One applicant displayed a fake paystub. Another submitted inaccurate bank records. Yet another was using a synthetic ID. 

It was a heck of a day for the property management team—but unfortunately, not necessarily a rare occurrence in today’s apartment landscape. Fraudsters are becoming more sophisticated, and property teams must fight back just as fervently, according to a panel at the 2024 Entrata Summit session Fraud Detection and the Future of Risk Management.

While many tools are effective in limiting certain types of fraud, a singular solution often leaves gaps in the process. Panelists agreed that a multitiered approach works best to help curtail what could turn into significant financial losses.  

“Think of fraud prevention in the same way you would think about protecting your home,” said Kelly Canepa, SVP of Product for Entrata. “There are multiple things you do to secure your house—you lock the doors, have an alarm system and you might have an ADT sign in the yard to deter people away. Similarly, fraud can come at you in several different ways, so you need more than one approach to combat it.”

Most operators’ fraud prevention process involves readily apparent first steps, such as analyzing credit history, criminal background and rental history, including any evictions. Many have adopted tools to help make this process more accurate and less cumbersome, but it’s becoming increasingly apparent that more layers are needed. 

“In recent years, we’ve just seen this surge of bad actors coming out,” said Fannie Thomas, Senior Director of Business Applications for RangeWater. “They are testing us on so many levels. You can go to YouTube on any given day and type in ‘apartment fraud’ and there are people walking you step by step on how to dupe the apartment industry. Now, we have to be a little smarter than them.”
Thomas agrees with the layered approach, in which operators should start with credit checks and the other basics. But in the current landscape, she says, verifying the identity of the applicant has become perhaps the most crucial step. Fraudsters often will utilize a synthetic identification, which combines real and fake information to create an ID. Income verification is another key component, she says, as it adds a further layer of verification when an applicant provides a paystub.  

“Some of those fake pay stubs are very, very good,” Thomas said. “So now we have to have another tool in place for those malicious actors.”

While forward-thinking operators have added ID and income verification tools, they should also have measures in place to determine whether the tools are working, the panel recommended. 

“When we launched these tools, we looked at delinquency rates and evictions and trended those over a series of years,” said Taryn Silva, Vice President of Learning and Development for Mill Creek Residential. “From 2020 to 2024, our average delinquency went down and rent collection went from 93.1% to 99.4%.”

Silva said another way to analyze the effectiveness of fraud prevention tools is by observing drop-points within the application. Many fraudsters abandon the process when they arrive at the ID or income-verification stages and realize they cannot circumvent the system. 

Panelists also agreed that fraud protection tools can be determined on a property-specific basis, as certain markets don’t pose as much of a risk as others. Silva recommended that any new lease-ups or areas known for fraud should be equipped with a full prevention package, while the remainder of the portfolio “depends on your approach and your market.” 

The primary message imparted by the panel is that multiple components are needed to effectively deter fraud. 

“When you’re thinking about your fraud ecosystem, your defense system, it’s not just one thing,” Thomas said. “It has to be multiple things.”