How Screening Tools 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 National Multifamily Housing Council survey, 93.3% of apartment owners, developers, and managers saw 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 proves that tools designed to thwart fraudulent applications and payment returns are more critical than ever to keep rental operations running efficiently and seamlessly.

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

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 stressing about how to control the problem. Nowawadys, 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 makes it 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 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 critical for any landlord or property manager who deals with 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 get the big picture of the applicant’s background, financial stability, rental track record, 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. 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 catches the latest types of fraud, such as 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 are often missed by human reviewers. 

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 can’t stop fraud on its own. ID verification is great at ensuring a potential applicant is who they say they are, 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, virtually eliminating the possibility of 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 best used in combination with document fraud detection and other income verification methods.

Connected Payroll

Connected Payroll, or payroll linking, is an alternate 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 HTML edit what their bank account says it has in it. 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, solely checking an employment database is not effective enough to stop fraud. Not all applicants’ employers will be in the database, and applicants can still provide fake information, use a bogus company name, or make edits to 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, or you may have to research and select what’s best 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.