The need for AI-driven fraud detection in property management - by Max Glassburg

Undoubtedly, artificial intelligence is the defining technology of our time. Now, it’s made its way into the realm of document authentication and fraud detection in property management. To bolster our screening solutions, Yardi partnered with Snappt to introduce our new ScreeningWorks Pro Document Authentication solution for Yardi Breeze and Yardi Breeze Premier clients. Snappt is currently the only provider utilizing AI to uncover applicant fraud, including a sophisticated new type of fraud known as inception fraud. 

Kyle Nelson, vice president of corporate strategy at Snappt, explained to us why his company’s AI-driven document authentication technology matters when it comes to fraud detection in property management.

Inception fraud

Glassburg: Snappt specializes in detecting inception fraud. What is that and why is it so hard to detect?

Nelson: Inception fraud is a scheme in which individuals apply for a rental home using a real pay stub from a real company, even though they are not actually employed by that company. They pay an Inception Fraud Company (IFC) to use its legitimate LLC to generate a real pay stub and matching bank statement. Because the pay stubs are produced by a verifiable company, traditional fraud detection methods typically fail to flag them, marking the documents as “clean” or “unedited.” 

Snappt’s advanced technology is uniquely capable of detecting this complex form of fraud, offering property managers an additional layer of protection against increasingly deceptive tactics.

Complementary fraud detection software

Glassburg: How does document authentication fit with other means of screening and fraud detection?

Nelson: Unlike other screening solutions, such as standalone bank linking or employment verification, Snappt closes critical gaps to ensure a more robust screening process. For example, ID verification is excellent for confirming that the person applying is who they claim to be, but it doesn’t guarantee their honesty regarding the authenticity of their supporting income documents. While ID verification works well alongside document fraud detection, it should not be used as a replacement for it.

One thing people miss

Glassburg: What’s a common misunderstanding about AI-driven fraud detection in the rental industry?

Nelson: Despite the rise in reported fraud across the industry, only 50% of property managers use a fraud detection solution. Many believe fraud isn’t happening at their properties simply because they can’t see it — but that doesn’t mean it isn’t there. Fraud techniques like text injection or document edits are designed to be virtually undetectable to the naked eye. Leasing teams are not equipped to spot these issues on their own, nor should they be expected to be forensic experts.

Validating that documents were downloaded directly from a major financial institution is key to confirming their authenticity, as embedded data provides critical insights into their reliability. Without the right tools, these manipulations often go unnoticed.

Do fraudsters use AI too?

Glassburg: As AI becomes a crucial tool to combat fraud, is it also going to be used by those committing fraud?

Nelson: As with any powerful technology, AI is a double-edged sword. While AI is becoming instrumental in combating fraud by identifying patterns, detecting anomalies and preventing scams, it is also being exploited by those committing fraud. Fraudsters can use AI to create hyper-realistic fake documents or even generate synthetic identities. 

However, with continuous advancements in AI-driven fraud detection, property managers can leverage screening tools with built-in AI to effectively identify and neutralize these emerging threats, ensuring robust protection against misuse.

Where property managers should focus

Glassburg: What type of fraud is seen to be the most worrisome for property managers?

Nelson: With nationwide fraud rates for income documents averaging 6-8%, fraudulent income documentation used during the application process poses a significant threat to property managers. This type of document fraud includes the manipulation or creation of falsified pay stubs, bank statements or other income-related documents to deceive property managers. 

Detecting and preventing this widespread issue is critical for maintaining the integrity of leasing decisions and protecting properties from potential losses.

Retroactive fraud detection

Glassburg: Is it legal to run documents through fraud detection software retroactively after a lease has been signed?

Nelson: We recommend using screening solutions during the application process or at the time of renewal for existing residents. The legality of using screening tools outside the application cycle depends on your privacy policy and the expectations set with your residents. Typically, all screening measures are conducted during the application process and prior to lease execution, ensuring compliance and alignment with standard practices.

Max Glassburg is a senior marketing writer with Yardi Breeze, Santa Barbara, C.A.