Episode 7: Fighting Fraud: Unmasking the Latest Schemes and Safeguarding Your Communities
“More and more applicants, when they are applying for vacant units across the country, are using fake financial information.”
This quote from Dan Berlind, CEO of Snappt, sets the stage for a critical discussion on the escalating problem of resident fraud in the multifamily industry, a topic he explored in-depth on The Multifamily Review. In conversation with host Marcus Armstrong, Dan shed light on the evolving tactics of application fraud and how property managers can protect themselves.
From forged bank statements and paystubs to the alarming rise of "inception fraud," where fabricated businesses and compromised payroll systems generate legitimate-looking documents, fraud is becoming increasingly sophisticated. Even bank account linking services are being exploited, with fraud rings creating login credentials to fabricate financial histories. This increasing complexity, Dan warns, is a troubling trend.
The shift to digital applications and remote leasing, while convenient, has inadvertently created a breeding ground for fraud. The emphasis on speed and high occupancy rates, particularly during lease-ups, often overrides thorough document verification. Dan explains how fraudsters exploit this by creating artificial urgency. Snappt’s data, based on monitoring 1.9 million units, reveals applicants applying to hundreds of properties in a single week, highlighting the scale of the problem. While major cities and high-growth areas like those in the Sun Belt and Austin, Texas, are particularly vulnerable, no region is immune.
The consequences of resident fraud extend far beyond financial losses. Dan urges property managers to consider the potential risks to their communities, citing links to drug dealing and human trafficking. Property damage and reputational harm are also significant concerns.
Traditional income verification methods are no longer adequate. Dan argues that high turnover and commission-based compensation for leasing agents often prioritize speed over scrutiny. These agents, typically not trained in fraud detection, are ill-equipped to handle the increasingly sophisticated tactics employed by fraudsters.
Snappt offers a solution by removing the leasing agent from the underwriting equation. Their platform verifies applicant identity and financial information against property criteria, integrating with a vast network of payroll providers, including gig economy platforms. This comprehensive approach addresses the growing challenge of verifying income for gig workers.
When evaluating fraud detection technologies, Dan advises considering the provider's long-term viability, security posture (including SOC 2 Type 2 compliance), customer support, and investment in R&D, particularly in machine learning and AI. Proactive measures, like Snappt's dedicated fraud forensics team, are crucial.
Looking ahead, Dan anticipates the continued rise of inception fraud and emphasizes the need for constant vigilance. He recommends networking, listening to industry podcasts, requesting data from companies, and conducting pilot programs. Snappt's website (www.snappt.com) offers valuable resources, including blog posts and data reports on fraud trends.
Finally, Dan shared the story behind Snappt’s squid logo, Sherlock, a playful nod to the company's dedication to uncovering the truth. For more information, visit www.snappt.com or contact Snappt directly.