The arrival of EMV chipped cards could trigger an increase incredit-card related scams, but analytics could help institutionscombat the problem.

“The U.S. has $3 billion in losses associated with thecard-present fraud, when we roll EMV out where is that fraud goingto migrate to? The fraudsters are not going to give up that type ofincome,” said Dena Hamilton, vice president, business solutiongroup of the Americas, at BAE Systems Applied Intelligence.

To reduce counterfeit, lost and stolen card fraud, and toprotect cardholder data, nearly every country in the world widelydeployed EMV. As a result, fraud attention turned toward the U.S.,where an estimated 7.7 million people reported the fraudulent useof a credit card, according to December 2013 Justice Departmentstatistics.

Much of the focus to date has been on how EMV will stop much ofthe bleeding from card-present fraud, but the history in othercountries showed fraud moved toward the path of least resistance toother areas of exposure.

The good news-bad news scenario, according to Hamilton, wasfollowing other EMV rollouts such as in the United Kingdom, theAsia-Pacific and Canada, the statistics showed successful EMVrollouts decrease card fraud. However, there is also a 300% to 400%jump in application fraud.

“Application fraud rises because it is perpetrated by identitytheft.” Hamilton pointed out.

Application fraud can take place several ways. Criminals oftenfirst commit typical identity theft, whereby they steal someone'sidentity to open an account. When successful, fraudsters oftenspringboard into adding themselves to a valid account through IDmanipulation.

In ID manipulation, also called synthetic identity fraud,criminals use actual information, such as social-security numbers,to create fake identities. Technology research and consulting firmGartner estimated synthetic identity fraud makes up 20% of currentcredit charge-offs and 80% of credit card fraud losses.

BAE Systems said it proactively monitors for application fraudsin real-time, as well as in the post-process, through a combinationof analytical approaches.

“The system looks for anomalies at the individual or personallevel, any anomalies in the application itself and at a networklevel, so we can do linkage across customer accounts and entitiesto see if we can see any anomalous behavior,” Hamilton said.