Despite the rise of advanced KYC (Know Your Customer) technology and tighter regulatory frameworks, fraudsters still manage to slip through the cracks and open bank accounts — often using them for illicit activities such as money laundering.
What are the common methods used by Fraudsters to bypass KYC?
Even with robust KYC systems in place, fraudsters exploit a variety of clever tactics to impersonate real individuals, create entirely new fake profiles, or manipulate systems from the inside.
1 - Identity Theft
One of the most widespread approaches, identity theft involves criminals using stolen personal information — such as names, ID numbers, or addresses — obtained through data breaches, phishing, or leaks. Since the data is genuine, banks are often misled into approving the application, assuming the applicant is legitimate.
2 - Synthetic Identity Fraud
This method blends real and fake data to create entirely new identities. Fraudsters often pair authentic information, such as a valid Social Security Number, with false names and addresses. Because part of the identity passes validation, these accounts are likely to slip through initial KYC checks and only raise suspicion much later.
3 - Document Forgery
Forged or digitally altered documents are frequently used to trick onboarding systems. Fraudsters modify passports, ID cards, utility bills, or bank statements to make them look authentic. A typical example would involve using edit tools to extend an expired ID’s validity before submitting the document for verification.
4 - Deepfake & Face Swap Attacks
With advances in artificial intelligence, fraudsters are now using deepfake technology to manipulate video or photo identity checks. These hyper-realistic fake visuals can deceive facial recognition systems and even trained human reviewers, making it challenging for banks to confirm the true identity of the applicant.
5 - Money Mule Accounts
In this scenario, fraudsters convince real people, often through social media or job scam postings, to open legitimate bank accounts on their behalf. These “mules” are usually paid a fee for the service, unaware that their account will later be used to move or launder criminal funds. For instance, a student might open an account and share login credentials for €200, unknowingly enabling financial crime.
6 - Social Engineering
Sometimes fraudsters sidestep the entire KYC process by targeting the human element — bank employees or customer service agents. Through manipulation or persuasion, they convince staff to override standard security checks. A common example is a fraudster posing as an irate customer on a support call, pressuring the agent to skip identity validation steps and approve account access.
7 - Exploiting Weak KYC in Foreign Jurisdictions
Fraudsters often seek out banks operating in regions where identity verification systems are outdated or poorly enforced. By submitting low-quality fake IDs from jurisdictions with weaker regulatory scrutiny, they exploit the limitations of global KYC systems and manage to open accounts.
Conclusion
As fraudsters continuously refine and expand their techniques, the need for KYC procedures to evolve in parallel has never been more critical. Staying ahead of these ever-changing tactics is essential for financial institutions to effectively detect and prevent fraudulent activities before they can cause harm.
Swiss fintech leader YAPEAL is driving this transformation by providing advanced KYC solutions that enhance security, streamline compliance, and empower financial institutions to navigate the complexities of modern regulations effectively.
The Author
Charline Dulac
Growth Marketing Manager at YAPEAL