How Truework Helps Prevent Fraud in Income and Employment Verification

Fluctuating macroeconomic conditions force businesses across every industry to reassess their operating model and cut costs where possible. Tightening the belt can help a company increase the resiliency needed to weather a challenging economic cycle, but this internal exercise fails to address the one external threat that is costing financial institutions billions of dollars every year: fraud.

Financial fraud, especially as it relates to the mortgage industry, is on the rise. In 2022, the risk of income fraud rose an astonishing 27.3% according to HousingWire. Not only is the frequency of fraud increasing, but so are the associated costs. According to National Mortgage Professional, for every dollar lost to fraud in 2022, a mortgage lender spent $4.20 addressing it, representing a 16% increase from 2020.

From detection to prevention

Detecting fraud can help businesses limit the damage, but preventing fraud from the get-go can eliminate these costs all together. Mortgage lenders and other financial institutions are taking action by partnering with vendors that have built-in fraud prevention practices.

The importance of income and employment verification in a lending or other high-stakes decision process makes this step a prime opportunity for fraudulent activity. The rise in sophistication of digital tools combined with the fierce battle for customer acquisition through online channels has helped make income and employment fraud both easier and more prevalent than ever.

Fraudsters can now manipulate income documentation with a few easy clicks, and there are dozens of websites that offer fake paystubs for only a few bucks. Organizations that fail to outmaneuver the modern-day fraudster leave themselves exposed to costly risks that could sink their business.

How Truework prevents fraud

As a one-stop platform with multiple verification methods, Truework applies different fraud prevention measures for each method. One of the best ways to prevent income fraud is by using source-of-truth payroll data. Not only is payroll data sourced directly from the system of record, these methods also eliminate the applicant’s ability to alter the information as data is shared digitally between the payroll provider and Truework.

Both Truework Instant and Truework Credentials leverage source-of-truth payroll data to complete income and employment verifications, helping prevent costly cases of fraud.

Digitally accessible payroll data, however, is not available for every applicant. In fact, millions of Americans do not have access to a payroll system that can provide instant data, requiring verifiers to pursue alternative means to complete a manual income verification.

Increased fraud risk in manual income verification

The risk of fraud dramatically increases whenever digitally accessible payroll data cannot be used to verify income. This increased risk is driven by the need for a human to be involved in order to complete the verification. Let’s look at a recent example from a lender:

John Doe applied for a loan, providing the name of his employer and a phone number in his application. When it came time to verify John’s income and employment, his lender was unable to use digitally accessible payroll data and instead kicked off a manual verification via an internal team. The loan processor used the information provided by John in his application to quickly complete the verification. John’s loan is now funded.

A few months later, John had not made a single payment. After spending many hours and even more dollars investigating the situation, the lender realized that John provided fraudulent income information in his application. While the employer did exist, the phone number provided turned out to be that of a family member, complicit in John’s fraudulent scheme. The lender’s losses were now compounded. Not only did they lose the principal of the loan, but they also invested additional resources to investigate the fraudulent activity.

Manual verification fraud doesn’t stop at a phony phone number, however. Fraudsters also create fake websites and bogus email domains with inexpensive tools to try and better hide their schemes. Lenders and other financial institutions often lack the sophistication or resources to detect such schemes.

Preventing manual income verification fraud with Truework

Truework Smart Outreach, our automated verification method for all non-instant requests, allows lenders and other verifiers to increase their fraud prevention defense by deploying robust validation steps before any phone calls are made or emails are sent to employers. These steps include:

-Never using applicant-provided information during the verification process. To prevent coordinated fraud efforts involving multiple parties, Truework avoids using information shared by the applicant to complete a request.

-Sourcing and validating all business contact information (phone number, email domain, etc.) through neutral third-party sources. By verifying information using independent business reference tools, Truework ensures that the information provided is accurate and reliable before contacting the employer.

-Never relying on a family member to complete a verification. To prevent conflicts of interest, Truework will always require a non-family member to complete an income verification, even if all other employer information has been validated via independent sources.

Each month, our Smart Outreach team is able to stop fraud in its tracks through robust diligence on every manual verification of income. Recently, we received a request with a legitimate employer, but the phone number provided by the applicant did not match the corporate number found through independent sources. Instead of using the provided phone number, our team called the employer using independently verified contact information and discovered that the employer was unable to verify the applicant’s income. In fact, the employer themselves believed the request to be a scam! The request was canceled immediately and the verifier was notified promptly about potential fraud.

With half of all requests completed in less than 24 hours, Smart Outreach has developed a multi-step fraud prevention process for every verification that mitigates risk while accelerating transactions.

Summary

Moving from detection to prevention is a key step for lenders and other financial institutions to protect themselves from the rise in frequency and sophistication of income fraud.

While direct-from-payroll verification methods provide maximum fraud prevention, Truework has developed a comprehensive anti-fraud process for non-instant verifications through our Smart Outreach service.

Leveraging Truework as a one-stop platform for income and employment verification helps lenders and other verifiers maximize income fraud prevention without sacrificing on speed or business outcomes.