Equipment dealers, lenders and service providers face increased document fraud this year as elevated interest rates, persistent inflation and supply chain constraints create a difficult economic environment.
Nearly 80% of risk leaders at banks, lenders and fintechs surveyed in fraud and risk management software provider Inscribe’s 2024 Document Fraud report said fraud attempts increased year over year in 2023, Inscribe Chief Executive Ronan Burke told Equipment Finance News.Fifteen percent of respondents reported an uptick in first-party fraud, 13% said third-party fraud increased and 48% said fraud picked up across multiple types.
The report is scheduled to be released in late January.
“Fraud prevention is a cat-and-mouse game because fraudsters are always evolving their techniques,” he said. “The solution needed to fight fraud is deeply technical and requires using the most innovative models and necessitates ongoing improvements to remain effective instead of once-and-done.”
Banking on fraud details, not identities
One area of concern for both dealers and lenders is fraudsters altering non-identifying documents such as bank statements, tax returns and transaction amounts in loan applications, Burke said.
In fact, 94% of fraudulent application documents modified non-identifying details.
Traditional fraudsters and unqualified borrowers modify non-identifying details to improve loan odds, Kit West, business development director/broker relations at equipment lender C.H. Brown, told EFN.
“We are seeing an increase in fraudulent documents, bank statements and tax returns,” he said. “Most likely to make the business look better than what it is just to get a loan.”
The growth of things like fraud-as-a-service, which allows fraudsters to effectively access fraudulent documents and tools online, continues to make access to fraudulent documents easier, Inscribe’s Burke said.
“The number of unique document templates detected by Inscribe has increased by nearly 20% since last year,” he said. “What’s more concerning is the majority of the templates detected were bank statements and pay stubs — likely used for higher loans and credit limits.”
“Fraudulent dealerships that do not exist and are selling equipment that does not exist to buyers who do not exist,” he said.
“These types of fraud deals are high level and require diligence on the perpetrators to make it work.”
While lenders and dealers continue the fight against fraudulent activity, investing in resources to reduce fraud remains key although no strategy is infallible, West said.
“We have invested in document and identity software to verify the authenticity of the docs,” he said. “We are sure that we have loans on the books that are 100% fraud, some are paying and some we are looking for the equipment.”
Ultimately, risk and organization leaders must prepare for the next techniques that fraudsters will come up with, Inscribe’s Burke said.
“As the world continues to become more complex, a company’s ability to reduce fraud and assess credit is directly correlated with growing revenue,” he said.
Registration is now available for Equipment Finance Connect. The dealer-centric equipment lending and leasing event of the year offers opportunities for dealers to learn new strategies, foster valuable partnerships and emerge with ideas to immediately apply to their businesses. Learn about Free Dealer Registration at EquipmentFinanceConnect.com.