In many organisations, fraud detection happens only after the damage is done. Security teams scramble to respond when bad actors have already breached their defences.
Fraud and identity theft continue to grow, and the cost now runs into billions of dollars. Conventional approaches to fraud prevention may no longer be effective.
To prevent fraud, simply “knowing” your customers isn’t enough. You must actively protect your operations from malicious actors. To do this, you need breach data, digital identity signals, and credential monitoring.
Why conventional KYC processes are no longer enough for fraud prevention
For decades, businesses have relied on know your customer (KYC) processes.
KYC is designed to verify that potential new clients are genuine and aren’t involved in illegal activities. It involves credit checks and background screenings to:
- Confirm customer’s personal details, such as their date of birth and address.
- Screen their name against sanctions and watchlists of politically exposed persons (PEPs) and criminals.
However, conventional KYC has serious weaknesses. The primary issue is that criminals are aware of how KYC works and how to circumvent it. Their primary method is by posing as someone else.
Fraudsters can steal someone’s identity. Alternatively, they can construct a fake persona by combining real and false details. This is known as synthetic identity fraud.
In these ways, fraudsters can slip through surface-level KYC screening and use your organisation’s products or services for their criminal activities.
Introducing the proactive fraud detection solution
Suppose you’ve onboarded a new customer after completing the standard credit, sanctions, and PEP checks. How would your view of that customer change if you discovered that:
- Their phone number or email address didn’t match verified records?
- Their email address appeared in a list of breached data?
- Their intended password was included in a database of compromised passwords?
- Their bank details were flagged as a mule account controlled by criminals?
These factors would substantially raise their risk level, but conventional KYC wouldn’t flag them. To prevent fraud today, more is required. You need to recognise criminal tactics, validate digital identifiers such as emails and phone numbers, and incorporate advanced due diligence.
Using breach data for defensive intelligence
Fraud is fuelled by stolen data. Cybercriminals use information leaked in data breaches to build highly convincing fake identities and launch various types of attacks.
However, if you use it smartly, breached data can help you build a powerful defensive shield for your organisation.
Credential monitoring involves infiltrating and scanning criminal forums and marketplaces for credentials that may have been compromised due to data breaches or leaks.
You can combine credential monitoring with solutions to analyse signals such as device fingerprints and behavioural patterns. This can detect danger signals that conventional KYC checks would miss.
A real-world example combining breach and behavioural data
Consider the following scenario:
- A user’s credentials have recently been found on a criminal forum.
- The user tries to sign in from a device or location that has never been used with their account.
Is it really the user signing in? The system recognises that it might not be and automatically raises a defensive barrier. It asks the user for additional verification or temporarily blocks their access to prevent harm.
This kind of proactive approach requires a combination of:
- Internal data, such as customer’s transaction history and account behaviour.
- External data, such as compromised credentials and third-party risk signals.
Building a future-proof fraud detection strategy
It’s time to replace passive verification with active protection. Advanced due diligence must include:
- Validation of digital identifiers: Checks for email addresses, phone numbers, or devices that appear in lists of breached data or are linked to fraud. Credential monitoring solutions like Cybercheck detect compromised credentials being traded on criminal forums before cybercriminals exploit them.
- Behavioural biometrics monitoring: Detection of unusual login times, locations, or typing patterns, which can be red flags for fraudulent activity. Machine learning can identify subtle correlations that human users may never have been able to spot.
- Link analysis: Mapping the connections between accounts, devices, and payment methods can expose fraud rings that could otherwise go undetected.
Fraudsters constantly develop and refine their techniques. It’s imperative that fraud prevention strategies keep pace. AI and machine learning continuously adapt to their evolving tactics by learning from new data and responding dynamically.
From KYC to PYO — protect your organisation
Proactive fraud detection is now a strategic imperative. It’s time to transition from KYC to a mindset of PYO — protect your organisation.
Solutions like Cybercheck are turning dark web intelligence into actionable defence and helping organisations stay ahead of the fraudsters.
