When it comes to financial fraud, the numbers are staggering. For example, one in every 109 mortgage applications has signs of fraudulent information. In just the last year, there were 115,000 instances of auto loan fraud alone. No matter the industry, if finances are involved, fraud is usually lurking nearby. The occasional fraudulent transaction is viewed by many businesses as the price of doing business in a digital world. To be sure, several of the fraudulent transactions that businesses face may seem unrelated on first look, but originate from common sources: credit fraud rings.

Credit fraud rings will put in the effort to research the marketplace to find companies that have fraud prevention vulnerabilities. They are also disciplined in sharing data and best practices to hit your firm again and again, while covering their tracks about the true source of these fraud attempts. 

Although many credit fraud rings use cut-and-dried tactics for sharing and exploiting stolen information to perpetrate fraud, others use big, flamboyant scams that seem too strange even for fiction. The following seven fraud rings fall into the latter category and, while not typical, they are worth studying to help you identify and mitigate less colorful types of fraud.

1. New Jersey-based international fraud ring

In 2013, the FBI charged 18 individuals for their roles in an elaborate credit fraud ring that was valued at over $200 million. The criminals created up to 7,000 fake identities and established credit, making small charges and then paying the bill to raise credit limits before eventually committing a higher level of fraudulent purchase, including wiring money to India, Pakistan, Romania and several other countries.

2. Insider threat and the dark web

From 2018 to 2019, a group of criminals ran a loan scam involving opening fraudulent loans using the identities of unsuspecting Americans. A Capital One employee supposedly sold identities for $500 per person. Also, the criminals gathered information from newsletters and websites and searched the dark web looking to triangulate this information with data dumps similar to Home Depot, Target and the Experian breaches.

3. B2B automotive dealer fraud

Ford Motor Company was the victim of fake flooring or double flooring. This is a process where a dealer gets financing from the manufacturer for a car or truck. In this situation, the criminal moved the vehicle to another dealership and got financing again. In addition, the dealer performed check-kiting, where the dealer holds on to money from a sale for longer than agreed upon, usually to benefit from interest rate changes. To date, at least 14 employees have pleaded guilty to fraud charges in what Ford calls one of the biggest credit fraud rings ever.

4. Student loan fraud at theology school 

In October 2020, six former employees of the Apex School of Theology were indicted after filing for student loans with the information of unwitting accomplices. The administrators convinced non-students to provide personally identifiable information (PII), which they then used to enroll at the school and apply for federal student aid. The employees would log in and do just enough school work to keep the individuals enrolled and receiving aid. The six former employees are accused of stealing $12 million in federal student aid.

5. Reverse mortgage/mortgage discharge crime ring

In 2016, the federal government charged five New York residents with running credit fraud rings that defrauded homeowners and the government out of $33 million. Working as The Pillow Foundation or The Terra Foundation, the people claimed to have mortgages discharged for a monthly fee. In addition, these people convinced unsuspecting homeowners to fill out second mortgages and reverse mortgages while keeping the money.

6. COVID-19 unemployment fraud

A Nigerian crime ring using a large database of stolen PII was broken up after being discovered filing for fraudulent unemployment benefits related to COVID-19. This scheme was doubly effective with the rush for states to provide extra benefits. As a result, many false applications were accepted, paying out millions of dollars. One company in Oklahoma had hundreds of unemployment claims filed against it despite having only seven employees. At its busiest point, the crime ring employed dozens of “mules” to launder the money prior to wiring it back to Nigeria.

7. HELOC fraud

In 2019, four New York area men were indicted in a $9 million fraudulent home equity line of credit (HELOC) scam. The people carried out a scheme using a combination of stolen identities and applications at several banks to get these loans. Using insider knowledge as real estate professionals, these individuals got HELOCs on vacant properties as well as occupied dwellings without the consent of the owner. For instance, in exchange for managing one property in particular, one of the individuals was allowed to live there rent-free. He later forged the owner’s signature on a deed and made a fraudulent sale.

Lessening the risk of credit fraud rings

As you can see, the diversity and scope of fraud rings are a challenge that is far too great to fight alone. Criminals are developing newer and trickier methods to defraud your business.

Fraud.net can help:

  • Our enterprise fraud prevention solution is powered by machine learning. It’s able to scan billions of data points to locate and identify a single datapoint that may unite the transactions of a criminal or online fraud ring.
  • Our collective intelligence network provides anonymous data that will unify your data along with other partners and merchants to reduce fraud and unlock your growth potential.
  • Our entity analysis can discover how stolen information is distributed across various entities (like credit fraud rings) and stop them from committing fraud.

To learn more about Fraud.net’s advanced fraud solutions, see our entity analysis in action or schedule a demo of our enterprise fraud detection solution.