Identity fraud is increasingly targeting 401k participants, with employees in workplace retirement plans squarely in criminals’ sights.
Recent cases involving Abbott Laboratories and Estee Lauder, who both used Alight Solutions as their recordkeeper, are high-profile examples.
401k advisors now also need to protect participants from scams specifically related to the COVID-19 pandemic, as fraudsters are targeting those in—or nearing—retirement differently than those not as close to retirement.
Indeed, Javelin’s 2020 Identity Fraud Study found that in 2019, retirement and brokerage account fraud showed a clear split between those closer to retirement age and the younger generation.
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For consumers age 55 and over, retirement and brokerage account fraud each totaled only 3% of the total non-card account fraud.
Meanwhile, for those age 18-54, retirement and brokerage account fraud totaled 16% and 8% respectively of non-account fraud.
Conversely, consumers 55 and over are at greater risk of bank fraud, accounting for 51% of all non-card account fraud, versus 45% for their younger counterparts.
“During the next twelve months, criminals will strike at the heart of the financial services industry and negatively affect consumers,” the report notes. “Areas of concern range from fraudulent account openings (synthetic identities), person to person (P2P), and full takeover of all accounts, not just checking or cards but also investment accounts and other high-dollar balances.”
Key findings include:
- Identity fraud losses in 2019 rose to a total of $16.9 billion, an increase of 15% over 2018. “Despite fewer incidents (13 million compared with 14.4 million in 2019), identity fraud losses are again increasing after counterfeit card fraud became a less threat post-EMV deployment,” the authors write.
- Account takeover rose 72% in 2019, with criminals taking full control of the account more than half of the time. “Account takeover had the sharpest rise and is the most impactful to consumers as the leading cause of the increase in annual fraud losses.
- Importantly, “younger generations are falling into the optimism bias, with a perception that older Americans are at a higher risk of fraud. They don’t consider that older Americans are at a lower risk for non-card identity fraud. Americans over the age of 55 experience significantly less account takeover and new-account fraud than younger generations. When it does occur, the average loss rate is 30% less than that of non-senior Americans.”
The report then offers several recommendations, including forcing consumers away from static passwords, focusing less on card transaction monitoring and increasing the use of analytics across the entire consumer relationship, and the implementation of two-factor authentication to reduce the likelihood of account takeover.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
