The Federal Reserve recently published an article, What’s New With New Account Fraud?, which alerts financial institutions to the significant rise in new account fraud. It notes that losses from new account fraud have more than doubled compared to just a decade ago. As we all know, technology has its pros and its cons and while digital/online account opening can offer a user experience more aligned to the shifting preferences of today’s consumers and businesses…and can be an attractive strategy for financial institutions to reduce costs and increase operational efficiencies, it’s not without risk.
New account fraud has always been a problem for financial institutions; it’s just being carried out in new ways. Today, large-scale data breaches have generated a plethora of PII (personally identifiable information) for criminals to exploit. Automated bots and scripts have enabled criminals to open accounts more quickly and at scale, and to obtain information about an institution’s Know-Your-Customer (KYC) and onboarding requirements. More recently, generative AI tools have made the creation of fake digital documents and synthetic identities easier, more convincing and highly efficient.
Financial institutions are encouraged to take a look at their existing fraud mitigation strategies and determine whether changes are needed. This might include more robust and sophisticated uses of identity verification, device assessment and transaction monitoring, as well as information sharing about scams and fraud.
Published
2025/09/16
