Multifamily Industry Fraud: New and Noteworthy in 2022

Multifamily Industry Fraud

Fraud is a very real risk in every industry today, but it is very prevalent in the multifamily industry.  Multifamily Industry Fraud is something that we must acknowledge as and address.  We can’t afford to hide from the danger of multifamily industry fraud. It is all around us!

1. What does fraud look like in 2022? 

  • 84% of apartment companies say they require residents to buy renters insurance as a risk mitigation method.
  • 97% of management companies have experienced multifamily industry fraud.
  • 95% of property management companies have trouble identifying, mitigating or preventing fraud.
  • There are 30,000 active fraud rings currently operating in the US.
  • The average cost per incident of fraud is between $5,000 and $10,000, not including the cost of damage to your brand and damage to the reputation of your property.
  • There has been a 19% increase in fraudulent driver’s licenses.
  • There were over 14 million victims of fraud in 2018.  The pandemic has likely made the number much higher today due to the increase in online transactions.
  • There were 158 million social security numbers breached in 2019 alone.

Fraudsters today look like you and me.  The old methods of identifying suspicious activity are no longer adequate, as fraudsters are everywhere.  There are even groups on Facebook and other social media to sell fraudulent packages to get approval to lease an apartment.  These groups also share which multifamily industry communities can easily move into with fraudulent information.

2. What are the types of multifamily industry fraud?

  • First-party fraud is when an individual uses a fake id or a stolen or purchased social security number to lease an apartment.
  • Synthetic Identify Fraud is the purposeful creation of new, fabricated identities.  It uses a mix of real and fictitious data to create a new credit profile.  Skilled fraudsters groom the identity for prime scores and then expand and build the identity over time.  Synthetic identity fraud has doubled since 2012.  There are more than $1 billion in outstanding balances due to identity fraud.  Since there is no third-party victim early on, there is no one to report it and stop it early.  Credit scores can be deceiving as synthetic fraudsters masquerade as a good prospects.  When the false profile is fully developed, the fraudster then “busts out” by going on a buying spree, amassing assets and debt under false pretenses.  Once the serious spending starts, the identity won’t last long, so they spend, borrow, and lease wildly for a short period of time.

3. How do we go about detecting multifamily industry fraud?

  • TransUnion* has a solution called ResidentID that can detect fraud flags during periods of peak fraudulent activity.
  • Income verification is easy to be falsified.  Websites such as paystubs.net can generate a fake pay stub for only a few dollars.  Don’t assume because a pay stub looks real, it is real. 
  • Secure all lease files for your community, as 65% of data breaches involve social security numbers.  Don’t make it easy for someone to access sensitive information and use it for fraudulent activity elsewhere.

4. What are the best ways to reduce fraud?

  • Much like on the reality TV show Survivor, you must outwit, outplay and outlast the fraudsters.  You need to stay one step ahead of them at every turn.  Use technology to fight the fraudsters’ technology. 
  • Build a proactive and robust multifamily industry fraud management strategy.  Screening is only one step and is not enough by itself to combat and detect fraud.
  • Verify identification. Checkpoint ID can help verify identification from the very beginning.  TransUnion* has solutions that can help identify fraudulent documents.
  • Enhance screening procedures through the integration of fraud technology.  The earlier you catch multifamily industry fraud, the better.
  • Use a multi-layered solution.  One tool is not enough to combat this widespread problem.  TransUnion* has technologies that are specifically designed for the multifamily industry.  These solutions can verify the devices and IP addresses from which people apply.  If the IP address is registered in a different location than the address given by the applicant, that is a red flag of fraud.  They can check the browser history for fraudulent activity.  They have authentication tools such as one-time passcodes and out-of-wallet questions to authenticate identity.  Out-of-wallet questions are things that an individual would easily know about their own life, such as what types of cars they have owned or cities they have lived in.  This could not be determined by looking at the contents of someone’s wallet.

Unfortunately, multifamily industry fraud is rising and is here to stay.  That is not to say we are helpless to combat it.  Knowledge is power.  Early detection is key to preventing or minimizing the danger of fraud.  There are solutions to help identify and prevent fraud.

Presented by:

Maitri Johnson
Maitri Johnson,
VP TransUnion

* For information about TransUnion’s multi-layered solutions to combat fraud, contact Maitri Johnson at maitri.johnson@transunion.com

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