3 Steps to Identify and Protect Against Fraud in Multifamily

The unfortunate truth is that fraud in Multifamily is becoming a more prevalent issue. How can fraud be mitigated and minimalized so your business can run smoothly? We’ll discuss the basics: 3 steps to identify and protect against fraud in property management.

FRAUD FACTS

Fraudulent rental activity, largely involving identity theft, is happening all across the country, and the statistics have grown more severe in recent years. The changes in business brought about by the pandemic have caused an increase as everyone works to adjust to the new normal. To make matters more challenging, fraudulent individuals don’t look any different from any other prospect. This can make it especially difficult to detect and identify fraud in multifamily. There are offers online that sell “approval packages.” These include fake paycheck stubs, electric bills, renter’s insurance paperwork, etc., for a fee of only several hundred dollars! A study commissioned by TransUnion discovered that applicant-based fraud is a bigger issue online than in person.

1. Know the Types of Fraud

First Party Fraud – When someone intentionally takes on financial obligations they cannot or do not intend to pay. First-party fraud involves misrepresentation and falsification of documents to improve creditworthiness and occurs due to collusion between two parties to pass screening.
Third-Party/ID Theft Fraud – Occurs when identities are stolen on the dark web through data breaches or by friend/associate relationships. Did you know 3.7 million identity records are stolen every day? Data breaches are up 45%, and consumers involved in a breach are 7 to 10 times more likely to be victims of identity theft! Often, fraudsters can obtain a CPN, a credit privacy number that mirrors a Social Security number and allows someone with poor credit to start fresh with a new (and dishonest) credit history.
Synthetic Identity Fraud – This type of fraud results from the purposeful creation of new fabricated identities. These use a mix of real and fictitious data to create a new credit profile groomed for prime scores and then used for fraud in multifamily and other industries. This type of fraud has doubled since 2012 and has left a trail of more than $1 billion in outstanding balances! This type of fraud is uniquely challenging to identify because there is no third-party victim to report the fraud and stop it early.

2. Learn How to Detect Fraud

There are several solutions to help you identify and address fraud in multifamily including:

Identity Verification – Verify the applicant is who they say they are and use credit data to match PII (personally identifiable information) and alert to any mismatches
Device Verification – Explore the digital behavior of applicants for red flags, check that IP address is valid, and check browser history for fraudulent activity
Authentication – Provide the applicant with a one-time passcode and provide the applicant with out-of-wallet questions to authenticate identity (these are questions someone couldn’t answer if they found your wallet)

3. Practice Ways to Reduce Fraud

Build a proactive and robust fraud management strategy
Verify identification with technology like “Checkpoint ID”
Enhance screening procedures through the integration of fraud technology
Use a multi-layered solution

No amount of technology or preparation can eliminate ALL of the fraud that you may encounter, but proper awareness and action, using these 3 steps to identify and protect against fraud in multifamily, will put your team ahead of the game.

Contributed by:

Maitri Johnson

Vice President | TransUnion