Third-party fraud is when a fraudster uses an individual’s or company’s information to commit fraud. Third-party fraud is more commonly known as identity theft. It is the type of fraud that impacts most individuals across the globe every year.
In 2023 alone, over 1.4 million cases of identity theft were reported to the FTC. The number is expected to double by the next year.
Third-party fraud is committed by all types of criminals – from individuals trying to use a stolen credit card or take out a loan in somebody else’s name.
While third party fraud usually involves using someone else’s personal information to commit fraud, some fraudsters also use synthetic identities.
The primary victims of third-party fraud are financial institutions, retailers, eCommerce stores, and, of course, the people whose identities have been stolen.
If you want to know how third-party fraud differs from first and second-party fraud, it helps to understand the other types:
In both first-party and second-party fraud, the legit holder of the details (or accounts) is involved in the fraud. In third-party fraud, the individual or the company whose details are being used has no idea that their information has been stolen.
Third-party fraud comes in all shapes and sizes, and fraudsters constantly work to find new and inventive ways to commit the fraud.
Some of the most common types of third-party fraud include:
Here are some of the best real-life examples of third-party fraud:
While these fraudsters got caught, a huge number of third party fraud goes undetected and unpunished. However, a vast amount of third-party fraud goes unpunished.
Businesses like banks, credit reference agencies, and card providers are the ones who report new trends in third party fraud.
In January 2023, Experian reported that third-party fraud was growing in relation to current accounts, savings, card, and loan accounts.
One particular trend is an evolution in fraudster’s methods to collect personal data they need to carry out the scams. Trends include:
Some other fraudsters look to take advantage of the popularity of crypto investments and use underground fraud as a service.
Preventing third-party fraud is becoming more and more important for both individuals and businesses.
The basics of preventing fraud, such as using complex and unique passwords, installing cybersecurity software, and being vigilant when using public WiFi networks, are important. Educating your user base on how to stay vigilant is also important.
A huge number of third-party fraud happens due to human error. People need to be trained to recognize spam emails and fake websites.
Businesses should think about investing in third-party software that helps verify the identities of businesses and consumers.