Written by firstparty fraud » Updated on: July 25th, 2025 37 views
What is First Party Fraud & How Can You Prevent it Within Your Organization?
First-party fraud can cause significant damage to organizations. This blog provides insights on how to detect and prevent first-party fraud to protect your business and its stakeholders from financial losses.
If you’re looking to understand and prevent first-party fraud in your organization, Anonybit’s solution for first-party fraud prevention can be a game-changer.
What is First Party Fraud?
First-party fraud is when an individual or an organization purposely misrepresents their identity or provides incorrect information to gain an unfair or unlawful advantage. It may involve using a synthetic identity. The use of false or synthetic identifying information distinguishes it from third-party fraud, in which fraudsters use a stolen identity to carry out illegal activity, or second-party fraud, where the fraudster uses someone else’s identity with that person’s knowledge.
Prevalence of First-Party Fraud in Financial Applications
First-party fraud is a significant issue in credit, loan, and insurance applications. Individuals often attempt to secure better rates by misrepresenting their employment status or income, making it common in these sectors.
Types of First-Party Fraud: Opportunistic vs. Organized
First-party fraud may be either opportunistic, carried out by an individual, or organized, perpetrated on a larger scale by a fraud ring. Organized fraud, in particular, can lead to major losses because criminal rings can defraud organizations out of large sums of money and because they employ professional tactics to fly under the radar and evade detection.
How Does First Party Fraud Occur?
First-party fraud is when an individual or an organization purposely misrepresents their identity or provides incorrect information to gain an unfair or unlawful advantage. It may involve using a synthetic identity. The use of false or synthetic identifying information distinguishes it from third-party fraud, in which fraudsters use a stolen identity to carry out illegal activity, or second-party fraud, where the fraudster uses someone else’s identity with that person’s knowledge.
Prevalence of First-Party Fraud in Financial Applications
First-party fraud is a significant issue in credit, loan, and insurance applications. Individuals often attempt to secure better rates by misrepresenting their employment status or income, making it common in these sectors.
Types of First-Party Fraud: Opportunistic vs. Organized
First-party fraud may be either opportunistic, carried out by an individual, or organized, perpetrated on a larger scale by a fraud ring. Organized fraud, in particular, can lead to major losses because criminal rings can defraud organizations out of large sums of money and because they employ professional tactics to fly under the radar and evade detection.
How Does First Party Fraud Occur?
First Party Fraud encompasses a wide range of fraudulent activities:
Individuals may make a purchase or transaction and either regret it afterwards or claim it wasn’t them and report it as fraud
Organized groups of criminals may make purchases and ship them to each other or make payments to one another and then claim it was never sent or never received.
First-party fraud compared to other fraud categories
According to the United States Federal Reserve, first-party fraud is one of four categories. It is important to understand the difference in knowing how to address this type of fraud.
1. First-party Fraud
Fraud is committed by an account holder whose main victim is an organization. Instances of FPF:
Include fraud committed via an account opened under a synthetic identity
Abuse of dispute policies to obtain a refund on false or misleading claims
Abuse of promotion policies to acquire discounts or excess refunds.
2. Second-party Fraud
The unauthorized use of an account holder’s funds by a loved one or trusted acquaintance. A loved one who obtained access to a credit card on trust might, for example, abuse the access to make more purchases—or different types of purchases—than were agreed upon when they were given access.
3. Third-party Fraud
Transactions made by an unknown third party who has illegally gained access to an account or payment instrument. Account takeovers or transactions on an account opened with a stolen identity are classic examples.
4. Fraud in the Inducement (Scams)
Some firms call this a victim-assisted scam. This means that a scammer tricks the account holder into making a transaction that causes them to lose money or be harmed in some way. Examples include romance scams and scams using fear to manipulate vulnerable people, such as:
A person who is disabled
Elderly
In urgent need due to personal circumstances
Protecting Businesses from Data Breaches and Fraud with Decentralized Biometrics
At Anonybit, our decentralized biometrics system design helps companies prevent data breaches and all types of fraud. With a decentralized biometrics solution, companies can bind a person to their physical identity, disallowing someone to claim that a transaction they initiated was not them. We also enable passwordless login, wire verification, step-up authentication, and help desk authentication. We are on a mission to transform the way companies implement identity management solutions.
To achieve this goal, we offer security solutions such as:
Secure storage of biometrics and PII data
Support for the entire user lifecycle
1:1 biometric authentication and 1:N biometric matching to prevent duplicates, synthetics and blocklisted identities
Anonybit eliminates the tradeoffs between privacy and security. Prevent data breaches, enable strong authentication to eliminate account takeovers, and enhance the user experience across the enterprise using Anonybit.
Book a free demo today to learn more about our integrated identity management platform.
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