How preventing third-party fraud is like baking a really good cake
Both rely on using the right ingredients and processes
Fraud. It’s a word that comes up in conversations across every industry. While there’s a general awareness that fraud is on the rise and is constantly evolving, for many, the full impact of fraud is misunderstood and underestimated.
At the heart of this challenge is the tendency to lump different types of fraud together into one big problem and then look for a single solution that addresses it. It’s as if we’re trying to figure out how to un-bake a terrible cake instead of thinking about the ingredients and the process needed to put them together in the first place. In this article, we’ll look at some of the key ingredients in preventing third-party fraud. But first let’s talk about this type of fraud is and how it impacts credit unions.
What Is Third-Party Fraud?
Third-party fraud—generally known as identity theft—occurs when a malicious actor uses another person’s identifying information to open new accounts without the knowledge of the individual whose information is being used. This type of fraud is unique from first-party or synthetic identity fraud because it involves identifiable victims who are willing to collaborate in the investigation and resolution for the simple reason that they don’t want to be responsible for the obligation made under their names.
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