Catch Me If You Can . . . And I Bet You Can’t!

by David Stunja

Unfortunately, fraud is not a narrow topic in the apartment world. It arrives at properties in various forms, and scammers are becoming more sophisticated in the ways they aim to circumvent the system.

Tactics include altered identities, counterfeit paystubs, modified bank statements, fake employment verification, and yes, illegitimate assistance animal requests. A panel of industry experts discussed the wide-ranging topic at the Apartmentalize 2023 session Catch Me If You Can . . . And I Bet You Can’t, providing a high-level account of their experiences with fraud and what they are doing to combat it.

Daniel Berlind, CEO of Snappt, noted that approximately 10 million fraudulent documents are submitted to the apartment industry annually, which equates to approximately 1,250 per hour. Of the more than 3 million financial documents scanned by Snappt, the company discovered that one in eight is illegitimate. That is an alarming trend, especially when one considers that fake financial documents are responsible for approximately 25% of evictions and the average eviction cost is $7,500.

“It’s well documented that there are entire fraud rings out there, and they’re creating a fake person from the ground up,” Berlind said. “They’re producing all the identity documentation and financial documentation that you’d expect, then passing this fake person in front of you.”

Identity verification and income verification platforms continue to be developed, along with tools to analyze an applicant’s rental history more effectively, enabling the industry to fight back. But not all fraud falls into the bucket of someone trying to scam their way into a home. As PetScreening director of multifamily Pat Patterson astutely noted, it extends to pets and assistance animals, as well.

Applicants frequently attempt to pass off their pet as a service animal or support animal, like an ESA, aiming to escape pet fees, pet rent or to work around a community’s restricted list. These attempts consist of falsified and altered documents, forged signatures, purchased ID cards and invalid online certificates. Complicating matters, rules surrounding what property teams can and can’t ask about service animals and support animals can be confusing.

Stephanie Thornberg, vice president of Avenue5 Residential, recommends that property teams become familiar with the HUD guidelines on assistance animals.

“When you talk about the different types of animals, you need to make sure that you know the terminology,” Thornberg said. “And always start from a place of ‘yes’ with accommodation animal requests. If a resident is requesting a reasonable accommodation, we assume they need it, and we’re going to work with them to accomplish that task.”

Thornberg said that fraudulent requests will eventually be uncovered by properties that utilize the proper resources to analyze them, whether it’s a well-versed risk management team or a third-party service that specializes in the verification process.

Properties are seeing fraud from multiple sides. Whether it’s identity-based, income-based or pet-based, the potential damage spreads beyond the mere dollars allocated to each case. In a peripheral way, it can affect pricing, as well.

“Fraud is potentially responsible for rising rents, because it affects the bottom line,” Patterson said. “All costs incurred by a community factor into where the rates have to be set.”

While operators clamor to keep pace with current fraud activity, the potential for future types of fraud is endless with the ready availability of AI and machine learning. Additionally, Berlind noted that Adobe documents such as pdf files are easier than ever to modify, which aids the pursuit of producing genuine-looking documentation.

With that in mind, the industry will have to be vigilant about the increase of sophistication in fraud attempts, both with augmented current measures and with AI regularly breaking barriers. The idea that apartment homes now can be located, researched, applied for, approved and moved into without any human interaction is something that could foster fraudulent activity. Communities should consider at least some in-person component, which could include a pet interview for pet-owning residents, before a lease is signed as a potential preventative measure.

New-age AI-fueled scams, such as deep fakes and algorithm manipulation, could soon become prominent in multifamily, and the industry will have to be ready. But as the scammers get more sophisticated, so too will the industry as it works to combat them.

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