New Account Fraud: What It Is and How to Prevent It

Fake accounts are not a new problem. While we often think of fake accounts causing a nuisance on social media, there is also a darker side to this type of fraud.

When fraudsters create new accounts to mimic legitimate user activities, advertisers can end up wasting portions of their budgets on engagement that will never convert. Understanding new account fraud is crucial not only for safeguarding your assets but also for ensuring the authenticity and efficiency of your campaigns.

What is New Account Fraud?

This type of fraudulent activity is fairly straightforward.

Fraudsters use fabricated identities to set up new accounts. This could be anything from bank accounts to credit cards or social medical accounts. The end goal is to commit fraud under this fake identity for financial gain.

In the advertising world, these fraudsters typically create fake accounts on platforms where ad spending occurs. This could be on social media sites, pay-per-click platforms, or affiliate marketing networks. These accounts are then used to generate false traffic, click on ads, or create sales leads that have no genuine buying intent.

Types of New Account Fraud

There are a few ways new account opening fraud can be messing with your campaigns. Here are a few examples of how this happens:

• Bot-Driven Account Creation: Automated scripts or bots can be used to create thousands of fake accounts that mimic real users. Sophisticated bots can skew audience data and click-through rates, leading advertisers to make misguided decisions.

• Incentivized Sign-ups: Fraudsters may respond to ads promising rewards for new account sign-ups or app installations. This can lead to a surge in seemingly legitimate traffic and conversions from fake accounts looking for the reward rather than true engagement. This is why such incentives aren’t a good marketing tactic.

• Cashback and Affiliate Fraud: By creating new accounts, fraudsters participate in cashback or affiliate programs. They might use these accounts to purchase products and then cancel them, or simply to click through ads without any intent to purchase. All of this leads to a financial loss for advertisers.

• Ad Farming: Multiple new accounts might be created to host or interact with ads, generating revenue for the fraudster through high-volume, low-quality ad engagements. This also drains the advertiser’s budget and damages the campaign’s ROI and overall effectiveness.

New account fraud also impacts individuals. Fraudsters often use social engineering tactics to carry out identity theft. They will conduct more fraud with a fabricated or stolen identity which can damage a victim’s credit score or other finances as well.

Recognizing the Red Flags

One look at the latest new account fraud statistics proves that this type of fraud isn’t going anywhere. Platforms like Facebook are deleting millions of fake accounts a quarter. Even LinkedIn has reported a growing problem with fraudulent accounts attempting to prey on users.

As much as these platforms try to stop fake accounts and verify real ones, they can pop up faster than they can be taken down. That’s why individuals and advertisers alike need to be on the lookout for suspicious activity that could signal a fraudulent new account.

Look out for some of these new account fraud red flags:

• Unusual Activity Spikes: Rapid, high-volume engagements, such as clicks or rewards accumulation from new accounts.
• Data Inconsistencies: Mismatches in registration details like names and addresses, or use of temporary email addresses.
• Multiple Accounts from Same IP: Several accounts created from the same IP address in a short period. More often than not, this is bot activity.
• Short Account Lifespan: Accounts that are used intensely for a brief period and then abandoned.
• Systematic Navigation: Accounts showing unnatural, programmed browsing patterns instead of human-like interactions.
• High-Risk Payment Methods: Frequent use of payment methods linked with high fraud rates, such as prepaid cards.
• User Complaints: Reports from other users about suspicious activities related to new accounts.

New Account Fraud Detection

New account fraud detection takes a dual approach.

First, it’s the ability to spot fake accounts at a glance. These accounts often have minimal personal information, generic or stock images, and lack detailed history that typical genuine accounts have. This is a good way for individuals to protect themselves from being scammed by fake accounts.

For advertisers, there are other methods and technologies that play a critical role in identifying and mitigating this type of fraud. These include measures like:

• Machine Learning Algorithms: Advanced algorithms can analyze vast amounts of data at a time. This can detect anomalies in account creation patterns, user behavior, and transaction histories that might be a sign of fraud.

• IP Address Analysis: Tools that examine the geographic location and reputation of IP addresses can identify if an account is created from a high-risk area or through proxies and VPNs commonly used by fraudsters.

• Email Verification and Risk Assessment: Services that verify the authenticity of an email address and check if it's been involved in previous fraud cases can help filter out potential fake accounts.

New Account Fraud Prevention

Unfortunately, new fake accounts are popping up faster than they can be deleted. However, there are still ways to ensure your ads are reaching genuine audiences.

This starts with choosing reliable advertising platforms. Some sites are simply more prone to fake accounts and ad fraud. But as we said, no platform is completely free of bots or fraudsters. That’s why you should also invest in a dedicated ad fraud solution.

Solutions like Anura offer real-time fraud detection capabilities to identify and block fraudulent activities before they impact campaign performance and budget. This includes blocking traffic from fraudulent new accounts run by bots or even people while still ensuring real people can engage with your ads.

Experience the power of Anura and discover just how much fraud you have with a free trial! Or, learn more about the impact of ad fraud and how to prevent it in our Ultimate Guide to Ad Fraud.