Digital identity Fraud-as-a-Service enabling 2,500X ROI

Europe has emerged as the global hotspot for identity fraud, experiencing a 150 percent year-on-year (YoY) growth, according to the Identity Fraud Report 2024 by verification platform Sumsub. The report highlights a worldwide escalation in fraud, driven by advancements in generative AI and the proliferation of Fraud-as-a-Service (FaaS).

The report reveals widespread victimization, with 56 percent of European respondents reporting that they had fallen prey to digital identity fraud. This vulnerability is compounded by the increasing integration of AI tools into everyday life — nearly 60 percent of respondents interact with such tools regularly, ranging from monthly to daily use. Weak passwords (22 percent) and data breaches (20 percent) were identified as the leading causes of account compromise.

Meanwhile, public opinion strongly supports shared accountability, with 79 percent of consumers believing that both governments and businesses must shoulder the responsibility for tackling identity fraud.

“Our latest Fraud Report once again shows the changing dynamics of ID fraud, not least the growing offensive capability of fraudsters. Thanks to generative AI and the wealth of readily available Fraud-as-a-Service options, it has never been easier for bad actors to inflict huge amounts of damage on a tight budget,” says Martin ten Houten, VP of business development, Europe, at Sumsub.

“Deepfakes can and should now be expected. Any misguided hope to head off identity fraud via a KYC-first approach belongs firmly to the past now that we can see over three-quarters of fraud takes place beyond this stage.”

Business impact in 2024

Businesses are grappling with mounting fraud threats, as 67 percent reported increased fraud activity in 2024. Globally, identity fraud rates have more than doubled since 2021, rising from 1.1 percent to 2.6 percent.

Certain industries are particularly vulnerable, with the dating sector experiencing the highest annual fraud growth at 8.9 percent, followed by online media at 7.7 percent, and banking and insurance at 2.7 percent.

Fraudulent activities largely relied on fake documents, which accounted for 50 percent of incidents. Chargebacks (15 percent) and account takeovers (12 percent) were also significant fraud tactics, further complicating businesses’ prevention efforts.

Deepfake explosion

Deepfakes continues to be a concern, constituting 7 percent of all fraud attempts globally – a fourfold increase from 2023. The UK saw an 118 percent rise in deepfake-related incidents. Concerns about their societal impact are growing, with 81 percent of respondents expressing fears over their potential influence on elections. Over half believe deepfakes have already played a role in shaping electoral outcomes, while 39 percent anticipate that they will do so in the future.

While Europe led the world in fraud growth, significant regional disparities emerged. Latvia (4.35 percent), Ukraine (2.97 percent), and Estonia (2.77 percent) recorded the highest overall fraud levels. At the same time, Montenegro, Ireland, and Portugal showed the fastest growth in identity fraud cases. In contrast, the UK experienced an 8 percent decline in identity fraud, standing out as a rare exception to the broader European trend.

The report highlights four critical themes transforming the fraud landscape. The democratization of fraud has made it easier than ever for bad actors to exploit vulnerabilities; with just $1,000 and a month of preparation, a fraud gang can cause losses exceeding $2.5 million.

The data further challenges the effectiveness of traditional fraud prevention models, noting that 76 percent of fraud incidents now occur after the KYC process. Additionally, regulatory pressure is mounting on businesses, driven by frameworks like the EU AI Act and Online Fraud Charter.

These regulations increasingly hold companies accountable for compensating victims of fraud occurring on their platforms, a sentiment echoed by 62 percent of consumers.

Article Topics

deepfakes  |  digital identity  |  fraud prevention  |  identity verification  |  KYC  |  Sumsub  |  synthetic identity fraud