Daniel Berlind
CEOIn this article
Inception fraud is one of the most deceptive and damaging types of fraud in the multifamily industry. Unlike traditional fraud methods, inception fraud can bypass even the most advanced applicant screening solutions, making it a significant challenge for property managers. Fraudsters use legitimate payroll software to generate structurally correct paystubs or bypass connected payroll and bank linking features, making their applications appear trustworthy.
To combat this sophisticated threat, Snappt implemented a manual Know Your Business (KYB) check in Spring 2024 as part of our proprietary fraud detection suite. This manual KYB verification enhanced our ability to identify fraudulent applications that rely on fabricated payroll records, closing a critical gap.
Now, by partnering with Middesk, Snappt is taking our fraud detection efforts to the next level. Middesk’s automated KYB solution allows for instant verification of business information, including financial status, history, beneficial ownership details, and hundreds of other data points. This partnership provides an additional layer of protection against fraud, ensuring that leasing teams can trust the information provided by applicants.
What is a “Know Your Business” or “KYB” check?
“Know Your Business” checks verify that a business is legitimate. These checks are standard practice in the financial services industry because when money is exchanged, people want the added assurance that the business or corporation they are lending money to or taking money from is legitimate.
Here are a few examples of “signals” that indicate the legitimacy of a business:
- Confirming the business address is a legitimate business and not a personal address or empty lot
- Verifying that the business is registered with the state
- Checking when the business was formed
- Checking if the business has a functioning website and when the website was generated
- …and many more
Inception Fraud Bypasses Traditional Methods
Applicants intending to commit Inception Fraud have generated authentic-looking payroll using professional payroll software, ensuring their pay stubs are accurate and structurally legitimate. Then, they will bypass a connected payroll or bank linking step and go directly to document upload.
Because the paystub will appear legitimate, traditional document fraud detection will not raise any red flags. However, with Snappt’s KYB check, we can access business records and verify the legitimacy of the applicant’s claimed employment information.
This added layer of verification allows us to catch more instances of Inception Fraud, protecting our clients from potential financial losses and maintaining the integrity of our platform.
What This Means for You
With this new enhancement, leasing teams can expect:
Faster Application Processing – Streamlining fraud detection means approvals happen quicker for legitimate applicants.
Stronger Fraud Protection – KYB checks add another layer of security against payroll fraud, ensuring that only verified businesses are associated with an applicant’s income.
Greater Peace of Mind – Confidently approve tenants, knowing their financial documentation has been thoroughly vetted.
Snappt remains committed to staying ahead of evolving fraud tactics, giving multifamily professionals the tools they need to make informed leasing decisions with confidence.
FAQ
Why is a KYB check now a crucial component of catching Applicant Fraud?
Inception Fraud has been steadily increasing since Snappt first identified this type of fraud in February 2024, and standard fraud detection methods can’t detect Inception Fraud.
Tenant Screening: Committing payroll fraud does not impact Credit Scores and is not yet well-known enough to be considered a criminal activity malicious enough to be on a criminal record.
Payroll and Bank Linking: Fraudsters can easily create a fake business and generate legitimate-seeming payroll deposits into a bank account by using certain (legitimate) payroll providers.
Document Fraud Detection: The paystub is structurally legitimate on every level of document review because it is generated from a legitimate payroll provider
Luckily, Inception Fraud can be identified with Snappt’s proprietary solution.
Some of our checks include:
- Checking that the business an applicant claims to be receiving income from is legitimate (KYB)
- A check to see if the business is on Snappt’s Known Threat List
- Algorithmic name-matching checks
When did Snappt implement a KYB check into their fraud detection process?
March 2024: Snappt implemented a manual KYB check as part of the solution for catching Inception Fraud.
January 2025: Snappt partnered with Middesk to speed up the KYB check portion of the Inception Fraud review.
Is there an additional charge for submissions that Snappt identifies as needing a KYB check?
No. Enhancements to Snappt’s Fraud Detection process are automatically included in the price you currently pay for Snappt.
Do any other income verification and applicant fraud detection solutions offer a KYB check?
No. Snappt is currently the only Applicant Fraud Detection company that has implemented a Know Your Business check as part of our review.
Learn how Snappt is leveling up its fraud detection solution