The ACCC indicated in August 2020 that identity theft was up 55% over COVID with the consumer watchdog's Scamwatch website receiving 24,000 reports of stolen personal information in 2020, compared to the 15,500 reports over the same time period the previous year. ASIC published a regulatory resource in 2019 setting out some matters to consider in preventing one off share sale fraud which LAB Group has previously reported on here. One safe measure recommended by ASIC to help prevent the occurrence of one off share sale fraud is the comparison of the geographical location of the IP address used to submit an application with the physical address of prospective applicants. A Virtual Private Network provides online privacy and anonymity by creating a private network from a public internet connection.

Virtual Private Networks and Fraud

Fraud is a significant issue that affects many financial industry organisations that are onboarding new or existing customers. Whilst not all VPNs indicate fraudulent activity, the use of Virtual Private Networks by potential fraudsters is becoming increasingly common due to their ability to mask network traffic and internet activity associated with a fraudulent application.

But what happens when a VPN is used?

A VPN, or Virtual Private Network, provides online privacy and anonymity by creating a private network from a public internet connection. This anonymity can attract bad actors as they seek to mask their IP address. In September 2019, police laid charges in relation to a $10m fraud involving retirement and share trading accounts. The article reports the court heard "Members of the alleged syndicate used VPNs to hide their identities online"

How can you protect your business?

VPN detection can be just one facet in the overall AML/CTF program applied to individual financial services organisations. LAB's Application Manager can now display if a customer has submitted an application via a Virtual Private Network (VPN). Once an online application has been approved a VPN summary table will display in application details which will detail each applicant, the IP address they were using and if that IP Address is associated with a VPN allowing your internal staff to view and assess the risks against other inconsistencies to Knowing Your Customer.

Accurately recognising a user's digital identity can be based on a variety of data parameters (i.e. VPN detection.) This can help financial services distinguish between legitimate customers and potential fraudsters, blocking high-risk activities in real time.