Third-party fraud

Third-party fraud is essentially another term for identity theft. It refers to situations where an individual’s personally identifiable information (PII) is stolen and then used to open or take over an account. Bad actors often engage in third-party fraud to gain access to credit, financial products, or services that would otherwise be unavailable to them — harming both the business and the person whose information they have stolen.

Frequently asked questions

What is the difference between third-party fraud and second-party fraud?

Both third- and second-party fraud involve the use of someone else’s identity information or credentials to carry out fraud. The key difference lies in whether or not the individual consents to this. 

In second-party fraud, the individual has consented to allow the bad actor to use their information for one reason or another. They are an active participant in the fraud. In third-party fraud, they have not consented and are not an active participant.

What are some examples of third-party fraud?

Many common fraud schemes fall under the umbrella of third-party fraud. These can include:

  • Account takeover (ATO) fraud, in which a bad actor gains access to an account and uses it to steal information or engage in fraud.
  • Credit card fraud, in which a bad actor uses a stolen credit card to make purchases illegally.
  • New application fraud, in which a bad actor applies for a new or increased line of credit or services under someone else’s name. This is also called new account fraud
  • Benefits fraud, in which a bad actor applies for government benefits (Social Security, disability, unemployment, etc.) under somebody else’s name.
  • Tax fraud, in which a bad actor files tax returns under somebody else’s name.

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