How to Prevent Ghost Loans Using AI: Actionable Strategies (2024)

Ghost loans are the ones that are fake loans documented in the loan books and exist only on paper. The challenges of ghost loans can crash an individual’s credit report and erupt into the public domain when people realise that their credit scores have dropped. Their credit reports could contain inappropriate information about loans they had never taken when precisely analysed.

An overview of AI & bank fraud detection

With cybercrime accounting for damaging the global economy by about 0.8%, fraud is becoming a more serious threat. The best way to combat this is by utilizing AI and detecting fraud before it even happens. The ability of AI to analyze large amounts of data in order to uncover fraud trends. This data can then be used to detect frauds in real-time.

Machine Learning is the exact process that “learns” patterns. If it is executed properly, ML can be used to differentiate between fraudulent and legal transactions in milliseconds.

Some ghost loan victims who reported frauds are:

The victims of ghost loans include one of the most-searched celebrities, Sunny Leone. Sunny Leone’s credit score dropped to 20 percent for a trivial Rs 2,000 that showcased as an unpaid loan, by misuse of her PAN (permanent account number) and other personal information, directing the loan to some other person.

Sunny Leone is not the only one who has stated ghost loan frauds. Journalist Aditya Kalra tweeted about damaging revelations in his credit report previously. He saw a loan paid out by IVL Finance involving his PAN number, name, and addresses in Uttar Pradesh & Bihar, and he had no idea about the same.

So, relying on the repayment record, the penalties for the ghost loan target include a quick fall in credit score, reduced credit limits, and denial of credit if there is a non-payment on the fake loan.

Sunny Leone and Aditya Kalra’s examples show the lack of cross-checks in KYC procedures that fintech stakeholders should explicitly track.

Data privacy at every level is increasingly becoming significant

Aadhaar authentication is a prime example of data privacy and security. Aadhaar number and other facets comprising biometrics are submitted to the robust Aadhaar system for online verification through accessible documents.

Story of India Aadhar stack allows leveraging biometric matching to resolve issues with ghost loans for consumers in one shot. This scenario means that consumers come first in every identification process, which fintech players should prioritise. And the best option is to make sure you put advanced technology to work at full throttle.

Different kinds of frauds in banking and financial sector

Fraudsters find loopholes and invent new ways to deceive innocent customers constantly. Some of the most common kinds of frauds that customers fall prey to are-

Phishing – Phishing happens when a group of cyber criminals creates a fake bank website in order to deceive customers. Scam emails are sent that link users to false websites where they are asked for personal information and misuse it.

Identity theft – Fraudsters seek to acquire access to your bank account by obtaining crucial personal information such as your date of birth, passport number, aadhaar data, PAN numbers, and so on, and then carrying out fraudulent transactions.

Money Mule Scam – Victims are duped into laundering stolen or illegal money through their bank accounts in Money Mule scams. Customers are contacted via emails, chat rooms,etc and they are persuaded to deposit money into their bank accounts in exchange for tempting rewards.

Vishing – Imposters posing as bankers,insurance agents, government officials, etc call people on the phone and reveal a number of consumer details, such as the customer’s name or date of birth to gain their trust and ask for private information such as passwords, OTPs, PINs, and CVVs which are then used by the scammers to access the customer’s accounts.

Besides these methods, there are numerous other ways scammers trick people such as SMS spoofing, SIM swap frauds, Juice Jacking , Aadhar based payment system frauds etc which one must be aware of.

Here are some of the interesting statistics related to the impacts of financial frauds

Around 3 to 4 percent of digital onboarding will end up in ID theft if explicit KYC norms are not in consideration. On the other hand, the customer acquisition funnel drops by a fifth if higher accuracy on individuals’ names and addresses are taken into account, as quoted by the founder of an ID authentication solution provider company.

However, the same founder quoted earlier and admitted that their facial recognition algorithms could merely match the face across the PAN, Aadhaar, and selfie since the image quality diverges across these documents. He added that they don’t even attempt matching faces across IDs. Instead, they ensure the selfie captured is that of the borrower.

If someone’s credit score got reduced by 50 points at least, that is a 200-basis point effect. So, if they now request a home loan of Rs 1 crore ($13,387), they will have to pay out an interest rate of 12 percent rather than 10 percent. They will see a yearly loss of Rs 2 lakh ($2,678).

Read more: Fraud Impact Report in the US (2023)

How are banks using AI for fraud detection

Banks have already begun implementing approaches that try to prevent fraud before it happens rather than waiting till after fraud occurs to act. To effectively prevent fraud, AI can be used to group consumers, perform risk profiling, etc. Furthermore, there are some other ways banks can use AI for fraud detection as well:

  • Know Your Customer (KYC): KYC done by using AI can verify ID, and perform biometric recognition in an instant.
  • Fraud Investigation: With a well-trained AI model, the list of transactions that need manual investigation can be cut down to a manageable number.
  • Building purchase profiles: Using machine learning to sift through data and build customer profiles is a useful way to provide an up-to-date snapshot of an account’s activity.
  • Developing fraud scores: Using previous transaction data, future transactions can be given a fraud score. These fraud scores can be used to flag, reject or approve a transaction.

How HyperVerge’s technology can solve frauds like ghost loans

One can fake an ID card or personal details like address, or other information. However, one can’t fake their face! With Hyperverge’s Digital and Video KYC face match systems, you can’t fake a PAN or Aadhaar because Hyperverge won’t let anyone commit fraud, as it offers supreme accuracy through selfie verification, liveness checks, and advanced face matching solutions. So, Hyperverge’s proof of life technology is watertight with almost impenetrable precision.

Divergent to prevalent opinions, facial recognition algorithms are precise to identify scams such as ghost loans if you have models such as HyperVerge. At HyperVerge, we have higher accuracy Artificial Intelligence (AI) engines (99.5%), which is maximum amongst all the global competitors.

Our compliant Digital and Video KYC solutions comprise explicit ID digitalisation (OCR), face match, and liveness with accurate fraud checks.

Through HyperVerge Fintech Platform, enterprise companies can check the applicant and face data against millions of prevailing customers. So, companies with cutting-edge techniques and methodologies can instantly recognise fraudsters.

Furthermore, HyperVerge enables a face-based de-dupe system that halts fraudulent applications at the initial step of the application procedure right in seconds.

With KYC technology solutions and identity verification processes, HyperVerge has validated 600+ million identities. The facial recognition solutions by the company can match a face amongst hundreds of millions of data sets on a real-time basis.

Moving forward with advanced technology solutions resolving ghost loan issues

Given the complexity of financial and banking industry problems, a viable solution is to accept advanced technologies and progressive methodologies. With HyperVerge’s modern technology solutions, one can solve frauds, including fake and ghost loans.

With AI solutions and products driven by HyperVerge, the company empowers deep-learning networks to power applications for its clients in banking and financial services.

Would you like more information about the fintech products offered by HyperVerge and how you can set them in your workflow? If so, write to us at Else to connect with us swiftly, fill out our request form right here.

How to Prevent Ghost Loans Using AI: Actionable Strategies (2024)


How do I stop fake loans? ›

Investigating the lender, reviewing loan documents, confirming personal data, being aware of upfront expenses and high-pressure tactics, seeking legal counsel, and using secure networks are ways to prevent fraud linked to loans.

What is a ghost loan? ›

Ghost loans are the ones that are fake loans documented in the loan books and exist only on paper. The challenges of ghost loans can crash an individual's credit report and erupt into the public domain when people realise that their credit scores have dropped.

How is AI used by fraudsters? ›

Scammers can impersonate your family and friends using AI technology to ask you for money or personal information. They do this by manipulating videos and recordings found on social media to produce realistic sounding voice recordings or even videos. These are called voice cloning or deepfakes.

How to check a fake loan? ›

Fake lending apps demand upfront fees with the promise of immediate disbursem*nt of funds whether or not you have completed your application.
  1. 3) Guaranteed Loan Application. ...
  2. 4) No Disclosure of Charges and Costs. ...
  3. 5) The Lender Doesn't Have a Physical Address. ...
  4. 6) Time Bound-Offers or Limited Period Schemes.
May 6, 2024

How to deal with fake loan apps? ›

If a loan app cheats or blackmails you, file a police complaint with the cyber crime division at the local police station. Under Section 66 of The Information Technology Act of 2000, scammers can be jailed for up to three years and fined up to Rs 1lakh, says Akanksha Natesan, advocate.

What is a silent loan? ›

A silent second mortgage is a second mortgage placed on an asset (such as a home) for down payment funds that are not disclosed to the original lender on the first mortgage. The second mortgage is called "silent" because the borrower does not disclose its existence to the original mortgage lender.

What is a black loan? ›

The Black Business Loan Program provides loans, loan guarantees, or investments through Loan Administrators to black business enterprises that cannot otherwise obtain capital through conventional lending institutions but who could otherwise compete successfully in the private sector.

How to fix ghost credit? ›

If you have a credit card but not much payment history, build your file by using the card lightly and paying on time. You don't have to carry a balance to generate a credit score. Pay in full each month to avoid interest. If you don't have a card, try the credit-building methods outlined above.

How can you tell if someone is using AI? ›

These common signs of AI-generated content include:
  1. Incorrect and outdated information.
  2. Lack of depth and personality.
  3. Repetitive language.
Oct 2, 2023

Can you check if someone used AI? ›

Yes,, Sapling, and Copyleaks are AI content detectors that identify AI-generated content. is praised for its accuracy in verifying authenticity. Sapling excels in detecting even short AI-generated texts.

How is AI used to prevent crime? ›

The Growth of AI in Crime Detection

It is turning out to be an indispensable part of the law enforcers or the police as it can support them in various ways. AI technology is used for surveillance, to monitor the crowd for an anomaly, evaluate video footage for crime and apply facial recognition to optimum effect.

How do I stop fake loan app harassment? ›

If loan RECOVERY AGENT are harassing you, there are many provisions to handle the situation. The Indian Penal Code, 1860, Section 506 (Concerning Criminal Intimidation), allow the defaulter to make a complaint at the police station against RECOVERY AGENT and recovery office.

How do I check a fake loan on my name? ›

Check Your Credit Score and Credit Report

One of the simplest ways to check if you are a victim of PAN Card fraud is by checking your credit report. The credit report includes general information such as your payment history, credit inquiries, loans taken under your name, etc.

Does fake loan affect credit score? ›

A fake loan is unlikely to be serviced. Non-payment of any loan would affect your credit score adversely. Your credit score is an indicator of your credit worthiness. Higher the credit score, the more creditworthy you are and greater your chances of getting a loan.


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