AI & hardship drive surge in Australian loan fraud

Australian lenders blocked more than AUD $1.5 billion in reported fraudulent financial applications during 2025, as attempts to manipulate credit applications and recruit money mules rose sharply, according to new Equifax analysis.

Equifax's Fraud Index Report 2025 Year in Review recorded a 25.5% year-on-year increase in first-party fraud, defined as people manipulating their own loan applications. Money mule activity rose 90.9% compared with the same period in 2024.

Equifax linked the rise in first-party fraud to household budget pressure and the growing availability of artificial intelligence tools, which can make it easier to falsify documents used in loan and credit applications.

Loan manipulation

First-party fraud can include misrepresenting income, expenses, employment, or other details in an application. It differs from identity takeover, which involves using someone else's identity to apply for products or access accounts.

Tehani Legeay, General Manager of Digital Identity and Fraud Services at Equifax, said the latest data suggested fraud was not limited to organised criminal groups.

"We've seen a significant spike in loan manipulations. Easy-to-use and inexpensive AI tools can now produce convincing fake documents, which may increase the temptation to falsify information to secure credit, especially amidst heightening economic pressures," Legeay said.

As reported incidents rose, lenders increased their focus on prevention. Equifax said the AUD $1.5 billion figure reflected applications stopped before approval, based on reported fraud attempts identified through its data sources.

"While the volume of overall fraudulent attempts and reported instances increased over the past year, it should also be recognised that prevention tactics during this time saved over $1.5 billion worth of fraudulent credit applications," Legeay said.

Higher-value categories

Transaction accounts and credit cards recorded a higher volume of incidents, Equifax said, while mortgages and auto loans tended to involve higher dollar values per case.

"While Transaction Accounts and Credit Cards saw a higher volume of fraud incidents, Mortgage and Auto loan categories represent significantly higher dollar amounts. Consequently, preventing fraud in these key categories drives a disproportionately larger share of total savings for our economy," Legeay said.

The findings come as lenders and data providers adjust how they categorise suspicious behaviour. Equifax said improved detection meant some cases previously labelled as other forms of fraud were now being identified as money muling.

Money mules

Money muling typically involves moving funds on behalf of criminals, often through personal bank accounts. The report said vulnerable individuals may be lured by promises of easy money or pressured by financial hardship, while criminal groups look for ways to legitimise proceeds.

Equifax reported identity takeover listings fell 16.6% over the period. It said the shift suggested some reclassification as detection methods improved.

"We've seen a massive 90.9% surge in money mule cases year-on-year; however, there are additional factors influencing this spike. Lenders have been enhancing their fraud identification capabilities, and instances that were previously flagged as other types of fraud are now being identified as money muling," Legeay said.

Equifax said some activity previously understood as identity takeover now appeared to involve participation by the account holder, either willingly or under pressure.

"Many accounts once thought to be subject to identity takeovers now appear to be instances of money muling-often with the account holder's involvement, whether they are complicit or coerced," the report stated.

Legeay said the reclassification still pointed to stronger recognition of fraud patterns, which could influence how lenders respond.

"While these figures reflect growth in criminal activity, they also show that, as an industry, we are getting better at spotting the true origins of fraud instances. Positively, this then allows for businesses to deploy targeted safeguards to help stop fraud before it happens," Legeay said.

Credit shift

For the first time in three years, Equifax said fraud grew faster among credit products than non-credit products. Credit product fraud rose 11.1% year-on-year, while non-credit product fraud fell 1.1%.

The report defined credit products as including credit cards and mortgages, and non-credit products as including telecommunications and utility applications.

Equifax linked the shift to rising demand for credit. It cited Equifax Consumer Market Pulse data showing a 6% increase in unsecured credit demand and 12.3% growth in mortgage enquiries, the strongest since 2021.

"The fraud landscape is shifting. As more Australians seek credit to manage their financial needs, it creates a larger pool of opportunity for fraud," Legeay said.