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Aug 27, 2019 bjohnson

The Cost of Familiar Fraud to Financial Institutions


Estimated Reading Time: 5 Minutes

What’s the real impact of familiar fraud to victims?

Statistics from Forbes and various online publications, particularly focused on familiar fraud and its impact on the fraud victim and the financial institution.

The most frightening part about familiar fraud is that, across all fraud types, this particular type doubled from 7% of fraud victims in 2017 to 15% in 2018. Familiar fraud – cases in which the victim personally knows the individual(s) abusing their identity – is one of the most emotionally and financially devastating fraud incidents to the victim. It’s also one that occurs the most in new account fraud (NAF). According to Forbes, based on the Javelin Strategy & Research 2018 Identity Fraud Study, of all NAF victims, over half (51%) reported they personally knew the individual(s) committing the crime.

With car loans, mortgages, student loans, and home equity lines of credit (HELOCs) all more than doubling in the number of fraud victims last year, it’s no wonder familiar fraud increased significantly in 2018. But what’s the real impact of familiar fraud to victims?

Cost of Familiar Fraud to Victims

With any type of financial fraud, the victim and the financial institution carry a burden – either emotional or monetary. Sometimes both. For the victim, the emotional burden from familiar fraud tends to lead to a financial burden.

People are quicker to believe that if they were to ever become a victim of fraud, it would be as a result of a data breach or from an unknown scammer. However, when they find out that a loan or a new account has been opened under their name, is now in default, is affecting their credit, and that the perpetrator is actually their old college roommate – the victim is left confused and conflicted with what to do as far as next steps. It’s harder for a victim of familiar fraud to prove they weren’t the ones who committed the fraud, because, oftentimes, when faced with the identity of the abuser, the victim decides to not move forward with filing a police report against the individual. Without a police report, or some other action taken against the fraudster, financial institutions are less likely to believe the victim didn’t commit the fraud themselves. Consequently, the victim is left with the financial burden of repaying the loans, as well as the arduous process of rebuilding their credit. As of 2018, nearly three-quarters of familiar fraud victims personally bore some financial liability for fraud.

At Generali Global Assistance (GGA), our certified identity theft resolution specialists have encountered familiar fraud on numerous occasions. We’ve worked with customers to identify and resolve a fraudulent inquiry, and as part of the resolution process, it becomes apparent the only person who could’ve committed that particular fraudulent act had to have been intimately familiar with the victim. However, the impact of familiar fraud isn’t just on the victim – it’s on the financial institution as well.

Cost of Familiar Fraud to Financial Institutions

The cost of familiar fraud to banks and credit unions is twofold. For one, once a victim has been burned by fraud, they’re more likely to switch to a different bank/credit union – one with controls in place to better combat these types of situations, and one with sophisticated monitoring in place to help identify new accounts and inquiries against their credit. And as many financial institutions know, it costs five times as much to attract a new customer than it does to retain one.

The other, longer-term damage familiar fraud has on banks is that, undoubtedly, it also exposes other security weaknesses the bank might have. According to Forbes, “The problem is that many organizations still have a very remedial means of verifying identity. They look at name, address, date of birth, Social Security number and try to verify they belong to one person and that the person is real, and then they move it further on in their process. That is the extent of their identity verification.” Depending on the size, the number of employees, and history of data security incidents, some organizations may not be prepared to even recognize when a potential familiar fraud incident is occurring. This case study of a familiar fraud incident outlines what a fraud case looks like when the victim is aware of who the abuser is. So with the rise of familiar fraud, what can banks do to bolster their data security and identity theft protection efforts, not just for their customers, but also themselves?


Simply requiring correct answers to static, basic “security” questions such as date of birth, current mailing address, and work information, doesn’t properly secure consumers from those friends/family members who are looking to commit fraud against them. Nor is it secure enough for protecting them against larger identity theft schemes. GOBankingRates, a consumer-focused online publication for all things personal finance, recommends to its audience to bank with financial institutions who use a combination of encryption, digital certificates, authentication, fraud alerts, secure messaging, and fraud protection software.

Financial institutions with fraud protection software help supplement consumers’ personal efforts in detecting fraud, saving their customers hours of time and energy spent on resolving the fraud incidents. With the rise of mega-breaches (think Equifax or Target), victims are less able to protect themselves against most types of frauds without the use of those types of valuable services. What’s more, consumers look to financial institutions as a likely provider of this type of service: 50% of consumers stated they would look to purchase identity protection from banks, 43% from credit unions, 41% from a credit bureau, and 40% from a credit card company. Providing credit monitoring and identity theft protection to your customers places the bank in the position of being a trusted resource, as well as a proactive one.

Check out GGA’s Identity Theft Protection services for more information, and ask us how we can help protect you and your customers from familiar fraud, as well as other types of identity theft.

Published by bjohnson August 27, 2019