Fraudulent documents are an ongoing problem for companies all around the world, regardless of the size with criminals putting businesses at more and more risk of fines and fraud. According to a report by CoreLogic, income fraud increased by almost 30% between 2021 and 2022 in the UK.
Meticulously crafted for the sole purpose of faking the financial status of the applicant, such documents pose a significant challenge to financial institutions, lenders, landlords, and employers alike. The consequences of falling victim to fraudulent pay stubs can range from financial losses to compromised business integrity and possible regulatory violations.
But the good news is that there are ways to protect your business or organization from the issues brought forward by fake pay stubs. In this blog, we will go through some of the telltale signs when looking through pay stubs, how businesses can detect them and how technology can help.
Let’s jump straight in!
What are Fake Pay Stubs and How Can Businesses Detect Them?
Before we proceed, let’s define what a fake pay stub is. Fake pay stubs are counterfeit documents that falsely represent an individual’s income and employment details.
Often, they include details such as a person’s name, address, employer name, salary, deductions, and other financial data. These documents are typically used to deceive landlords, lenders, or employers, allowing individuals to qualify for benefits or services they might not otherwise be eligible for.
Over the years, technologies have been developed to make document processing and fraud detection easier. What are these and how can they help?
OCR for Data Extraction
Optical Character Recognition (OCR) technology is used to scan, extract and convert pay stubs into machine-readable text. This simplifies data extraction from both digital and physical documents, making it easier to automatically analyze the content and is a great first step in digital anti-fraud management.
AI and Machine Learning
Advanced AI and Machine Learning algorithms can analyze pay stub data to identify inconsistencies and irregularities. They can detect discrepancies in income figures, deductions, and tax calculations that may indicate a fake pay stub.
Intelligent Document Processing
Intelligent Document Processing (IDP) is a solution that combines OCR, AI, and Machine Learning to analyze documents. With IDP, pay stubs can be verified using external sources such as employer databases or tax records, to validate the accuracy of the information provided.
Leveraging these technologies brings undoubtable benefits to a business some of which including:
- Enhanced Accuracy: AI and Machine Learning models can detect discrepancies that human reviewers might miss, improving accuracy in identifying fake pay stubs.
- Efficiency: These technologies streamline the verification process, reducing the time and resources required for manual checks.
How to Spot a Fake Pay Stub With 5 Signs
Now that you know what fake pay stubs are, we can delve into some of the signs of potential fraud. Some of these signs can be obvious at first glance and are a great list to have when conducting a cursory examination of a potentially fraudulent pay stub.
- Formatting: Inconsistent formatting can be a dead giveaway. Legitimate pay stubs typically follow a standard template with uniform fonts, alignment, and spacing while fake pay stubs often have mismatched fonts, unusual formatting, or uneven spacing.
- Unusual or Unrealistic Figures: Pay stubs should display reasonable and consistent financial figures. So be on the lookout for perfectly round numbers like $10,000 instead of $1,360 for example that seem unrealistic for the industry and position.
- Missing or Generic Company Information: Fake pay stubs may lack crucial details of employer’s address, name and contact details. Always verify the legitimacy of the employer by cross-referencing the information provided.
- Inaccurate Dates and Durations: Pay stubs should reflect accurate pay periods and employment durations. Fake pay stubs often contain implausible dates or durations, such as an unusually short employment period or paychecks issued on weekends or holidays when businesses typically don’t operate.
- Absence of Security Features: Many legitimate pay stubs incorporate security features to prevent forgery, such as watermarks, holograms, or special paper. Difficult to replicate, fake pay stubs usually lack these security features. So be suspicious if the document lacks any visible security features.
How Are Fake Pay Stubs Being Verified by Lenders?
Analyzing and verifying financial documents is crucial for financial institutions and lenders to prevent fraud and enhance security. Some lenders require that applicants supply two recent pay stubs (used for cross-verification purposes) to verify their income.
Some lenders verify these documents manually, calling previous employers to verify the information and relying on the naked eye to spot anomalies and inconsistencies. This can leave room for error and fraud to pass through.
More institutions are now turning to technology to combat the rise in fraudulent documents. This is done through intelligent document processing software. This process uses OCR to extract data from pay stubs to verify and cross-check them. With machine learning algorithms, the software is able to find abnormalities and possible fraud in submitted pay stubs.
EXIF analysis, for example, can be used to detect whether a document has been altered with various photo and document editing software like Photoshop. This option enables you to spot potential fake bank statements with much greater precision.
These technologies offer new ways for businesses to protect themselves from fraudulent documents.
Verify Fake Stubs Seamlessly With Klippa DocHorizon
Now, we’ve laid out how you can automate pay stub verification and its benefits, let’s introduce you to our solution, Klippa DocHorizon. Klippa Dochorizon is a top-of-the-line document processing solution that provides you with the tools to stand against fraudulent documents. Our document processing solution utilizes AI-powered technologies and advanced OCR to combat document fraud.
Using document validation to easily detect image manipulation and identity fraudulent pay stubs and safeguard your business. With exif data analysis, easily detect photo editing and manipulation with EXIF data analysis.
But aside from fraud prevention, you may be asking yourself what else you get from Klippa’s document processing solution. Well, with Klippa DocHorizon, you:
- Save time: Save time using automated document processing, powered by Klippa’s OCR technology and eliminate manual input and document processing.
- Automate document workflow: With the DocHorizon platform, easily set-up workflows and automate document-related business processes.
- Save money: Using automation, easily improve efficiency and workflows to save money on operational costs.
- Seamless onboarding: Verify any documents in seconds and ensure that none of the onboarded clients or employees pose a risk to your company.
- Easy integration: Klippa DocHorizon is easy to implement in no more than 1 day via API and SDK.
- Enhance compliance: Ensure compliance with industry regulations and avoid fines.
Curious to find out how Klippa’s solution can help you take a stand against fraud? Book a free online demo below!