Do Screening Tools Work? How Many Fail to Catch Fraud

As a property manager, you are probably aware that there’s a growing number of attempts by prospective tenants to apply for leases using fake information. Many of these scams are designed to convince you to skip doing a thorough background check. And often, it’s because the applicant is hiding something.

According to a recent survey by the National Multifamily Housing Council, 93.3% of apartment owners, developers, and managers reported experiencing application fraud in the last 12 months. Failure to identify this fraud can contribute to one reason why many landlords report a higher number of payments with insufficient funds when rent is due.

This trend demonstrates that tools designed to prevent fraudulent applications and payment returns are more crucial than ever to maintain efficient and seamless rental operations.

This article focuses on the various tools created to assist property managers in stopping fraud and explores their effectiveness. Let’s dive in!

Quick Insights

• Traditional screening tools often fail to detect fake documents, such as altered pay stubs and bank statements.
• Fraudsters can easily manipulate financial documents to make themselves appear more qualified.
• Property management systems can screen tenants, but usually don’t detect document fraud.
• Fraud detection tools utilize technology to identify forged documents before they are approved.
• The most effective tools use AI and machine learning to spot patterns and inconsistencies.
• ID verification and bank linking can help, but they aren’t enough on their own.
• A layered approach that includes document fraud detection offers stronger protection.
• Choosing the right tool means looking at accuracy, compliance, integration, and scalability.

How to Spot Fraud

First, let’s review the ways applicants attempt to defraud property managers.

There are a few red flags that may alert you to an applicant who is trying to scam you. It’s all too easy for prospects to make subtle changes online to bank statements, pay stubs, and tax forms, leaving some property managers stressed about how to control the problem. Nowadays, a scammer can make a simple tweak in a code or Photoshop, and suddenly, their annual salary goes from $40,000 to $140,000. The result: a potentially high-risk tenant moves into your property undetected.

But it’s not your fault! There are thousands of ways to create fake documents, most of which are nearly impossible to detect via the human eye. The good news is that there’s technology available on the market that property managers can utilize to prevent fraudulent rental applications from slipping through the cracks.

Different Screening Techniques & Their Effectiveness

Investing in software to detect fraud is crucial for any landlord or property manager who handles lease agreements. But which screening tool is right for your business?

Property Management Systems

Let’s start by looking at the differences between screening and fraud detection tools. Yardi and Appfolio, for example, can screen tenants, but they don’t detect fraud on their own.

In a nutshell, tenant screening helps landlords and property managers gather vital information about potential tenants ahead of signing on the dotted line. It involves gathering information and conducting various checks to determine an applicant’s suitability. A good screening process should involve a range of reports, such as background checks, credit checks, employment verification, rental history verification, and references.

With a screening tool, the goal is to gain a comprehensive understanding of the applicant’s background, financial stability, rental history, and general reliability. Some of these screening tools may have handy integrations with a fraud detection company, so be sure to do your research.

Comprehensive Fraud Detection

Fraud detection software is designed to spot fake documents like pay stubs and bank statements before they even get through the screening process. These tools help save time, money, and future headaches.

The first crucial part of a comprehensive fraud detection suite is document fraud detection. Effective document fraud detection technology should examine a document’s metadata and structural elements to identify potential discrepancies. In today’s world, most alterations escape the naked eye, making forged documents indistinguishable from authentic ones. To ensure a document’s legitimacy, you need to utilize technology that conducts thorough forensic scans.

The most effective fraud detection solutions go a step further, leveraging machine learning and AI technology to identify and flag fraudulent document patterns. This advanced approach detects the latest types of fraud, including inception fraud and payroll fraud. 

Lucky for you, Snappt does all of these things! Snappt’s AI-powered fraud detection software has scanned over 8 million documents and has a 99.8% accuracy rate in detecting fraud. Our advanced algorithms can detect any changes or edits made to income documents, including those that human reviewers often miss. 

So, instead of spending hours vetting an application, you can spend mere minutes uploading digital documentation for image and historical analysis, as well as a data-driven review using algorithms developed to catch document manipulation. Within 30 minutes, certification is delivered to the user, stating whether the documentation is fraudulent or clean.

What about connected payroll, ID verification, and bank linking? Can’t they stop fraud without having to invest in fraud detection software? Let’s find out.

ID Verification

Many property management companies agree that ID verification is a great tool to add to your arsenal, but it can’t stop fraud on its own. ID verification is great at ensuring a potential applicant is who they claim to be, but that doesn’t mean they are being honest across the board. It’s best to use it alongside document fraud detection, but not as a substitute.

Bank Linking

Leasing teams often ask applicants to use a bank-linking service as a way to verify their income. However, the downside is that this method can’t be required. Applicants are allowed to opt out, effectively eliminating the need for any verification process. Additionally, bank linking can be easily manipulated by fraudsters who are able to fake bank statements or provide false account information. This technology is most effective when used in conjunction with document fraud detection and other income verification methods.

Connected Payroll

Connected Payroll, also known as payroll linking, is an alternative method for verifying income and employment. It involves connecting directly with an applicant’s employer through a secure portal to verify their salary and job status. Similar to bank linking, applicants can opt out of this technology, or their employer’s payroll provider may not be connected to the system, bypassing any verification system. Connected payroll should be paired with document fraud detection and other income verification methods to offer the strongest defense against fraud. 

Optical Character Recognition (OCR)

Some landlords consider using OCR (Optical Character Recognition), but it doesn’t cover all the bases. This tool can never fully and accurately detect a significant amount of fraud. By simply using a web browser, a user can edit the HTML that displays their bank account balance and information. They can take a screenshot of that or print it to a PDF and successfully create a pixel-perfect, undetectable copy that’s impossible for OCR to detect.

Employment Databases

Employment databases are often used to verify that an applicant works where they claim to. While this can be an added benefit to your screening process, relying solely on an employment database is not effective enough to prevent fraud. Not all applicants’ employers will be in the database, and applicants can still provide false information, use a fictitious company name, or modify their income documents during the application process.

How to Ensure You Choose the Right Screening Tool for Your Business

While it’s crucial to leverage general property management software to run a successful apartment rental company, it’s equally important to implement thorough fraud detection to protect your properties.

Some software tools available on the market today offer integrations with fraud detection companies; otherwise, you may need to research and select the best option for your business needs.

Key features to look for should include:

• Accuracy
• Algorithm age
• Number of documents scanned
• SOC2 compliance
• Customer support capabilities
• Accessibility
• Scalability
• Integration with other software

The risk landscape will only widen and become more complex for property management companies and landlords looking ahead. And because most rental companies aren’t experts in fraud detection and prevention, it’s essential to enlist the support of the right tools and partners that can help navigate the pervasive, threatening world of rental fraudsters.

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