What is account takeover fraud and how can you prevent it?
Today, businesses are increasingly vulnerable to financial fraud, with account takeover (ATO) attacks causing losses exceeding $15 billion in the U.S. alone. ATO is a form of online identify theft in which an attacker gains unauthorized access to a victim’s online account and then uses that account to conduct fraudulent activity or access sensitive personal or financial information.
ATO fraud attacks can have serious consequences for both individuals and organizations, ranging from financial loss and reputational damage to operational disruption and compromised customer relationships. And with one in three internet users today being victims of an ATO, these types of cyberattacks show no sign of slowing down.
What is account takeover fraud?
ATO fraud occurs when cybercriminals gain unauthorized access to an individual’s online account, such as a bank account, email account, or social media profile, and use it for malicious purposes. While it has been around for many years, ATO fraud became a ‘popular’ form of identity theft in the early 2000s, when more people began using digital platforms for banking and shopping.
Account takeover fraud can occur through various methods, including:
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Phishing: Cybercriminals send deceptive emails or messages to trick victims into providing their login credentials.
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Data breaches: Stolen credentials from data breaches are sold on the dark web and used to access accounts.
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Malware: Malicious software installed on a victim's device captures login information.
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Credential stuffing: Cybercriminals use automated scripts to test stolen usernames and passwords on multiple sites.
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Social engineering: Manipulating victims into revealing their login information by impersonating trusted entities.
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Brute-Force attacks: Use of automated tools to try numerous username and password combinations until they find a match.
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Man-in-the-middle attacks: Attackers intercept communication between a user and a website, allowing them to capture credentials or other information.
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SIM swap fraud: A type of account takeover where fraudsters transfer a victim’s mobile phone number to a new SIM card under their control. This allows them to intercept SMS-based two-factor authentication (2FA) codes and bypass login protections to gain unauthorized access to accounts.
How does it happen?
Online security systems have traditionally relied on usernames and passwords as their primary method of user authentication. However, these methods are falling short. Weak passwords that are easy to guess are one way for fraudsters to quickly gain access to accounts. Many users tend to reuse passwords across multiple accounts. So, if one account is compromised, attackers can use the same credentials on other platforms.
Even when organizations implement an additional layer of protection like one-time passcodes (OTPs), vulnerabilities remain. OTPs delivered via SMS are becoming a growing target for attackers. Through SIM swap fraud or social engineering, fraudsters can intercept these codes and bypass the intended security controls—ultimately gaining unauthorized access and taking over user accounts.
What type of accounts do fraudsters target?
ATO attacks can occur on almost any type of online account, with fraudsters using a variety of techniques to gain unauthorized access. Passwords exposed in data breaches, as well as cyberthreats such as phishing, malware, SIM swapping, and man-in-the-middle attacks, also remain popular methods.
While Multifactor Authentication (MFA) provides an additional layer of security against ATO, it can still leave an account open to the risk of attack. For example, a SIM swap attack is when a fraudster impersonates a user and convinces their mobile carrier to transfer their phone number to a new SIM card. This allows the attacker to intercept MFA codes sent via SMS, giving them control over the user’s phone and with it, access to sensitive online accounts.
Phishing for MFA tokens further undermines the effectiveness of MFA tokens. With this type of attack, fraudsters send the user an email with a link that takes users to what appears to be a typical login site. If they type in their username and password, the attackers can steal their credentials and MFA token, which gives them access to the account even though MFA is enabled.
How account takeover fraud affects businesses
As digital interactions become the backbone of business growth, it is critical for businesses to fortify their digital defenses and protect themselves and their customers from identity fraud.
ATO losses can have a major financial impact on enterprises. While the average cost of an ATO attack is $344, these costs can swiftly escalate, resulting in a severe impact on the bottom line. Equally damaging is the erosion of customer trust and the resulting reputational damage, which can lead to long-term client attrition and decreased market credibility.
Most consumers hold businesses responsible for protecting their online presence. So, it’s not surprising that 38 percent of ATO victims abandon an enterprise after a takeover attempt. In addition, non-compliance with regulations such as General Data Protection Regulation (GDPR) and Revised Payment Services Directive (PSD2) can result in significant legal and financial penalties.
Relying solely on traditional authentication methods and basic MFA is no longer sufficient. Organizations must adopt more sophisticated and adaptive security solutions—such as biometrics—to stay ahead of cybercriminals.
How account takeover fraud affects individuals
Account takeover fraud can have serious and lasting consequences for individuals as well:
Financial loss - ATO fraud can lead to severe financial loss for individuals. Cybercriminals can swiftly withdraw funds, make unauthorized purchases, and transfer money from a victim's accounts, leading to immediate monetary loss. They can also exploit an individual’s personal information to apply for loans and credit cards, resulting in significant debts that the victim is held responsible for. This can also damage their credit score, complicating their financial stability and future creditworthiness.
Identity theft - When fraudsters gain access to and misuse personal information, they can also open new accounts or obtain identification documents in the victim's name. This not only exposes an individual to potential financial liabilities but can also entangle them in legal complications. The misuse of social media or email accounts by criminals can lead to reputational harm, with fraudsters posting inappropriate content or sending deceptive messages.
Legal consequences - In some instances, victims of ATO fraud may face potential liability for unauthorized activities conducted using their compromised accounts, including money laundering. In addition to the stress and anxiety caused by this situation, the legal ramifications can be financially taxing, as victims work to clear their names and prove their innocence.
What victims of account takeover fraud can do
Recovering from account takeover (ATO) fraud can be a challenging process, but there are several steps victims can take to mitigate the damage and regain control of their accounts.
The first thing a victim should do is change the passwords of their affected accounts, using strong, unique passwords for each account. They should also enable multi-factor authentication (MFA) and biometric authentication for the accounts where these security options are supported.
Individuals should notify their financial institutions of the fraud, contacting their banks and credit card companies to secure their accounts, and then regularly check the accounts moving forward for any unauthorized or suspicious activities. They should also notify the major credit bureaus and request a fraud alert or credit freeze on their credit reports. And, if any identification documents have been compromised (e.g., driver’s licenses or passports), fraud victims should contact the relevant authorities to reissue these documents.
What can financial institutions do to prevent account takeover fraud?
Financial institutions face a more intense and ongoing battle against account takeover fraud tactics. To effectively combat this threat, they must consider a multi-layered approach and consider some of the latest developments in fraud detection and prevention.
Multi-factor authentication (MFA) - Often considered the cornerstone of ATO prevention, requiring multi verification factors (e.g., password, SMS code, biometric scan).
Biometric authentication - Biometrics such as facial recognition and voice recognition with integrated liveness detection and safeguards against deepfakes and injection attacks.
Risk-based authentication - Adapting authentication requirements based on the perceived risk level of a transaction. For example, requiring a step-up verification for high-value transfers or logins from unfamiliar locations.
Real-time monitoring - Continuously monitoring account activity for suspicious patterns, such as unusual transaction amounts, login locations, or device changes.
AI and machine learning - Leveraging AI and machine learning algorithms to analyze vast amounts of data and identify subtle fraud patterns that humans might miss.
What can individuals do to prevent account takeover fraud?
Preventing ATO fraud requires a multi-layered approach to secure an individual’s online presence, including the use of strong, unique passwords for each account, and enabling multi-factor authentication (MFA) that includes biometrics, if supported.
Individuals need to be vigilant against phishing attempts to steal personal information and account credentials. Regularly monitoring accounts for any suspicious activity is also crucial to safeguard against ATO fraud. This Account Takeover Fraud Prevention blog provides additional guidance.
The bottom line
ATO fraud attacks can have devastating consequences for both individuals and organizations, leading to financial loss, reputational damage, operational disruption, and compromised customer relationships. Individuals may face unauthorized transactions and identity theft, while businesses might experience data breaches and even loss of customers. To mitigate these risks, adopting a multi-layered security approach is crucial. This includes enabling multi-factor authentication (MFA), incorporating secure cloud-based biometric authentication with liveness detection, regularly monitoring accounts for suspicious activity, and educating users about phishing and other common attack vectors. By taking these proactive steps, individuals and organizations can better defend against ATO attacks and safeguard their digital assets.
To learn more about advanced fraud solutions to combat ATO, contact us today.
