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Dm MANAGEMENT: DOCUMENT FRAUD Combatting document fraud with AI-enabled IDP Nicos Vekiarides, founder and CEO of Attestiv, examines the growth in document fraud and explains how AI is being used by both sides in the fight for document security Document fraud is as old as the written word. The ancient Romans had laws as early as 80 B.C. prohibiting forgery and falsification of documents in land transfers. We still deal with forged documents and fraud today, but technology makes identifying fraudulent documents and paperwork harder. The solution is to apply more sophisticated technology, such as fraudresilient intelligent document processing (IDP), to identify altered and bogus documents. Artificial intelligence has made it easier for criminals to generate credible forgeries. News stories about deepfakes - high-fidelity forgeries of audio and video images used to embarrass a politician or public figure - involve the same AI technology being used to counterfeit documents. AI algorithms can imitate details of documents such as watermarks, holograms, microprinting, signatures and images, making detection increasingly tricky. AI has invaluable potential to streamline document processing, but it also can be used to falsify paperwork and perpetrate fraud. The best way to combat AIgenerated fraud is with better AI tools embedded in document processing to identify the fakes. THE COST OF DOCUMENT FRAUD The losses from fraud and forged documents continue to mount as criminals become more sophisticated. According to the US Department of Justice, settlements for false claims adjudicated under the False Claims Act exceeded $2.2 billion in 2022. The Federal Trade Commission (FTC) also reports that consumers lost nearly $8.8 billion to fraud in 2022, a 30% increase over the previous year. Most of that money was lost to investment scams ($3.8 billion), and $2.6 billion was lost to imposter fraud. Insurance fraud costs American consumers $308.6 billion each year. More than 20% of property-casualty losses are because of fraud, and $60 billion yearly is lost to Medicare fraud. Home loans are another common target for fraud. In the second quarter of 2022, an estimated 0.76% of mortgage applications contained fraudulent paperwork. That represents one in 131 mortgage applications. There has also been a rise in income fraud, such as doctored pay stubs and W- 2 forms. These types of documents are often used to create false identities. The IRS reported $5.7 billion in tax fraud in 2022, making tax fraud the third mostreported form of fraud reported in 2022. Any transaction that relies on documentation can be a target for fraud. The right AI and IDP technology could prevent most of these losses. THE RISE IN IDENTITY THEFT Identity theft is a growing problem that is contributing to document fraud. The FTC reports that there were nearly 560,000 identity theft cases in the United States in the first half of 2023 and estimated that reported identity theft cases would exceed 1 million by the end of 2023, which is higher than any pre-pandemic year. Identity theft cases spiked in 2020 and 2021, reaching unprecedented levels of 1.4 million complaints per year. Identity theft is most commonly used for fraudulent online purchases, loan applications, and applications for government benefits. When the U.S. government issued relief cheques during the pandemic, many criminals used identity theft to steal the funds. Credit card fraud remains the biggest problem stemming from identity theft. By the third quarter of 2023, Americans had filed more than 220,000 credit card fraud complaints, representing 4 out of every 10 identity theft complaints. Adopting AI-powered document validation as part of IDP can head off most of these fraudulent transactions, identifying forged applications and documents before they are processed. 8 @DMMagAndAwards January/February 2024 www.document-manager.com
MANAGEMENT: DOCUMENT FRAUD Dm "INCORPORATING FRAUD DETECTION INTO IDP SCALES MUCH BETTER THAN HUMAN REVIEW, AUTHENTICATING DOCUMENTS AND IMAGES AS PART OF DATA INTAKE. AI ALGORITHMS ARE MORE PRECISE AND MORE ACCURATE IN DETECTING FRAUD, AND THE SYSTEM USES ML TO BECOME MORE SOPHISTICATED, TRAINING THE SYSTEM TO RECOGNISE NEW ANOMALIES AND POTENTIAL FORGERIES. AUTOMATED FRAUD DETECTION IN IDP IS FASTER AND MORE EFFICIENT AND CAN DETECT FORGERIES THAT OTHER PROCEDURES WOULD MISS." THE MOVE TO DOCUMENT AUTOMATION Artificial intelligence is increasingly used by businesses to improve operations, especially when processing paperwork. Sixty-four percent of companies believe AI will help improve productivity. As a result, AI is expected to see an annual growth rate of 37.3% through 2030. Businesses are seeing an immediate impact from the use of AI in back-office processes. Paper documents can be scanned and converted into a digital format that business software can readily ingest. IDP handles data extraction, identifying unstructured and semistructured data from paper documents and converting it into usable data. Using AI and machine learning (ML) streamlines paper processes, extracting data with a high degree of accuracy. With the move to automated document processing, human inspection is no longer needed. As a result, fraudulent data and documents often go undetected and are processed automatically. Incorporating fraud detection into IDP scales much better than human review, authenticating documents and images as part of data intake. AI algorithms are more precise and more accurate in detecting fraud, and the system uses ML to become more sophisticated, training the system to recognise new anomalies and potential forgeries. Automated fraud detection in IDP is faster and more efficient and can detect forgeries that other procedures would miss. MOST COMMON TYPES OF DOCUMENT FRAUD AI-enabled fraud detection in IDP can identify almost any type of document fraud. The four most common types of document fraud are: Image fraud - Falsifying or substituting an image is an easy way to forge an ID. For example, a photo or image can be superimposed on a legitimate ID, or a computer-generated passport or driver's license can be used to falsify a loan application or for other fraud. This trend is a growing concern since lenders and others are accepting scanned ID files for online applications. Falsified documents - One of the more sophisticated forms of identity theft is creating false documents using stolen information. Creating a phony birth certificate, driver's license or passport makes it easier to falsify a bank account or loan application or impersonate someone to access their investments and accounts. Modified documents - A common form of fraud is changing legitimate documents by manipulating information, such as modifying names, dates, ID numbers, etc. With computer technology, it's easy to modify genuine documents to open a line of credit, apply for a credit card, or commit a similar crime. Illegitimate documents - Rather than falsifying legitimate documents, criminals can create fake documents such as cheques, invoices, or money orders that look legitimate. Using fraud-resilient IDP technology can identify anomalies such as doctored pixels and spot phony documents immediately, either rejecting them or tagging them for additional scrutiny. USING AI TO DETECT FRAUDULENT DOCUMENTS Detecting fraudulent documents isn't easy. Close visual scrutiny can reveal falsifications such as watermarks or holograms, but it takes a trained eye to know what to look for. Manual inspection is far from accurate and is slow, especially if you need to inspect thousands of documents. IDP simplifies document digitisation - converting paper to a machine-readable format while automated fraud detection analyses the documents simultaneously. IDP is not optical character recognition (OCR) but uses AI/ML to analyse, contextualise, and categorise all the document data. Fraud detection AI analyses the document for anomalies, authenticating the data and ensuring the original documents are genuine and haven't been altered. IDP with AI fraud detection eliminates document fraud and prevents losses for consumers and businesses. Financial service companies, healthcare providers, insurance companies, lenders, and government agencies are saving time and money with digital transformation and improving security by incorporating AI fraud detection into digital document processing. AI saves time and improves the accuracy of document conversion. Like any emerging technology, AI can be harnessed for many applications, including criminal activity. Using AI to falsify documents makes it harder to detect forgeries. Fortunately, AI technology can be used for digitisation and authentication, detecting forged documents before they are processed. Introducing AI/ML safeguards as part of IDP fights fire with fire, providing automated tools to prevent fraud. More info: www.attestiv.com www.document-manager.com January/February 2024 @DMMagAndAwards 9
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