Accelerating ID fraud linked to worsening economic conditions in new report

For digital ID providers, yearly increases in fraud are becoming as reliable as death and taxes. In its third annual ID Fraud Report, IDScan.net says identity fraud reached its highest levels in the final quarter of 2024, with an increasing number of fraud attempts linked to synthetic identities, deepfake images and digital documentation.

“Fraud is becoming more sophisticated, more frequent, and more difficult to detect using legacy systems,” says Jimmy Roussel, CEO of IDScan.net, in a release. “With fraudsters increasingly leveraging tools like generative AI and deepfakes to bypass traditional defenses, businesses must urgently invest in advanced identity verification solutions that can protect both their operations and customers.”

Finance remains the most attractive target for fraudsters, seeing more than twice the amount of attempted fraud as other industries. But there were also spikes in the cannabis, hospitality and logistics sectors; the latter experienced 61.4 percent increase in fraud activity in the fourth quarter of 2024, in keeping with global economic and supply chain pressures.

For nightlife and hospitality, fraud has predictable peaks during spring break, Halloween, and the holiday travel season. April 20, colloquially known as 4/20, marks a “peak date for cannabis-related ID fraud.” January is the busiest month for casinos – and also fraud season.

Per the report, “fraudulent ID attempts were most commonly associated with IDs claiming to originate from Colorado, Arizona, California, Nevada, and Texas. The average age on flagged IDs was 31, with 64.1 percent of fraudulent IDs marked as male.”

Synthetic identity documents easier than ever to create

Generative AI tools have amplified fraudsters’ ability to create fake IDs at scale. Synthetic digital identity documents that replicate the look of legitimate government-issued IDs are easy to distribute and hard to detect with traditional verification methods. A blog from IDScan.net says these fake IDs are “frequently sold on the dark web for as little as $5, making them highly accessible to criminals.” Freely available online services exist solely to generate fake faces. Synthetic identities are at anyone’s fingertips.

“One of the more concerning aspects of these AI-generated IDs is the service model behind them,” the blog says. “Platforms like ProKYC provide full-service options for creating fake IDs, complete with images, videos, and the ability to bypass verification systems that use phone cameras or webcams. For less than $700 a year, cybercriminals can access these services, enabling them to generate fraudulent passports and even selfie videos for identity verification processes.”

With this kind of power so readily at hand, fraudsters can easily attempt to create accounts or access credit at financial institutions, schedule high-risk transactions in person, log back into accounts they’re locked out of, and subvert background checks.

‘Fraud is already rising in response to economic uncertainty’

It’s not simply that fraudsters have better tools, either. Social conditions impact fraud rates directly. A company post explores how economic uncertainty drives fraud:

“While fraud is always a reality, there is a strong correlation between economic recessions and rising fraud,” it says. “The Association of Certified Fraud Examiners found a direct correlation between economic downswings and increased fraudulent activity. A study, done in 2009 and analyzing the impact of the 2008 housing crisis showed that 55 percent of businesses reported an increase in fraud incidents between 2008 and 2009.” Likewise, disruptions related to COVID saw concurrent spikes in fraud.

Desperate times, as they say, call for desperate measures.

As it happens, the U.S. (and the world) may be entering into a whole new era of economic uncertainty, battered by whiplash tariffs into a ripe mulch from which even more fraud will sprout.

“We are already beginning to see worrisome trends that indicate fraud is already rising in response to economic uncertainty,” the firm says. “In an analysis of our finance and banking customers, we found that identity fraud in 2025 is already 34 percent higher than the same time period in 2024.”

Increases in fraud “have risen rather starkly in January 2025, correlating with stock market losses, large company layoffs, and government agency RIFs, so while they speak to an overall market increase in general fraud activity over time, the large spikes we’re seeing today appear linked to the very near-term economic outlook.”

“If trends continue, and the adverse relationship between the US stock market and fraud trends continue, we expect that fraud will increase an average of 5 percent for every additional 10 percent drop in the NASDAQ. We are also exploring correlations between fraud attempts and national unemployment, as individuals turn to nefarious sources in search of income. Inflation, job insecurity, and tightening credit markets may push more people toward identity fraud, with sophisticated fake IDs becoming more accessible through AI-driven forgery and the dark web.”

“Businesses and organizations should steel themselves for increased attempts at fraud, an increasingly diverse fraudster demographic, and a larger span of fraud sophistication.”

IDScan stresses the need for tampering detection, liveness detection

IDScan.net, of course, can help with all of this. The post describes the results of testing of its digital ID verification software on 200 AI-generated fake ID images, which the firm purchased.

“We caught 84 percent of the AI-generated fake IDs with image and symbology analysis alone. When combined with third-party database checks, we were able to catch 99.6 percent of the fraudulent IDs. Of the third-party database checks run, DMV checks were able to catch 100 percent of the fake IDs.”

The results underline the need for tampering detection as part of a robust document verification solution. “In 24.2 percent of cases, we found evidence of photo tampering. This suggests that relying on barcode scanning or optical character recognition (OCR) alone is insufficient for detecting fraud. Document tampering detection plays a crucial role in identifying altered photos or manipulated text on an ID, something that traditional verification systems may miss.”

IDScan.net’s proprietary tech flagged 39.7 percent of total fraud attempts by checking for formatting issues, template inconsistencies, and unreadable barcodes alone.

“ID verification solutions must incorporate advanced algorithms, real-time data analysis, and multi-step verification processes to ensure that identities are legitimate. Document verification solutions should check for inconsistencies in images and text, while also evaluating data patterns that may suggest tampering or forgery.”

Beyond tampering, there is the question of liveness. IDScan says face liveness and document liveness detection should be “table stakes,” combined with behavior-based risk detection that analyzes user behaviors, such as login patterns, device interactions, typing speeds, and navigation habits, to identify suspicious activity in real time.

Article Topics

document verification  |  fraud prevention  |  ID verification  |  identity verification  |  IDScan.net  |  synthetic identity fraud