Financial Fraud Is Evolving. Is Your Company Prepared?

Every day, financial companies faithful to their mission of lending money are waiting with open arms for opportunities to place capital, and fraudsters are more than eager to deceive them by pretending to be something or someone they are not. They have developed highly sophisticated methods to fraudulently access financing.

From identity theft to credit bureau manipulation, fraud schemes represent a significant risk to the whole financial sector. However, technology can prevent these crimes through different validations: through the INE (National Electoral Institute of Mexico), RENAPO (National Population Registry), SAT (Tax Administration Service), credit bureau, and more official instances. Complex? Yes. Automated? Yes.

I. How does financial fraud occur?

Fraud usually begins with the creation of a false identity, that can either be personal or corporate. There are different methods for this:

• Use of altered documents: Tampered or stolen official ID’s.

• Creation of shell companies: Modification of tax information to hide negative background.

• Use of third parties: Obtaining financing with borrowed or falsified data.

Once they are inside the financial system, these actors can inflate income, falsify account statements, and overvalue assets to obtain loans that will not be repaid.

II. Let's take a look at the most common types of fraud in the financial sector

1. Loan application fraud

This is the submission of false information about income, credit history or identity to obtain a loan.

2. Balance sheet fraud

This involves altering financial statements to hide liabilities and appear solvent and/or generating false invoices to simulate non-existent income.

3. Collateral fraud

In this case, it involves the use of overvalued or non-existent assets as collateral for loans, or the use of the same collateral in multiple loan applications.

4. Payment fraud

This consists of the registration of fictitious payments to simulate that obligations have been fulfilled and/or the request for debt discounts with false information.

5. Insider fraud

Here, we are talking about the collusion of employees with applicants to approve loans without proper requirements and manipulation of internal data to facilitate the granting of fraudulent credit.

Yes,I know, it's a daunting topic, but here's the solution: Let's talk about prevention and correction.

III. Here are some prevention strategies with automated validations

The best way to combat fraud is to detect it before it happens. Tools such as xpAzul allow real-time validation of the identity of applicants and the authenticity of companies through the following strategies:

1. Identity verification with national ID

• Consultation of the credential in the INE Nominal List to confirm its authenticity and validity.

• Implementation of certified proof of life to avoid the use of manipulated photos or videos.

• Biometric comparison between the ID and the applicant in real time.

2. Business validation with the SAT

• Information extraction directly from the SAT base to avoid the presentation of altered documents.

• Matching of RFC, company name and address with the Tax Identification Card.

• Verification of the Compliance Opinion to know the fiscal status of the company.

3. Direct consultation with Credit Bureau and Círculo de Crédito (Mexican Credit Bureau)

• Analysis of the company's or individual's credit history to detect risks.

• Identification of modifications in the RFC that may indicate attempts to hide previous debts.

• Detection of blacklisted records for fraud or non-compliance.

4. Protection in banking transactions

• Verification of the RFC associated with the bank account where the loan will be deposited.

• Detection of phantom companies or unauthorized accounts.

5. Forensic analysis of documents

• Identification of alterations in official ID’s, account statements and invoices.

• Fraud prevention by checking documents against official databases.

6. Real-time fraud alerts

• Generation of automatic alerts for any data inconsistencies.

• Facilitation of quick reviews with verifiable evidence.

Financial fraud not only generates economic losses, it is also a serious blow to an institution's reputation, diminishing confidence in the sector. Implementing automated validation tools enables safer decisions, reduces risk, and ensures that capital goes to the right applicants.

In an increasingly digital financial environment, having certified technology solutions makes the difference between operating with security and order or facing a crisis.

So, how are you protecting your company and its validation processes?