The Pitfalls and Solutions to the Ever-Growing Document Fraud Industry

If anyone told you that document fraud is still one of the largest forms of fraud in this digital age, many would deny given the prevalence of digital credentials today. It is hard to fathom that the market for counterfeit and fake documents and certifications is still high in 2021. However, the counterfeit market for…
The Pitfalls and Solutions to the Ever-Growing Document Fraud Industry

If anyone told you that document fraud is still one of the largest forms of fraud in this digital age, many would deny given the prevalence of digital credentials today. It is hard to fathom that the market for counterfeit and fake documents and certifications is still high in 2021. However, the counterfeit market for physical documents like driving licenses and passports is still a highly valuable market as seen from figures recorded in 2020.

According to a study by U.K-based researchers at the University of Portsmouth’s Centre for Counter Fraud Studies, counterfeit documents and document fraud in general cost the global economy over £3.2 trillion annually, with the numbers increasing year after year. As with previous years, passports and government identification had the highest cases of fraud and counterfeit, another report by TrustID shows.

Passport visas made up 6% of the total fake documents during checks made in 2020 representing a sharp fall from the 12% recorded in 2019. This was possibly due to the COVID-19 protocols that restricted many citizens from traveling abroad. However, fake IDs and passports witnessed growth in fraud cases increasing by 9% from 2019 and 12% from the all-time high figure recorded. This could indicate a possible surge in unqualified/unregistered workers looking for employment during the COVID 19 pandemic.

Simply put, document fraud is defined as the “manufacturing, counterfeiting, alteration, sale, and/or use of identity documents and other fraudulent documents to circumvent immigration laws or for other criminal activity”.

Over the years, institutions and companies have been in the field looking for ways to stop documentation fraud but are yet to find a foolproof method. One of the most commonly implemented solutions to document fraud is designing more secure documents that make it harder to counterfeit. Nonetheless, this will only make the fraudsters more creative devising newer and better ways to create counterfeit and fake documents.

As such, authorities are moving their efforts towards blockchain technology which could be the solution to securing, verifying, and authenticating documents.

A decade of authentication and verification solutions

After decades of trying to prevent and detect document fraud, we finally have a solution in blockchain technology that is decentralized, secure, and immutable. Blockchain technology brings about a new perspective on document management systems protecting any party from tampering with the information already recorded on it.

At its core, blockchains’ solutions to document fraud stem from how the technology innately works. The technology creates a chain of transactions that is immutable (cannot be deleted or changed without consensus) with end-to-end encryption. This means that only the verified documents will be broadcasted on the network and must be authorized to ensure they are the real document. Additionally, hacking a blockchain is almost impossible (unlike conventional document management servers) as every computer in the network has a copy of the document.

First, blockchains maintain the integrity of the document by creating a hash of every single document posted on the chain. The hashes are either public or private and can only be changed, deleted, or manipulated when consensus amongst the parties involved is reached. Even so, there will be a trail showing the hash has been tampered with.

A case in example is the Cardano-based platform, Blockademia, a decentralized information system solution that issues, verifies, and authenticates documents on the blockchain. According to their website, the platform is responsible for checking and authenticating documents across the globe including issued diplomas, certificates, title deeds, insurance policies, state documents, certificates of ownership, source codes, royalty rights documents in music and films, and other important documents.

We have just been featured at @CardanoCube as one of the most interesting projects on the Cardano ecosystem to invest in, under the “Identity” section.

— Blockademia – ACI (@blockademia_aci) October 26, 2021

Every single version of a document is timestamped and given a hash to allow organizations and institutions to keep track of when a particular document was added to the blockchain. As explained before, any changes or tampering with the document will be visible on the chain with a different timestamp.

Given Blockademia is hosted on a public blockchain, anyone in the public can check the authenticity of the documents posted on the platform, reducing the cases of fraud. Authorities, universities, organizations, and governments are responsible for verifying and authenticating documents before they are posted on the blockchain. Leveraging its blockchain features, Blockademia ensures the documents are permanently registered and no one can tamper with them.

Can authentication systems survive the digital identity revolution?

As the world moves to a digital future and digital identification, document fraud and counterfeiting are only going to get worse. According to the Association of Certified Fraud Examiners (ACFE), 71% of organizations sampled expect document fraud to go up in the next year as the world adjusts to the COVID 19 pandemic.

With current traditional authentication techniques, document verification and authentication are becoming more challenging for corporations and institutions worldwide due to the complex processes needed to verify documents and fraudsters getting better at counterfeiting mechanisms. Traditional authentication systems also find it almost impossible to track and detect cases of digital identity fraud hence the need for better solutions – like blockchain technology.

With blockchain technology, counterfeiting and document fraud will be greatly reduced due to the immutability and verification properties the technology upholds. Additionally, documents will be more secure and private (if you wish) as blockchains offer better privacy than traditional document management systems by anonymizing data and requiring permissions to access certain documents.

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