How do fraudsters open bank accounts?

May 17, 2023
How do fraudsters open bank accounts?

FRAUD ACCOUNTS ALERT!! Do you know how fraudsters open them???

Bank account fraud is a growing problem that affects both financial institutions and their customers – the account holders. In leveraging the advantages of new technology, fraudsters are constantly finding new ways to open bank accounts using stolen identities and illegally obtained funds, causing significant financial losses, reputational damage, and regulatory scrutiny to banks and businesses.

To prevent these types of fraudulent activities, it is urgent that banks implement effective strategies and technologies to detect and prevent fraud before it occurs.

In this article, we will discuss some of the key strategies and tools that banks can use to protect themselves and their customers against bank account fraud.

Understanding fraudsters' motives

Fraudsters see banks as great targets because they are a rich source of sensitive financial information that can be used to steal money, commit identity theft, and engage in other criminal activities. There are the several types of fraudsters, each with different objectives at work:

  • Traditional fraudsters: typically use stolen or fake identities to open accounts in order to receive illicit funds, launder money, or commit other financial crimes.
  • Synthetic identity fraudsters: create new identities by combining real and fake information, making it difficult for institutions to detect their true identities.
  • Account takeover fraudsters: steal existing bank accounts by impersonating legitimate account holders and redirect funds to their own accounts.

To achieve their goals, fraudsters use a range of tactics, such as:

  • Social engineering: involves tricking bank employees into providing confidential information or approving fraudulent transactions without interacting with the legitimate account holder.
  • Phishing: involves the use of fake websites, emails, or other communications to trick customers into disclosing their login credentials or other sensitive information, believing that it is legitimately sourced.
  • Malware: involves infecting customers’ computers or mobile devices with malicious softwares that can capture login credentials or other sensitive information.

The account opening process

The process typically involves several steps, such as identity verification, credit checks, and risk assessment. However, there are several weaknesses in the process where fraudsters take advantage to exploit, such as:

  • Weak identity verification: many banks rely solely on static information such as name, address, and date of birth to verify a customer’s identity, which can be easily obtained by fraudsters.
  • Poor data quality: reliance on third-party data providers for customer information, which may contain errors or outdated information that can be further used by fraudsters.
  • Lack of cross-checks: failing to cross-check the information provided by a customer against other sources to verify its accuracy, which can allow fraudsters to create synthetic identities or use stolen identities.

To impersonate legitimate customers, fraudsters use various tactics such as:

  • Using fake or forged identity documents to open accounts.
  • Hacking into legitimate customers’ email accounts or social media profiles to obtain personal information that can be used to open new accounts.
  • Impersonating legitimate customers by using their login credentials or other personal information.

Common red flags and indicators of fraud

There are several signs that a new account application may be fraudulent, they are:

  • Unusual or suspicious activity: attempts to open multiple accounts in a short period of time, or using a large number of credit cards or bank accounts to fund the new account.
  • Inconsistent information: discrepancies in the information provided by the customer, or information that does not match other sources.
  • Unusual behavior: customers who are reluctant to provide additional information or who exhibit suspicious behaviors during the account opening process.

Fraudsters attempt to hide their true identity by using tactics such as:

  • Using false or incomplete information to open accounts.
  • Using virtual private networks (VPNs) or other tools to mask their location and IP address when opening accounts.
  • Using stolen or fake identities to bypass identity verification checks when opening accounts.

These red flags and indicators of fraud are important for banks to take into consideration when opening new accounts for clients to prevent fraudulent activities.

Preventing bank account fraud

As previously stated, it is crucial that banks become the pioneer in preventing fraudulent activities to protect their own operations and their clients. Below are the ways in which banks can prevent bank account fraud.

Strategies for banks to protect themselves against fraudsters

There are several strategies that banks can use to protect themselves against fraudsters, such as:

  • Enhancing customer education: banks can take the initiative to raise the awareness among customers about the risks of fraud and how to protect themselves. A great example is to use strong passwords and be cautious of phishing emails or phone calls.
  • Conducting regular risk assessments: regular assessments should be conducted to learn banks’ fraud risk. This in turn, will allow them to identify vulnerabilities and implement appropriate controls.
  • Strengthening internal controls: internal controls can be implemented, such as segregation of duties, dual approvals, and transaction limits to prevent fraudulent activities when it comes to monetary transactions.

The importance of proactive fraud prevention measures

Proactive fraud prevention measures are critical for banks to prevent damages in finance, reputation, and regulation. By proactively detecting and preventing fraud, banks can protect their customers’ assets and maintain their trust over time, as well as reduce their own operational costs and compliance risks.

Technologies and tools that can help banks detect and prevent fraud

In this day and age, there are plenty of technologies and tools to help banks detect and prevent fraud, some examples are listed below.

  • Machine learning and artificial intelligence: they can analyze large volumes of data to detect patterns and anomalies that may indicate fraudulent activities. Advanced models can also be built around these technologies to enhance fraud prevention capabilities over time.
  • Biometric authentication: this uses unique physical characteristics such as fingerprints, facial recognition, or voice recognition to verify customer identities and prevent identity theft. Under the encouragement of EMVCo and FIDO Alliance, password-less, biometric-based authentication is gradually becoming the resolution to online fraud.
  • Fraud detection software: this can analyze and monitor customer behaviors and transactions in real-time to detect suspicious activities and alert bank staff to potential fraud. Advanced options can also provide banks with recommendations to deal with fraud attacks.
  • Data analytics and visualization tools: these can help banks effectively identify patterns and trends in customer behavior, transaction data, and other sources of information to detect and prevent fraud.

By taking advantage of these smart technologies and tools, banks can improve their fraud prevention capabilities and protect themselves against the growing threat of bank account fraud.


Bank account fraud is a serious threat to both financial institutions and their customers. Fraudsters are constantly evolving their tactics to evade detection and steal money from unsuspecting victims. However, by researching and implementing effective strategies and utilizing the latest technologies, banks can significantly reduce their risk of falling victim to bank account fraud.

Some of the most important strategies that HiTRUST suggests include enhancing customer education, conducting regular risk assessments, and strengthening internal controls. In addition, smart technologies can definitely give banks a hand in detecting and preventing fraud before it causes significant harm.