How agents can reduce fraud before, during and after the referencing process 

In this tips piece, Blake Richmond, managing director of referencing at Goodlord, sets out how agents can combat fraud in the lettings process. 

Over recent years, many agents and landlords will have seen a rise in the number of fraudulent tenancy applications. Thanks to changing eviction regulations, rising economic instability, and the increased accessibility of the tools needed to forge documents, the conditions have been ripe for a surge in fraud.

However, alongside this, new methods to prevent and detect fraudulent activity have also emerged. Here’s how agents can leverage new technology to spot counterfeit applications and protect their landlords from rogue renters. 

Know what you’re looking for

The most common forms of fraud we identify typically involve one of the following: fake forms of ID being submitted; doctoring of documents around income or residential status; and fake references from employers or landlords. The falsification of these documents is on the rise, so knowing to check them carefully and put in place measures to spot forgeries is vital. 

How is technology helping to combat the rise in fraud

The best way to avoid fraud is to set up your referencing process to catch fake documents and spot issues with ID by making the best use of new tech to verify identity and data. The three key checks areas that are key to building a financial picture and support in identifying fraud are:

• ID check - using artificial intelligence (AI) tools such as Onfido, which Goodlord uses, to check ID documents remotely can match genuine tenants to their identity document. All a tenant has to do is scan their ID and snap a selfie, then a hybrid of machine learning and human expertise verifies that their ID is genuine and checks if their facial biometrics match the photo. This technology - which is also used to match people to their passports at airport eGates - ensures that the reference that is generated is truly for the person that has imputed the data.

• Credit check - Obtaining a credit profile from a Credit Reference Agency gives added reassurance that an individual’s financial footprint can be found online. There are genuine reasons why someone may not have a financial profile - for example, they might have only  recently moved to the UK or they are a first time renter who hasn't used any lending products - however, not finding a profile where it is expected is a flag that should be investigated further. 

• Income check - Open Banking is the latest tool that is being used to verify tenants' incomes. Tools like Credit Kudos, an Open Banking provider, allows us to securely exchange data between us and the applicant's bank. Open Banking, which has been in use since 2018, enables us to verify a tenant's salary information directly with their bank. This speeds up the financial checking process with a system that is not able to be fraudulently manipulated. The same cannot be said for the use of pay slips, which are often the first thing to be falsified. Open Banking is becoming more common and, as understanding of its benefits increases among agents and tenants, we are seeing a rise in its adoption, which is reducing both referencing  turnaround times as well as fraud. 

After referencing - Hedge your risk

Even with the most thorough process, there is still the possibility of fraud taking place. 

It’s always worth considering taking out rent protection insurance to help with any costs should a tenant stop paying their rent. Following the pandemic, demand for insurance has increased substantially. It’s a brilliant safety net that can provide peace of mind to your landlords. 

The rise of technology is playing a massive role in both enabling and combatting referencing fraud. But if agents are savvy, prepared and know what to look for, fraudulent applications can be found quickly and easily before it’s too late.