Account Takeover Prevention: Strategies For Lenders To Prevent Fraud

Identity theft is one of the growing concerns for industries of all sectors, including the banking and financial sectors. Various banking frauds have surged dramatically in recent years, leading to substantial financial losses and severely eroding customer trust. Account takeover, or ATO, is a dominant form of identity theft that occurs when a fraudster gains unauthorized access to a user's account for malicious purposes.

According to Sift's global data network, the account takeover attack rates for the FinTech industry surged by a staggering 808% between Q2 2022 and Q2 2023.

An account takeover attack jeopardizes a customer's identity, sensitive information, and the company's reputation—with 73% of consumers believing that the brand or company is accountable for ATO attacks and responsible for securing their confidential information.

Hence, in this case, it becomes critical for banks and financial institutions to adopt the best tools and strategies to prevent account takeover attacks and their repercussions to protect their company's trust and reputation.

This article explores account takeover attacks, how they occur, best practices for preventing them, and how Arya AI can help. Let's get started!

What is an account takeover?

An account takeover (ATO) is a type of identity theft fraud wherein malicious actors or fraudsters gain unauthorized access to a user's financial account to carry out fraudulent activities, such as changing the user's account details, sending fraudulent transactions, or stealing sensitive data, personal information, funds, etc.

Fraudsters use various tactics to access the customer's accounts. For instance, they often employ malicious bots to access genuine user accounts with sensitive financial information.

Moreover, they also use other sophisticated tactics, such as brute force attacks, phishing emails, social engineering attacks, and stolen account credentials.

These fraudsters continually monitor the user's accounts to find loopholes and vulnerabilities and the best time to attack and gain unauthorized access. If they aim to make unauthorized transactions, they typically make smaller transactions at first to avoid being caught before executing much riskier and larger transactions.

Let's look in more detail at how fraudsters employ account takeover.

How does account takeover frauds happen?

As discussed earlier, fraudsters employ several tactics to hack into a user's account and takeover on their critical data and transactions. Here are the different tactics used by fraudsters.

1. Phishing

In phishing attacks, fraudsters deceive users by pretending to be credible and trustworthy organizations and sending emails or text messages consisting of malicious links and attachments.

The body of these emails or messages convinces users to click on links or open attachments that might consist of malicious bots or direct users to malicious links, creating a sense of urgency to enter their account credentials through fake login attempts.

Banks and financial institutions have been one of the top-most industries vulnerable to phishing attacks in 2022, experiencing 27.7% of all phishing attacks compared to other industries.

Thus, by gaining user's trust and deceiving them into entering their credentials, fraudsters gain access to their financial records, transactions, and information—allowing them to perform further fraudulent processes.

2. Stolen cookies

The cookies users accept when they visit certain websites get stored on their web browsers and devices, acting like digital keys.

These cookies consist of important login details and information hackers exploit to gain unauthorized access without the need for passwords or other login passcodes to hack into the accounts.

3. Credential stuffing

A credential stuffing attack involves using automated tools and software to log in to multiple user accounts and websites using a single stolen password and user credentials.

Once fraudsters gain access to a stolen user credential, they attempt to log in to the user's other accounts, hoping the user uses the same credential for all website accounts.

This is one of the most common tactic fraudsters employ to conduct account takeover which leads to identity theft and financial risks for users and financial organizations.

4. Malware infection

Fraudsters infect users' devices, such as tablets, phones, and computers, with malware through email attachments, malicious links, website ads, or compromised software to steal their login credentials when they try to log in to their banking accounts.

Once getting access and steal the credentials, the fraudsters take over the user's accounts to conduct further fraudulent activities and put the user's critical data and the financial institution's reputation at risk.

5. Keylogging

A keylogging or keystroke logger attack is a type of malware attack that involves the attacker or fraudster using software or hardware to record the user's every keystroke they make on their computer device.

This allows the fraudsters to capture sensitive user information and credentials, such as passwords, personal messages, transactional data, and credit card details. Once the software collects this information, it sends it to the command-and-control server (C&C) server, allowing fraudsters to gain unauthorized access.

6. Man-in-the-middle (MITM) attacks

In MITM attacks, the fraudster secretly eavesdrops on communication between two parties, a customer and an organization, via email, social media, or web browsing to alter the communication and its details.

These types of attacks often occur when the victim uses unsecured Wi-Fi networks, making it easier for fraudsters to access the user's login credentials, banking information, or other sensitive data.

What are the signs of an account takeover?

It's critical to recognize the common red flags and early signs of account takeover before they negatively affect the banks and their customers.

Here are the common signs that reflect the presence or possibility of an account takeover attack:

• Unusual login patterns: If you notice frequent unusual login patterns, such as multiple users trying to log in at odd hours from unusual locations and devices, it's a major sign of an account takeover attack. Similarly, when you notice several changes in the login credentials, such as a single email address being linked to multiple user accounts, it's more likely a sign of unauthorized account access.
  
• Unfamiliar and suspicious transaction patterns: If there is a sudden and huge deviation from the user's ideal or normal transactional behavior, it's a sign of ATO. a sudden spike of high-value transactions, making purchases from unusual locations, splurging in international transactions, and transacting at an abnormal frequency is an indicator of an ATO attack.
  
• Failed login attempts & multiple account lockouts: When there is failed login attempts and users report about getting locked out of their accounts within a short timeframe, it's a sign of unauthorized account access. This indicates that fraudsters are using credential stuffing or other automated solutions to access user accounts.
  
• Unusual country's IP address: If there is an abrupt increase in the IP addresses from unusual countries besides the expected access locations, it's a sign of ATO. A fraudster may use IP addresses from different countries to access user's accounts for malicious means.
  
• Unknown devices: To avoid begging getting caught and identifies, fraudsters often conceal the information and identity of their devices through gadget spoofing, making it difficult to recognize if the same device is used to access multiple accounts. Such devices are generally tagged as 'unknown,' and if there are a high number of unknow devices present in the system, it's more likely a sign of an account takeover attack.

Key strategies for lenders to prevent account takeovers

Using sophisticated tools and strategies to prevent account takeover is critical to avoid identity theft risks. Here are a few key strategies that can help prevent risks of account takeover attacks.

1. Proactive security management

Ensuring all the systems and software at your bank or financial institution are up-to-date with the latest security patches is critical to minimizing the risks of loopholes and vulnerabilities used by attackers to hack into the systems.

Thus, following secure coding practices and implementing a robust vulnerability management program is essential to detecting, prioritizing, and fixing security flaws and vulnerabilities before attackers exploit them.

2. Ensure phishing protection

Phishing attacks are highly prevalent in the financial and banking industry wherein the fraudster tries to compromise the user's account credentials to perform fraudulent and malicious transactions.

Spreading awareness to customers and loan applicants about blocking spam emails, filtering risky emails, and avoiding clicking on suspicious links and attachments is crucial to preventing phishing risks.

3. Set limits on login attempts

Limiting a user's login attempt to probably 4-5 attempts at a time is the best way to limit unauthorized access to user accounts. You can also add these limits to VPNs, proxies, and more to strengthen account security.

Restricting the number of login attempts allows banks and financial institutions to minimize the risks of brute-force attacks and ensure overall account security.

4. Set notifications for suspicious account changes

To mitigate account takeover, real-time alerts and notifications via email or SMS about unexpected and suspicious changes to the user's accounts, such as email address updates, odd-timely password changes, or alteration of critical data and billing information, are essential.

These real-time alerts enable banks and financial institutions to make prompt decisions and take suitable actions to avoid risks of account takeover early on.

5. Employ a reliable fraud detection solution

A trustworthy and reliable fraud detection solution is paramount for identifying suspicious activities and enabling continuous monitoring using advanced algorithms capable of handling and analyzing large datasets.

These advanced solutions make it easier to customize security rules and minimize false positives, allowing financial institutions to prioritize genuine and authentic users and reduce account takeover.

Arya AI offers a trustworthy and robust fraud detection system for identifying suspicious activities, enhanced security, and a seamless user experience. The platform offers a variety of apps that you can choose from according to your requirements and seamlessly integrate directly into your workflows.

6. Perform behavioral analysis

Banks and lending institutions must perform behavioral analytics to understand users' behavior and patterns, including their typical login times, devices used, and services most likely to be used, to determine deviations and chances of fraud.

Any deviation from the normal user behavior allows banks to flag it as suspicious, allowing them to take prompt actions and mitigate risks of unauthorized access and account takeover.

7. Conduct regular audits and assessments

Conducting regular security and review audits is critical to identifying and fixing security vulnerabilities and uncovering potential weaknesses attackers could use to gain unauthorized access.

Performing penetration testing, systematically reviewing users' accounts and their activity logs, and considering third-party security assessments are essential to addressing anomalies, gaining objective insight into the current security posture, and preventing account takeover risks.

How Arya AI can help prevent account takeover?

A robust identity verification system plays a critical role in preventing and fighting against account takeover risks.

When you can confirm that the users are who they claim to be when logging in, it becomes easier to grant account access to genuine users and avoid unauthorized access to fraudsters.

To enable secure identity verification, at Arya AI, we offer exclusive Apps, such as face verification and bank statement analyser, which help determine and verify the user's identity and monitor their banking records to identify suspicious anomalies and take preventative measures in time to prevent account takeover.

Some of our popular Apps that can help your financial institution include:  

• The Face Verification recognizes and matches the user's faces from several sources, such as images, identity documents, or surveillance footage, to ensure an exact match and secure account access.
  
• The Document Fraud Detection offers advanced capabilities to detect and prevent fraudulent activities across various document formats to identify anomalies and inconsistencies that may indicate fraud. Read more on How lenders can leverage AI-powered document fraud detection systems
  
• The Bank Statement Analyser reads the user's bank statement transactions and converts that data into an easily readable and understandable analytical report. This makes identifying trends and anomalies easier and fixing them before they cause trouble.

Banks and financial institutions can integrate these Apps within their existing identity verification systems to further streamline the process and mitigate account takeover risks efficiently.

Conclusion

Account takeover risks are inevitable and pose significant risks to financial organizations, banks, and their customers. Implementing a robust fraud prevention framework is essential for protecting banks and financial institutions from significant losses and maintaining customer trust.

While following account takeover mitigation best practices, such as implementing MFA and strong password policies, limiting login attempts, performing regular audits, and setting up alerts for account changes, is crucial, having a comprehensive and robust fraud detection mitigation solution also plays a key role in limiting unauthorized access attempts.

According to a Liminal report, the total ATO prevention market in banking is anticipated to grow from $954.8 million in 2024 to a whopping $1.5 billion by 2028, at a staggering CAGR of 9.3%.

This shows the growing ATO concerns and banks' increasing proactive steps and measures in preventing and mitigating the risks. So, make sure you leverage advanced authentication and ATO prevention technologies and check out our intuitive Apps at Arya AI to strengthen your company's account security and prevent unauthorized access and ATO attacks.