Fake ID Fraud

What You Need to Know About the Growing Threat of Fake ID Fraud

Digital identity verification processes have become standard when it comes to concluding contracts, granting access, or executing payments. Know Your Customer and Know Your Business processes that comply with strict regulatory and legal requirements help ensure that remote activities can be carried out securely and efficiently. However, digital KYC and KYB processes have also become a target for fake ID fraud, a new form of identity fraud that is clearly on the rise.

What is Fake ID Fraud?

Fake ID fraud refers to the creation, alteration, and misuse of forged or manipulated official documents such as ID cards, passports, or driving licenses, primarily within digital onboarding, verification, and reevaluation processes.
In digital onboarding in particular, the manipulation of data, images, and or videos is increasingly shifting toward scalable fake ID fraud. In these cases, perpetrators combine synthetic identities with deep-fake video or selfie streams to deceive identification systems such as liveness checks and biometric verification methods.
So called “fraud-as-a-service” tools such as FraudGPT or OnlyFake have also emerged. They enable the generation of deceptively realistic IDs, bank statements, or selfies at the push of a button. This allows even individuals with limited technical expertise to carry out highly professional looking attacks.

The Financial Sector is Particularly Affected by Fake ID Fraud

The financial sector, including banks, lenders, payment solution providers, fintech’s, and crypto markets, is at the top of the list of industries affected by fake ID fraud, as direct financial gain is possible here. In addition, despite fully compliant legal and regulatory implementations, there is still a risk that fake identities are used for money laundering, credit fraud, terrorist financing, and other forms of financial crime.

Other Industries Exposed to the Risk of Fake ID Fraud

• Insurance companies regularly rank among the top five sectors affected by fake identity fraud, as insurance policies can quickly become an entry point for benefit fraud and money laundering.
• Telecommunications providers are also heavily affected by fake ID attacks, particularly during contract signings and the issuance of SIM cards using fake identities.
• Operators of C2C platforms such as dating apps, digital marketplaces, social media services, and online media are subject to less stringent requirements when implementing secure KYC processes. As a result, fake identities are frequently used here for social engineering, romance scams, and bot networks.
• E-commerce providers also suffer significantly from the consequences of fake ID fraud, which often occurs during account creation based on purchased data sets from the darknet.
• In the e-gaming sector, fraud involving fake identities is also widespread, whether to bypass bans or to fraudulently obtain valuable in game assets or winnings.

Typical fake ID Fraud Patterns

As mentioned at the outset, fake ID fraud represents a rapidly growing threat. It is therefore all the more important to be familiar with the different fake ID threat patterns.

AI-generated Fake Identity Documents

Criminals use generative AI to create passports and ID cards with realistic looking portrait photos, holograms, fonts, and light reflections that can pass simple photo or PDF checks. Common indicators of such fake ID fraud include slightly blurred micro text, unnaturally uniform lighting, or a lack of aging signs compared to the claimed issuance date. These indicators can often only be detected by extensively trained agents and/or highly advanced AI based verification systems.

Manipulated Genuine Documents

In addition to completely fake identities, there are more traditional forgeries in which genuine documents are altered by changing the photo or personal data such as name or date of birth, or by manipulating stamps or visas. The aim here is to retain the original serial numbers and layouts of the documents in order to deceive database and plausibility checks, while the underlying identity is effectively replaced.

Digital Document Forgery

Original digital documents such as passport scans, PDF IDs, or digital certificates are increasingly being altered directly. According to a recent identity fraud report, well over half of all document forgeries detected now involve modified digital originals.

Deepfakes and Video Spoofing

Deepfake selfies and videos imitate faces, facial expressions, and voices in order to deceive automated identity verification procedures and or liveness detection checks. Criminals use face swap apps or voice cloning to present seemingly real movements, which are in fact recorded or synthetic content.

Synthetic Identities as Fake IDs

When synthetic identities are used in a fake ID fraud attack, they consist of a combination of real data points such as ID numbers or tax IDs obtained from data leaks, combined with fictitious attributes to create an entirely new but realistic looking person. These identities are often built up over a longer period of time and later used to open credit lines, utilize bank accounts for money laundering purposes, or deliberately default on payments.

Bot-supported Mass Registrations

As outlined earlier, criminals increasingly use automated methods to carry out large scale fake ID fraud attacks. Bots are used to generate numerous applications with varying identity data and slightly modified data sets in order to test the functionality of scoring and rule-based fraud detection systems. Once a specific combination of document type, country of origin, and device type is successfully validated, this pattern is scaled to submit a large number of applications, for example for small loans, within a very short period of time.

ID Fraud as a Service

Organized criminal groups now order fake IDs, deepfakes, or even complete KYC kits as service packages via the darknet. Equipped with such a service package, multiple participants act in a coordinated manner using manipulated identities, for example to set up a network of accounts for money laundering or payment fraud.

How Companies can Minimize the Risk of Fake ID Fraud

Companies subject to the German Money Laundering Act, such as credit institutions, can protect themselves against fake ID fraud by implementing a risk-based combination of advanced document and biometric verification, real time monitoring, and AI driven behavioral analysis. These measures help reduce risks during onboarding, reevaluations, and compliance with anti-money laundering regulations, as well as payment fraud, while simultaneously meeting regulatory requirements such as BaFin supervisory guidelines.

A key measure in minimizing the risk of fake ID fraud attacks is to rely exclusively on qualified and proven identification solutions that meet KYC and KYB compliant requirements, such as those offered by WebID since 2012.

When it comes to assessing the actual risk of fake ID fraud, WebID supports companies internationally through the use of ID Fraud Protect. This is a comprehensive AI based analysis designed to provide maximum protection against identity fraud and can incorporate penetration testing and red teaming instruments.