The most common fraud types we saw this year include false credit inquiries, new account fraud, tax fraud, and account takeovers. Learn how these schemes work — and get the latest from our identity specialists on how to fight back.
As the year comes to a close, we’re looking back at some of the most common fraud types we’ve seen in 2022.
Over the last 12 months, our identity specialists have opened thousands of identity theft cases and helped our members save millions of dollars in fraud losses.
Through it all, reports of false credit inquiries, new account fraud, tax fraud, and account takeovers have been top concerns.
Here’s what you need to know about how to recognize and avoid these common schemes in 2023 and beyond.
False inquiries and new account fraud
This year, our identity specialists have helped our members battle false new credit inquiries and new account fraud more than any other fraud type.
The two issues are closely related. A false new credit inquiry often precedes new account fraud, which is a type of identity theft.
Here’s how we’ve seen it play out. Once a fraudster gets access to your personally identifiable information (PII), they may attempt to take out a line of credit in your name. That credit application must be reviewed by a lender, which can trigger a “new inquiry” on your credit report.
If the loan is denied, it may be the end of the story. However, in some cases, identity thieves keep searching for a merchant who will approve them for a line of credit.
This can lead to a string of false "new inquiries." If the fraudster is able to successfully open a new financial account or line of credit in your name, that’s considered new account fraud.
According to Brian Stuart, Director of Customer Care at Allstate Identity Protection, checking and savings accounts are particularly vulnerable to new account fraud. That’s because these types of accounts don’t always require a credit check, so they don’t go through the same scrutiny with the three credit bureaus.
Our latest insights
In August of 2022, we alerted our members about a rise in false inquiries and new account fraud.
Since then, we’ve seen a slight reduction in reports of this fraud type. Cases involving false credit inquiries fell by 13 percent in the third quarter of this year, compared to the second quarter. Plus, we saw an 11 percent decrease in new account fraud in that same timeframe.
But, reports of this type of identity theft are still elevated overall — so we recommend that everyone stay vigilant.
“We’re still seeing fraudulent inquiries and new account fraud more than any other fraud types,” confirms Stuart. “So you should continue to be on high alert to any unrecognized inquiries on your credit report, or any new account that has been opened under your name.”
Credit monitoring services like the one we offer may alert you to any new inquiries on your credit — so be on the lookout for these types of communications.
Tips to stay safe
In addition, our identity specialists recommend the following:
Keep a close eye on checking and savings accounts. Look over your financial accounts often, and check for any activity that you don’t recognize, such as overdraft fees.
Set up two-factor authentication, or 2FA, especially for financial accounts. Since this adds an extra step in the login process, it can help slow down or stop would-be cybercriminals.
Keep your account information under wraps. Store your account paperwork out of sight, and always shred financial documents before throwing them away.
Tax refund fraud
Tax refund fraud, also known as Stolen Identity Refund Fraud (SIRF), has also been a top concern this year.
Here’s how this scam typically works: a thief gains access to your personal information, then uses your details to file a fraudulent tax return with a goal of pocketing your refund.
Tax refund fraud is often discovered during tax season, when victims get a letter from the Internal Revenue Service (IRS) about a tax return they didn’t file. Or, they’re unable to file their legitimate tax return because someone has already filed one under their Social Security number.
Our latest insights
Back in March, we alerted our members about an increase in requests to remediate tax-related fraud.
Unfortunately, we’ve continued to see a rise in this fraud type. As of October 2022, open remediation cases involving government tax fraud were up 85 percent over the previous year.
Tips to stay safe
Our number-one recommendation with tax season on the horizon?
“File your tax return as early as possible— as soon as applications are open and you receive your W2 or other needed documents,” says Vera Tolmachoff, Restoration Manager at Allstate Identity Protection. “Don't wait until the end of the tax season.”
This is because once your return is processed, it’s harder for a thief to file in your name. During tax season, it’s also smart to:
Be on the lookout for phishing scams. Remember that the IRS does not initiate contact with taxpayers through email, text, or social media.
Follow the IRS’s guidance for choosing a tax preparer. Look for one with a Preparer Tax Identification Number (PTIN) and professional credentials, such as a certified public accountant (CPA) license.
Account takeovers
Imagine a fraudster gets access to your personal information, uses it to access your bank account, and then changes the login credentials of that account to prevent you from accessing it yourself.
This is called account takeover, and it’s another fraud trend to keep an eye on.
There are many types of accounts that can be compromised by account takeovers, including bank or credit card accounts and social media or e-commerce accounts.
Our latest insights
Compared to fraudulent inquiries, new account fraud, and tax fraud, there were fewer overall open remediation cases involving account takeovers this year. And, some good news: cases of account takeover fraud decreased 32 percent year-over-year.
That being said, Tolmachoff says that fraudsters are still profiting from committing this kind of fraud, especially on social media.
Tips to stay safe
“Strong passwords are critical to preventing account takeovers,” says Tolmachoff.
So is monitoring your accounts for activity you don’t recognize so you can act quickly to minimize any damage. Here are clues to watch out for:
You see that personal information on your account has been altered
You get an alert about changes to your account that you don’t recognize
You see an unauthorized transaction on your account
You are notified that your login credentials have been compromised
It’s difficult to predict what scammers will do in the coming year. But know that we’ll continue to alert you about the fraud trends we’re seeing as they unfold so you can stay a step ahead.
And if you do encounter an issue with your identity, we’re only a phone call away.
