Address Fraud Survey Gauges the State of the Industry, Identifies Inefficiencies

Northfield, MN (March 3, 2009) — A new Fraud Management Institute survey has found that banks could be spending an estimated $300 million a year on change-of-address confirmation letters. Additionally, many survey respondents reported they are spending considerably more time on FACT Act Red Flag compliance than was originally predicted.

For its first Annual Address Fraud Survey and Analysis Report, the Fraud Management Institute polled fraud management professionals in the banking and financial services, telecommunications and ecommerce industries to gauge the state of fraud management practices and effectiveness. The report is available as a no-cost download at www.toFMI.com/library and www.IDInsight.com. The Fraud Management Institute and ID Insight are hosting a free Webinar to discuss the report on Thursday, March 19, 2009, from 1:00 to 2:00 p.m. EST. To register, visit www.IDInsight.com.

According to the report, the true costs associated with managing address-related fraud risk may still not be fully known. “Especially now with the FACT Act Red Flag requirements, a lot of new attention is being put on addresses,” says Mike Freiling, the Fraud Management Institute’s Director of Professional Services. “As the industry becomes increasingly aware of address fraud as a key component of many fraud and identity theft schemes, we wanted to assess fraud management perceptions, as well as strategies that are helping prevent, detect and mitigate the fraud associated with address misuse.”

According to Freiling, one of the survey’s key findings is that more than one-third (34 percent) of respondents reported that in the event of a customer address change, they mail confirmation letters to both the old and the new addresses; 20 percent mail confirmation letters to the old address only; and 4 percent mail letters to the new address only. The report projects that mailing confirmation letters costs the industry $300 million a year.

“Mailing confirmation letters has been a commonly accepted practice, even though the process is slow, expensive, and has little impact as a fraud-control measure” says Matt Schraan, product director at ID Insight, one of the survey sponsors. According to Schraan, adopting an automated risk-based approach such as Safe2Change can cost much less than sending letters, while also providing protections that the letter strategy can’t. “In addition to allowing banks to comply with the FACT Act Red Flags, an automated solution can cut costs off multiple budget lines and significantly reduce manual review time and expense.”

FACT Act Compliance

The first Annual Address Fraud Survey and Analysis Report is being released four months after banks and financial institutions were required by the Fair and Accurate Transactions (FACT) Act Red Flag guidelines to begin scrutinizing address changes on existing customers, as well as new account applications where the application address differs from the information maintained by the credit bureaus.

The majority of businesses surveyed said they needed more time to prepare for compliance than the Federal Reserve had projected, according to FMI’s Freiling. More than half (57 percent) of respondents rated the Federal Reserve’s estimate of a total of 41 hours to comply as either “much too low” or “a little low.”

“This finding fits with what we’ve been hearing about institutions rushing to have a compliance strategy in place by the November 1, 2008, deadline,” said Schraan. “Now they’re looking forward and asking, ‘How can we comply more cost-effectively and efficiently?’”

The first Annual Address Fraud Survey and Analysis Report, which polled 325 fraud management professionals in December 2008, was designed to serve as a benchmark for the state of FACT Act compliance.

About ID Insight

ID Insight, the innovator in Access-Point Intelligence, knows more about people and their access points -- physical addresses, phone numbers and other points where fraud occurs -- than any other identity-fraud risk-assessment company. Based in Northfield, Minn., the company combines its massive collection of data on people and access points with patent-pending analytics to help companies prevent fraud, reduce costs and capture more business. ID Insight provides next-generation verification, authentication, and fraud solutions to financial services companies, credit issuers, retailers, online merchants and wireless providers nationwide. For more information, visit www.IDInsight.com.

About the Fraud Management Institute

The Fraud Management Institute was established in 2007 to provide support to individuals and organizations concerned with fraud and loss management throughout the world. In addition to providing specialized consulting services to help organizations enhance their fraud management capabilities, our goal is to serve as a clearing house for information that is shared within the fraud management community. For more information, visit www.toFMI.com.

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Media Contacts:

Brian Bellmont for ID Insight, (952) 233-0428,

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