial institutions may leverage blockchain for secure and transparent transactions.
  • Cloud security: There will be a growing use of cloud computing in the financial sector. Financial institutions will focus on implementing strong encryption. They will also focus on access controls and monitoring mechanisms to protect sensitive data stored in the cloud.
  • Enhanced customer education: Financial institutions will invest in educating customers. They will educate them about phishing attacks, password hygiene, and other common threats.
  • Regulatory frameworks: Governments and regulatory bodies will continue to enhance cybersecurity frameworks. This will ensure the financial sector maintains robust security standards. Compliance requirements will evolve to keep pace with emerging threats.

Protect your financial identity with SMSCountry OTP 2FA

There you have it. 

We have explored the world of financial identity fraud. We also discussed effective strategies to prevent and combat this growing threat. 

Now, it’s time to put your knowledge into action. 

Looking for a trusted platform to help you fight identity fraud with SMS? 

Use SMSCountry SMS API to integrate seamless OTP delivery into your application.

Schedule a free demo with us to learn how our solutions can safeguard your financial identity. 

Sign up for free today and take control of your online security.


Can financial identity fraud affect my business’s credit score?

Financial identity fraud can impact your business’s credit score. This can happen if fraudulent activities get associated with your business’s accounts

What are some warning signs that a business email or transaction may be fraudulent?

Signs of fraudulent business emails or transactions include 

  • suspicious requests for sensitive information.
  • unexpected changes in payment instructions.
  • poor grammar and spelling.

How can my business avoid phishing scams that target financial information?

To avoid phishing scams, educate employees about recognising and avoiding suspicious emails. Use email filters and verify requests for sensitive information through a trusted source.

What should my business do if we receive suspicious emails or phone calls requesting financial information?

If you get a suspicious email or phone call, do not provide any financial information. Instead, report it to your IT department or the appropriate authority.

Can my business be held liable for financial identity fraud committed by employees?

Sometimes, businesses can be held liable for employee financial identity fraud. Especially if proper security measures and training are not in place.

What are some legal consequences for businesses involved in financial identity fraud?

Legal consequences for businesses in financial identity fraud include 

  • Fines, 
  • Lawsuits, 
  • Reputational damage, 
  • Potential criminal charges.

How can my business monitor its credit report for signs of financial identity fraud?

Review your business’s credit report for suspicious activities often. This helps detect signs of financial identity fraud early.

How can my business ensure that third-party partners protect our financial information?

Ensure third-party vendors and partners have robust data security measures. This should include encryption, access controls, and regular security audits.

What are some best practices for securely storing and transmitting financial information?

Best practices include:

  • Using encryption 
  • Using secure networks
  • Using strong passwords 
  • Limiting access to sensitive financial information.

How can my business obey data protection regulations to prevent financial identity fraud?

To obey data protection regulations: 

  • Implement privacy policies 
  • Obtain consent for data collection 
  • Ensure secure data storage
  • Conduct regular audits.

What should my business do if we discover that a vendor or partner has suffered a data breach?

If a vendor or partner experiences a data breach, communicate with them to understand the impact. Also, assess potential risks, and take appropriate actions to protect your business and customers.

How can my business work with financial institutions to prevent and detect financial identity fraud?

Collaborate with financial institutions to:

What resources are available to help my business recover from financial identity fraud?

Resources for recovery include:

  • Working with law enforcement 
  • Hiring cybersecurity experts 
  • Engaging in identity theft recovery services.

Is identity theft a financial fraud?

Yes, identity theft is the fraudulent use of someone’s personal information for financial gain.

How long does identity fraud last?

The duration of identity fraud can vary, but it can take months or even years to resolve the consequences of identity theft fully.

What is the most common method used to steal your identity?

Phishing. Fraudsters deceive individuals into revealing personal information through deceptive emails or messages. This is a standard method used to steal identities.

How many stages are in identity fraud?

Identity fraud typically involves three stages: 

  • Acquiring personal information
  • Using the stolen information for fraud 
  • Profiting from illegal activities.

When did identity fraud start?

Identity fraud has been a persistent issue. It became more prevalent with the rise of digital technology and online transactions.

Prasanth Yerrapragada

Prasanth is a tech geek at heart and loves to solve problems. He counts his lucky stars for having worked both in product management and engineering roles. He has a knack for understanding customer pain points and building products that are intuitive and solves these problems. When he is not at work, you can find him playing board games and jigsaw puzzles with his son.

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