Identifying Fake Documents
Fake documents — the Achilles' heel of financial institutions — are rising.
Digital transformation made many application processes easier and faster. That’s great for applicants and underwriters, but also for criminals who are looking to defraud banks and creditors.
Identifying fake documentation can be a challenge as digital applications pile up and create endless backlogs. Not only does this bog down productivity, it also makes detecting fraudulent documents more difficult.
According to a report from TrustID, fake IDs grew by 6% in 2020. See the chart below for a breakdown of the types of identification being falsified.
All of these potentially fake identity documents just adds another headache to the ever-increasing workloads surrounding underwriting and account opening.
Thankfully, there's a way to overcome this challenge with the help of artificial intelligence. But more on that later. Let's first explore fake documentation and how to detect it.
What is the difference between forged and fake documents?
A fake document is an identity document that wasn't officially produced or recognized. Fake documents can come in different forms, depending on the use case. For example, a fraudster may illegally produce an entirely fake driver's license or Social Security card to use during a loan application process.
Sometimes, it's easy to spot pseudo documents (completely fake documents with made-up names and details) when they're missing seals, numbers, or other identifiers. Other times, it's not so simple, especially if the fraudster is skilled.
Forged documents, on the other hand, are authentic but have alterations. For instance, someone alters a photo or changes the name or birthdate printed on an ID. They can even make an entire document look like a different government agency issued it.
The most common types of forged documents include:
- Fraudulent passports
- False driver's licenses
- Forged account numbers and signatures on a check
- Forged signatures on contracts and invoices
- False birth certificates
If there's a document identifying a person, then odds are that fraudsters will use it to create fake or forged documents.
What are the 3 types of forgery?
There are three types of forgery: freehand simulation, tracing, and electronic manipulation. Here's an overview of each:
- Freehand simulation: When a fraudster attempts to copy a signature, handwriting, or design using copies of the original documents.
- Tracing: Reproducing handwritten text, signatures, and designs using transmitted light or carbon tracing, where the fraudster places a blank sheet over the original and traces text and design elements.
- Electronic manipulation: Using photo editors to copy signatures or information and paste it into a fraudulent document.
How can you tell if a document is real or fake?
There are several ways to determine whether a document is genuine or fraudulent. The first step is to understand the purpose of the document. Is it being used as proof of identity? If so, you should absolutely verify the document’s validity before accepting.
In the finance industry, commonly faked identity documents include bank statements, paychecks, IDs, Social Security cards, and insurance policies. The typical documents required to apply for loans, credit cards, mortgages, car loans, and insurance.
Finding alterations in these documents is crucial to determining their authenticity. A forged document used to be possible to detect with the naked eye using high-powered magnification. Not so much today, thanks to technological advancements.
However, manually detecting pseudo documents is still possible if it's done by amateurs. Things you can look for include:
- Missing or altered numbers
- Errors in the data (e.g., misspelled names)
- Altered text or images
- Unusual formatting
- Mismatched logos and addresses
You can also compare documents to official databases to find inconsistencies, including possible cases of false documentation. For instance, if a lot of your customers use Wells Fargo, Capital One, and other known banks, you can verify the authenticity by looking at their statements.
Unfortunately, this isn't always enough to detect a counterfeit document. Photo editing tools allow criminals to manipulate photos and graphics quickly, making it challenging to catch cases of false documentation solely through visual inspection. So if you're relying solely on visual inspection, it'll be challenging to catch.
Fortunately, tools are available to assist you. Inscribe is an AI-powered fraud detection and automation platform that identifies inconsistencies in data, fonts, and format, as well as alterations like text boxes placed over documents.
Why do people use false documents?
People use fake documents for many reasons. Someone who wants to buy a home, but works under the table, won’t have tax returns or pay stubs to prove their income level. So they may create pseudo documents to trick a loan officer into granting them a loan.
Outside of the financial industry, you'll find folks using fake passports or other forms of fake paperwork to gain entry into different countries.
And most recently, you'll see people showing fake vaccination cards to gain access into their jobs or sports arenas.
Some knowingly risk their freedom and financial well-being to commit loan and credit card fraud. It's a federal crime that can land them behind bars and/or with a hefty fine. This is true for both the creator of the pseudo document and those using it.
How does someone get fake documents?
There are several ways criminals get their hands on false documents. Some create and modify documents themselves, while others purchase them from hackers or the dark web.
Data breaches are a gold mine for scammers looking to steal identities and create fake or pseudo documents, such as fake business documents. It's also possible for criminals to skim the web and piece together information about individuals using social media and websites.
Hackers like to take advantage of unsecured internet connections or swipe wallets and purses from unsuspecting patrons in shopping centers. Some may even steal from those closest to them in order to create fake documentation.
How does someone falsify documents?
Some documents are easier to falsify than others. All one needs to alter a bank statement or paystub is the original financial document and the right software to duplicate and manipulate it.
Scammers will try to design fake documents using the same layout, formatting, colors, and fonts that would appear on the authenticate version. This is possible using an original version and turning it into a modified document or duplicating it into a fake document that was designed to look like an original with software.
Here's an overview of several ways fraudsters falsify documents.
Creating a new document
If a fraudster can't get their hands on an original document (or if it's difficult to alter), then they'll create a pseudo-document. In most cases, the new version will contain fake information, such as a fabricated company or authority that "issued" the document.
This is a common scenario if there are samples of documents publicly available online. For example, a fraudster completing a loan application may use falsified pay stubs as proof of income.
Modifying the original document
If a criminal can steal a check, driver's license, or other original document, then they can modify it to look as if it belongs to them. This is done either manually or digitally using software.
Often, modifying an original document includes changing company names, logos, beneficiary or account holder details, and adding text or numbers. For instance, using an actual bank statement or utility bill, but altering the name and address.
Criminals may also attempt to steal legitimate blank document templates, and print falsified information on them. This is more challenging to detect since the proper seals and other identifiers are present.
Since most loan and credit applications are digital today, it's easier for fraudsters to submit real documentation that doesn't belong to them. For example, submitting an application using a stolen identity.
This is possible if they have access to physical or digital versions of other people’s IDs, Social Security cards, passports, bank statements, and so on.
These methods are popular among scammers because it's easy to pull off behind the veil of a computers and the internet. All criminals need is adequate software knowledge and design skills to create forged, manipulated, or counterfeit documents.
AI solution to ease fake document challenges
So how do pseudo documents impact financial institutions in the real world? A report from Javelin shows US businesses saw an astounding $17 billion in losses because of identity fraud in 2019.
Fake identities and documents are damaging businesses in the financial sector—something Crédito Real knows all too well. Unfortunately, using manual methods prevents companies from resolving the growing issue.
At Crédito Real, verifying documents created fiction and inefficiencies. Analysts manually reviewed each document, ensuring consistency and accuracy of IDs, income, tax declarations, addresses, and more.
This can take 30 minutes or more per application, eating up hundreds of hours weekly. Then even the best document expert can overlook credible-looking documents. In these instances, fraud goes undetected until further down the line, costing the business more because of legal fees and recouping goods from fraudsters.
After adopting Inscribe, Credito Real made document reviews 10x faster and saved $100k each month by detecting fraud earlier. Best of all, what normally required hundreds of hours a week now took seconds to perform. This was possible using Inscribe's automated easy-to-use technology.
Make fake document protection faster and easier with AI
Fast document processing is critical in the fast-paced world of finance. Your customers expect quick approvals, and you want to keep them happy (without sacrificing security). So being able to identify acceptable documents on the fly is critical.
Using AI reduces friction in the application process and safeguards your company from fraud risk. Your forensic document examiners and underwriters will thank you.