As fraudsters gain access to more advanced technology, including artificial intelligence (AI), income fraud has evolved from simple document manipulation into a complex, multi-layered ecosystem. And it’s working for them. In fact, 60% of property managers reported experiencing fraud, with a whopping 84% citing altered documents as the biggest challenge.
“We’ve seen fraud evolve so much over the years,” says James Stilwell, director of fraud operations at Snappt, a leading fraud detection service. “And we see these advanced types of fraud in areas that are not traditionally high fraud cities. It’s not just downtown L.A. or Atlanta.”
Generative AI tools are powering many of these advanced fraud tactics. For example, bad actors can use AI to manipulate income documents without leaving obvious traces. “It gives fraudsters an extremely powerful toolbox to more quickly iterate and commit fraud,” Stilwell indicates.
Here are five developments shaping modern fraud tactics and why leasing agents need a fraud forensics team to fight back.
1. Manipulated documents
Before AI gained widespread adoption and the fraud marketplace became commonplace, bad actors manipulated documents like pay stubs and bank statements using editing programs (e.g., Photoshop).
“That was more or less the extent of fraud. Fraudsters were either buying a cheap fake document or photoshopping a document that they already had to suit their needs,” explains Stilwell. While this tactic is still popular among fraudsters, more sophisticated methods and tools are increasingly becoming more common.
2. Synthetic identity creation
As fraud detection software made it increasingly difficult for fraudsters, they turned to more creative ways to trick property managers. They started creating synthetic identities — new identities comprised of real and fake information.
“Synthetic fraud is the fastest-growing type of identity fraud, accounting for an estimated 85% of all identity fraud in the country,” according to the National Apartment Association. Bad actors may use fake verification portals and throwaway emails to do it, but they’re also stealing legitimate identities and submitting clean documentation to leasing agents. With the latter approach, the leasing agents don’t realize that the documents don’t actually belong to the person submitting them.
3. Third-party fraud services
Like any other service, you can hire someone to help you carry out fraud. Known as fraud-as-a-service (FaaS), these online marketplaces make it easier than ever to commit fraud and scam property managers.
No technical skills? No problem. Fraudsters can go to these online marketplaces or social media, hire someone, and get falsified documents, tools, how-to guides, and other services in a matter of days.
4. Inception fraud
Fraud is constantly changing, with fraudsters regularly finding and using new techniques or technology to help them con property managers and leasing agents. One of the latest, most dangerous schemes is inception fraud — the practice of using a real pay stub from a real company by an applicant who doesn’t actually work there or receive paychecks from the business. Both the pay stub and the company are legitimate, so traditional screening processes fail to flag the application as fraudulent. This makes inception fraud one of the toughest modern fraud tactics to catch and, therefore, fight.
“It takes time and effort to hunt out inception fraud,” Stillwell notes. “You need to look at the employer on the document, verify that it’s legitimate, and all these other steps to keep fraud out.”
5. Timing and application strategies
Not all advancements in application fraud require high-tech tools or services. Many savvy fraudsters are going old school — keeping it simple by applying for a lease on the weekend or a holiday to try to slip through the system. They’re also flooding a property with lease applications to overwhelm the property management team in hopes of getting approved because the leasing agents do not have the bandwidth to review all of the applications or documents thoroughly.
Safeguard your properties with a fraud forensics team
These evolving strategies pose serious challenges for property managers, calling for more advanced detection tools. However, tools can only go so far when it comes to thwarting these more complex schemes. “That’s why it’s more important than ever that your fraud detection partner invests in a fraud forensics team,” Stilwell stresses.
The best fraud forensics teams carefully examine the fraud marketplace, identifying trends and investigating the latest schemes. These teams infiltrate fraud rings, purchase documents from them, and study generative AI to understand fraud and how to protect property managers against it.
“Make sure you're not just using fraud detection, but you're using one that is comprehensive and has a fraud forensics team that’s looking at all of these things,” Stilwell says. “At Snappt, we go out and look at the dark side of the fraud world, so leasing agents don’t have to.”
That kind of advanced protection is becoming more and more vital as fraud continues to evolve.
“It’s an arms race at this point,” Stilwell indicates. “And you need to have a fraud forensics team that's keeping pace with it — detection that's constantly evolving. As we say, ‘fraud moves fast, but Snappt moves faster.’”
For more insights on fraud trends and safeguarding your properties with a fraud forensics team, check out Snappt’s guide, Outsmarting Applicant Fraud.
