First-party fraud

First-party fraud refers to instances where a bad actor misrepresents themselves — providing false information about their identity or financial situation, for example — in order to realize some kind of gain. In cases of first-party fraud, the primary victim could be a financial institution or business the bad actor is lying to, or even an individual. This differs from second- and third-party fraud in that it doesn’t involve the bad actor taking advantage of another person’s information.

Frequently asked questions

What are some examples of first-party fraud?

Bad actors commonly engage in first-party fraud in order to improve their chances of being approved for a loan or line of credit or to qualify for more advantageous credit terms (a higher credit limit, lower interest rate, etc.). Favored tactics include falsifying their employment status or history, or inflating their income. 

First-party fraud is common in the insurance industry, where an individual might lie to the carrier upon purchasing a policy or filing a claim. For example, an individual may lie about their health history on a life insurance application — claiming, perhaps, that they never smoked tobacco. This could result in cheaper premiums than if they had told the truth. 

Less common are situations in which a bad actor misrepresents themselves to defraud individuals — for example, a fraudster posing as a real estate agent who sells a fake listing, pockets the down payment, and disappears from a hopeful homeowner’s life.

How can you fight first-party fraud?

Identifying first-party fraud can be challenging, especially when information being provided by individuals is not easily verifiable. Verifying the information that you can — via document verification, government ID verification, database verification, etc. — can go far in weeding out synthetic IDs and other illegal fabrications.

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