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Red flags: Detecting & preventing fraud at the point of address capture

Yet, the recent small business administration loan scam has shown this is not always the case.

Caused by a vulnerability - or complete lack thereof - in the loan’s eligibility checker, thousands of US citizens managed to profit off a government aid program designed for struggling small-business owners. This oversight resulted in the government essentially giving $10,000 to anyone who asked.

With Bloomberg condemning that ‘some innocent people have been taken advantage of because someone didn’t do due diligence on the front side’, the question emerges: how can we prevent fraudulent individuals from writing the playbook for innocent people? 

av and geocode white paper

Small business administration loan scam 

In 2020, a $20bn US government aid program meant to provide relief to authenticated small businesses was manipulated to reward anyone who asked. All individuals had to do was claim they owned a business consisting of at least 10 employees, and their monetary grant arrived within a few days of application.

The success of this seemingly watertight scheme came as a shock to all, many wondering how inexperienced fraudsters could so easily ravage this government-sanctioned program. Bloomberg reported how ‘low-level employees at the [government] agency watched helplessly as misspent money flew out the door,’ saying: “I’ve never seen anything like it … I don’t think they had any processes in place. They just sent the money out.” 

Herein lies the issue: when large-scale programs are in place - especially those rife to be exploited for monetary gain - appropriate technology needs to be harnessed to perform the essential identity checks that ensure payments and loans are distributed legitimately.

With a report from the agency’s inspector general confirming that tens of billions of dollars in potentially fraudulent transactions took place - including multiple loans sent to applicants using the same bank account details or address - you cannot help but wonder: why were identity verification measures not put into place, and could their use have prevented billions of dollars of fraudulent activity?

The importance of accurate identification

Business owners from all sectors know the importance of maintaining accurate customer records - and yet, 41% of businesses still admit that poor address data causes their business problems. What’s more, a third of eCommerce businesses admit they do not check addresses before mailing, leaving it to the shipper to mitigate.

 In the case of the small business loan scam, this goes deeper than ensuring someone’s package arrives at the correct address. In some instances, it was reported that citizens from overseas were taking advantage of the scheme, despite not being based in the US - and what’s worse, multiple grants were being awarded to individuals at the exact same address.

The approval process for granting funds should have included due diligence on the applicant, including documentation collection, identity verification (IDV), and address verification (AV).

Conducting an AV check at onboarding can be a viable method of preventing fraud at the first red flag. For instance, a customer address record may seem valid at the time of input, but upon further action, one may find that the address is associated with multiple email addresses or phone numbers. This will then alert the organization to the possibility of fraudulent activity before any deception can take place.

Additionally, the use of geocodes could enhance the level of accuracy and insight per address record by allowing organizations to check where cards have been used recently and match it to the applicant’s information and address.

Verifying with location data could have prevented a great deal of exploitation, and when used in conjunction with accurate ID verification, identifying locations associated with fraud is not only a useful tool but an essential one.

Accurate location data leads the way

Verification is the key to stopping fraud in its tracks. If rogue data never gets into the system, fraudsters are severely limited in their capabilities. When customer address is validated as part of onboarding, we can reduce fraud at checkout stages, when used alongside identity theft checks.

Combining leading technology with the richest global data, Loqate’s Address Verification technology gives organizations across the globe the precision and reliability they need to deliver winning customer experiences to their customers.

Address verification and geo use cases

With an easy-to-integrate product portfolio – including address verification, email and phone validation–we’ve helped over 19,000 businesses boost sales, maximize operational efficiency, and grow their customer base.

Our global API is available in 130 different address formats, 3,000+ languages, and all countries and territories, making Loqate your key partner in tackling address capture and verification issues worldwide.

Speak to a member of our team today to learn how Loqate’s Partner Program can help your Fintech business improve conversion rates, mitigate fraud, and improve the quality of your customer databases.

Justin Duling |

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