Identity fraud is one of the most frustrating things banks and payment processors have to deal with.
According to Javelin, US businesses suffered almost $17 billion worth of losses due to identity fraud. By mistaking a criminal for a genuine client, a bank or payment processor might unwittingly aid money laundering, tax evasion, and terrorist activities.
The traditional document validation process was slow, unreliable, and difficult to scale. It introduced a lot of friction into the registration process while not guaranteeing perfect security. And as your business grew, you had no choice but to hire more and more security specialists to keep up. Which could get incredibly costly.
Thankfully, modern advances in machine learning (ML) and artificial intelligence (AI) technologies can help solve all these issues.
Read on to find out everything you need to know about document fraud and how to detect fake documents with modern AI-based document verification systems.
Identity document fraud is the criminal process of buying, selling, or manufacturing counterfeit IDs in order to perform illicit payment, immigration, company registration, or other types of criminal activities (according to the Interpol)
Listed below are the most common types of identity documents used for fraud (source – Interpol):
| False Document Sources | Counterfeit Documents |
|
|
Fraudulent documents are used to commit a wide variety of crimes. These can range from money laundering, gaining illicit employment, and other types of financial crimes to human trafficking and terrorism-related activities.
Document fraud can be carried out in a number of ways. The four most common types of counterfeit documents are pseudo documents, false documents, modified documents, and image fraud.
This is the most common type of fake identity document. As we already mentioned above, pseudo documents are completely fake documents. They often have important safety features missing, including watermarks and holograms. Despite this, the ID may look somewhat official and will typically purport to come from a distant land, which could be enough to fool inexperienced workers.
False documents are not counterfeits or reproductions. Instead, they are genuine documents that were issued by real government institutions. A genuine ID becomes a false document when a third party uses it for illicit activities.
For example, a criminal might attempt to use a stolen passport to take out a series of bank loans in the victim’s name. They will then pocket the money and disappear, leaving the victim and the bank left to deal with the losses.
Modified documents are a cross between pseudo documents and false documents. The base of a genuine personal identification document, such as a passport or an ID card, is taken and then altered to display other details. The base can come from either a document issued in the name of another person or from blanks stolen or leaked from the government-contracted printer.
If you work at a bank or payment processing company that allows users to register remotely, then you know that having to deal with image fraud is an unfortunate consequence of providing services over the internet.
Digital authentication of documents is difficult because the end user only has to provide an image of their ID, rather than the physical document itself.
To commit fraud, criminals will either take pictures of modified documents in a light that hides their most noticeable flaws or use a piece of image manipulation software, such as Adobe Photoshop, to make alterations to a photo of a genuine document.
The world of document fraud is a rapidly changing one. Advances in the realms of document fraud detection and prevention make previously popular methods outmoded overnight.
This forces criminals to invent new avenues of attack.
To which government agencies have to reach in turn.
And so on.
According to TrustID, the most commonly faked type of documents are passports and ID cards. Fake visas and residence permits are much rarer.
And despite all the myths, driving licenses are faked much less frequently than other types of documents.
In terms of trends, ID card fraud became 33% more prevalent last year and fake visas became twice more common (possibly due to Brexit).
The following countries’ documents are faked most often:
As can be seen from the list, the vast majority of documents are faked in the European Union. The only non-EU countries in our top 10 are Nigeria (#3) and India (#6).
This means that financial service providers who work in Europe must pay special care when dealing with identity checking.
Machine learning and artificial intelligence is improving document verification in a variety of ways.
Traditionally, document verification had to be carried out by hand, with trained security specialists looking over every application. This method has, of course, very slow, inaccurate, and expensive.
No matter how big your security team, processing thousands of applications per day can never be a fast and convenient process for the user.
Humans are human, and even the most experienced security experts will make mistakes. And that is before we even mention the fact that scaling manual document verification is an incredibly costly and unsustainable endeavor.
Thankfully, machine learning and artificial intelligence technologies are coming in to help financial institutions by combatting document fraud in a much more efficient way. A well-trained ML identity fraud prevention algorithm can process thousands of documents per second, filtering out the cases which truly require the attention of your team.
Thanks to these AI-based algorithms, you can reduce staff costs while improving both processing speeds and security.
The first step to document verification using AI systems is integrating the software into your payment processing systems.
When document verification is required, the new client will be asked to upload a picture of their government-issued document and a selfie taken directly via the app.
The fraud detection software then uses OCR (Optical Character Recognition) algorithms to read the data from the document and identify any discrepancies with the typography that could indicate that the document has been modified.
Simultaneously, the AI system compares the document against a database of known real documents and checks for all visible forgery marks.
Once the document is verified as genuine, the algorithm will use a sophisticated facial recognition system to make sure that the customer’s face is the same exact one that appears on the document.
A few seconds after the data has been submitted for review, the system will either automatically confirm the verification attempt as genuine, block it as fraudulent, or send it to your security team for further review.
| Manual Document Verification | AI-Based Document Verification |
|
|
Want to take advantage of the latest developments in AI document fraud verification? AI-powered online document verification solutions can help lower risks of suffering negative consequences related to document fraud.
Discover how SDK.finance’s system simplifies KYC checks (like document verification) for new and existing users, and helps to manage all aspects of client management within one centralized platform:
Employing an automated tool you get the chance to decrease manual effort in document verification and minimize the number of fraudulent documents in your business everyday operations.
Proud to announce that SDK.finance is the best FinTech startup 2015! Central European Startups Awards has… Read More
On November 10, SDK.finance was presenting demo at Bank Innovation Israel 2015 DEMOvation challenge. Bank Innovation… Read More
Great news! SDK.finance is selected for the €20.000 cash prize pitch competition at Execfintech! After… Read More
On March 8, CTO SDK.finance Pavlo Sidelov and CEO Alex Malyshev were attending one of the… Read More
On March 30, SDK.finance has been selected as a finalist for Red Herring's Top 100 Europe award,… Read More
Money 20/20, the cutting-edge FinTech conference, was held April 4 – 8 in beautiful Copenhagen… Read More