# New Account Fraud: Definition, Types and Prevention Measures

Banking, eCommerce, and gaming companies with less stringent identity verification processes usually fall prey to the damages caused by new account fraud.

**Author**  
Rahi Bhattacharjee

## TABLE OF CONTENTS  
1. [What is new account fraud?](https://bureau.id/resources/blog/new-account-fraud-definition-types-and-prevention-measures#header-1)  
2. [Types of new account fraud in different industries](https://bureau.id/resources/blog/new-account-fraud-definition-types-and-prevention-measures#header-2)  
3. [How does new account fraud work?](https://bureau.id/resources/blog/new-account-fraud-definition-types-and-prevention-measures#header-3)  
4. [Challenges of New Account Fraud Prevention](https://bureau.id/resources/blog/new-account-fraud-definition-types-and-prevention-measures#header-5)  
5. [How does Bureau provide AI-powered fraud detection software to prevent account opening fraud?](https://bureau.id/resources/blog/new-account-fraud-definition-types-and-prevention-measures#header-6)

The impact of new account fraud on businesses is profound and multifaceted. Financial institutions, e-commerce platforms, and gaming companies face significant monetary losses, often running into millions of dollars annually.

## What is new account fraud?

Every business needs one thing to survive - customers. But what happens when the customer itself causes the business damage? New account fraud is a type of criminal activity that involves opening new accounts with malicious intentions to profit illegally.

Additionally, new account fraud leads to damaged reputations, loss of customer trust, and increased operational costs due to fraud investigations and enhanced security measures.

## Types of new account fraud in different industries

New account fraud opening is a criminal tactic used to create accounts for the sole purpose of conducting criminal activity. This shows up in different industries in different ways.

**In the banking industry:**

1. **Mule accounts:** New accounts are created to [launder money](https://www.bureau.id/blog/the-stages-of-money-laundering) and mask its criminal origins. Witting mules may open multiple bank accounts to transfer these funds for a small commission. Unwitting mules may unknowingly hand over their personal information or have their data stolen to create accounts under their name.

2. **Credit fraud:** In this case, fraudsters create a blend of real and fake personal data to build a [synthetic identity.](https://www.bureau.id/blog/the-anatomy-of-a-synthetic-identity) These identities are then used to create new bank accounts for credit services.

**In the eCommerce industry:**

1. **Promo abuse:** eCommerce apps often have multiple promotional offers that offer new customers certain benefits if they sign up for their platform.

2. **Shipping fraud:** Fraudsters use stolen data to create accounts used to place orders for high-value goods.

**In the gaming industry:**

1. **Bonus abuse:** Bonuses are often available to new customers in real money games.

2. **Bot attack:** Fraudsters will use bots and emulators to flood online games with fake accounts during tournaments.

## How does new account fraud work?

Banking, eCommerce, and gaming companies with less stringent identity verification processes usually fall prey to the damages caused by new account fraud. These fraudulent accounts can cause direct damages to businesses or lay the foundation for more elaborate fraud that happens later.

At Bureau, we don't like leaving things to chance. We assess factors like the user's digital footprint, device integrity, and behavioral patterns when interacting with their device. **This holistic risk-based approach allows Bureau to make ‘decisions’ about an identity’s potential to commit fraud.**

#### The typical steps that a fraudster follows:

- **Step 1:** The fraudster obtains personal information through phishing, [social engineering](https://www.bureau.id/blog/social-engineering-tactics-exploring-the-human-angle-in-fraud), data breaches, and buying data on encrypted communication platforms or the darknet.
- **Step 2:** This information can also create synthetic identities at scale.
- **Step 3:** The fraudster gains access to multiple SIM cards or a SIM box.
- **Step 4:** Once they can seamlessly receive the OTP generated during the account creation process, they create multiple fraudulent accounts to abuse its services.

## Challenges of New Account Fraud Prevention

1. **Dormant accounts:** Many new accounts fraudsters create stay dormant until the need to use them as mules arrives.
2. **Expensive and complicated identity verification:** The leading reason why online services suffer is that their initial defenses fall short.
3. **Friction vs. verification:** Organizations are moving towards a more streamlined customer onboarding process, which results in loopholes that criminals can exploit for illicit gains.

## How does Bureau provide AI-powered fraud detection software to prevent account opening fraud?

### 1. Money Mule Score

The Money Mule Score is a risk assessment tool that evaluates the likelihood that a new account applicant could be a money mule.

### 2. Device Intelligence

[**Bureau’s Device Intelligence**](https://www.bureau.id/products/bureau-device-intelligence-behaviorial-biometrics) gathers and analyzes data related to the devices used to access an online service.

### 3. Behavioral Biometrics

[Bureau’s Behavioral biometrics](https://www.bureau.id/products/bureau-device-intelligence-behaviorial-biometrics) analyzes the unique patterns of behavior exhibited by users when they interact with digital interfaces.

By integrating these tools, Bureau provides a comprehensive defense against new account fraud. Here’s how they work together:
- **Layered Security**
- **Real-time Analysis**
- **Improved Accuracy**

Schedule a free consultation with us to get a tailored fraud-prevention solution.