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Preventing Loan Fraud: 10 Important Visuals on File Tampering Detection

2 Mar 2021
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One of the most difficult tasks for lenders is identifying fraudulent loan applications. This challenge is pervasive in business, personal, and mortgage lending, with the past year’s  pandemic accelerating the problem when new processes were quickly introduced into the underwriting workflow.  In this fast-paced environment, it is more crucial than ever for lenders to have the ability to adapt to evolving fraud tactics.

At Ocrolus, we process millions of financial documents each year and have studied the idiosyncrasies of potentially fraudulent activity. To aid lenders in identifying suspicious activity (and more importantly, the associated rise in loan defaults), Ocrolus has developed File Tampering Detection (FTD), a proprietary technology that enhances our core service of automating financial document workflows. While file tampering itself is not proof of fraud, our analysis of thousands of loan outcomes has demonstrated that applications with tampered bank statements, pay stubs, or tax documents perform significantly worse. With FTD, lenders now have the ability to identify red flags, prevent fraud, and price loans more accurately.

Below are ten visuals that highlight fraud’s pervasiveness in lending and detail Ocrolus’ research on the relationship between altered documents and loan defaults.

An Alarming Increase in Fraud

With the world more digitized and transparent than ever before, fraudsters have come up with increasingly clever methods to get past electronic systems. In the annual Consumer Sentinel Network report published by the Federal Trade Commission, reports related to financial fraud and identity theft grew from 3.24M cases in 2019 to over 4.72M in 2020, an acceleration of an ongoing trend.


Further illuminating is the fact that identity theft is rampant across institutions that produce documents used in lending decisions.

Top Types of Identity Theft




An Overview of File Tampering Detection

Ocrolus File Tampering Detection technology analyzes documents to determine whether they have been edited after being originally produced by the issuing institution. By investigating every aspect of the document and its underlying data, FTD can identify tampering undetectable by the human eye.

Of the 2.9 million documents Ocrolus received in 2020, approximately 1 percent showed evidence of file tampering.

Explaining 2020 with File Tampering Detection


Ocrolus FTD captured an increase in file tampering over the summer related to the SBA’s Payroll Protection Program (PPP), which offered loans that could be converted into grants for businesses affected by the pandemic.  This data is consistent with the government’s metrics on the widespread uptick in fraud during the program. Interestingly, there were substantial differences in the rate of FTD by document type. Pay stub FTD was consistently lower (although nontrivial at around 1 percent), while W2 FTD was consistently higher (around 3 percent). Bank statement FTD tracked the overall aggregate trends in FTD rates across all document types. Lenders need to be aware that the types of documents they request can impact rates of suspicious activity, as certain documents may be easier or more important for applicants to manipulate than others. When these documents have been tampered with in any way, it’s a sign that a borrower may be misrepresenting themselves.

On average, Ocrolus clients in 2020 submitted loan applications that had evidence on file tampering in 1.26 percent of cases. However, there was a lot of variation between lenders: some had close to zero evidence of tampering, while the most extreme had an FTD rate of over 4 percent. It is crucial for lenders to understand where they fall on this spectrum to determine the prevalence of fraud in their pipeline.

Distribution of FTD Rates Among Ocrolus Clients

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As shown below, no type of lender is safe from file tampering. Small business loans (which included a substantial portion of PPP loans) had the highest FTD rate (2.1 percent) when compared to personal loans (1.1 percent) or residential mortgages (1.5 percent). However, even consumer loans still have significant FTD rates, demonstrating the value of FTD technology across a wide variety of products.


Focusing just on bank statements, there was variation in FTD rates by the type of organization that created the document. It may seem counterintuitive that statements issued by fintechs are tampered with most frequently, given the advanced technology often employed by these companies in their financial offerings. However, the rapid pace and volume of fintech decision-making may be attractive to fraudsters hoping to slip by unnoticed.


Another interesting discovery is that businesses in the transportation industry saw far more document tampering activity than those in other sectors. With stay-at-home policies adopted across the country in 2020, research indicates that industries most impacted by the economic slowdown, including services and retail, had more incidents of potential fraud than stable industries like construction and finance.



File Tampering Detection Can Reduce Default and Improve Profitability

Ocrolus developed FTD technology in conjunction with our lender partners. What has proven to be most revealing is retroactive analyses. We reviewed documents submitted during the application process for already funded loans, which allowed us to quantify the impact of file tampering on loan performance. After analyzing thousands of loans from multiple lenders, loans with one or more altered documents defaulted at a rate 18% more often than loans without FTD activity.


Furthermore, the percentage of principal that was not recovered was 1.17 times higher for FTD loans.


Finally, and most telling, the gross interest margin for loans with file tampering activity was 70 percent that of loans with no FTD activity.

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On all of these performance metrics, FTD has proven to be a statistically significant predictor of outcomes.


File Tampering Detection (FTD) is a powerful tool in identifying altered documentation and preventing fraud. Loan applications containing tampered documents default more often and are less profitable than loans with verified documentation. Without FTD, lenders are susceptible to mispricing loans, experiencing significant losses, and misclassifying fraud risk as credit risk.

If you want a customized analysis of your loan performance, including how FTD and other Ocrolus analytics can enhance your decisioning process, contact