Synthetic Identity Fraud: Understanding the Threat and How to Fight Back

What is Synthetic Identity Fraud?

Synthetic identity fraud is currently the fastest-growing form of identity theft, resulting in staggering losses worth billions of dollars. Shockingly, over 80% of all new account fraud can be traced back to synthetic identity fraud. Fraudsters behind synthetic identity scams are not only cunning but also highly sophisticated. They meticulously combine real and fictitious data to create a completely new identity. Once established, this synthetic identity becomes the perfect cover for a wide range of ongoing fraudulent activities. What’s worse, these criminals can carry out their schemes for years without detection, gradually building a synthetic credit profile linked to the fabricated identity. Eventually, they strike, exploiting multiple accounts, loans, and credit cards, only to vanish into thin air, leaving no trace behind. As the saying goes, “It’s extremely difficult to track down someone who doesn’t exist.”

Sadly, this type of fraud is notoriously challenging to identify and prevent, unless you have access to advanced identity verification and due diligence tools. Let’s delve into the process of creating a synthetic identity and discover the actions you can take to protect yourself.

How is a Synthetic Identity Created?

To understand the creation, cultivation, and maintenance of a synthetic identity, let’s take an example. Imagine a fraudulent mastermind named Bob, who has been riding the gravy train of synthetic identity fraud for years, tricking numerous businesses across the country. Here’s a glimpse into Bob’s fraudulent activities:

  1. Bob acquires authentic personal information, typically a Social Security Number (SSN), from various sources, including the dark web. Vulnerable individuals such as children, the elderly, and the homeless are often targeted. For instance, a child possesses a legitimate SSN but has no credit history or public records. To a fraudster like Bob, that SSN is like a goldmine, ripe for exploitation.

  2. Using the real SSN, Bob blends it with a fake name, date of birth (DOB), and address to construct a brand-new identity. This practice is sometimes referred to as “Frankenstein IDs.” Alternatively, Bob might utilize his real name, DOB, and address while pairing it with an unrelated SSN. With this synthetic identity in hand, Bob is all set to perpetrate fraud.

  3. Bob proceeds to employ this synthetic identity to obtain credit and establish a false credit profile with credit reporting bureaus. In this way, he gradually cultivates a deceptive credit identity. A skilled fraudster like Bob plays the long game, steadily building an excellent credit history, showcasing credibility, and making actual payments on his newly established credit accounts. Over time, the synthetic identity gains valuable credit and secures additional loans and credit cards. As the credit profile strengthens, more merchants and banks are inclined to extend credit, convinced of the synthetic identity’s reliability. Finally, when the moment is ripe, Bob makes his move. He maximizes the credit cards, seizes the funds from the loans, and disappears without a trace. All the accounts are left in default, but the synthetic identity wasn’t that of a real person, making it astoundingly difficult to track down Bob.

  4. The fraudster repeats this cycle again and again. In fact, many fraudsters maintain multiple synthetic identities simultaneously. They passionately pursue their craft, defrauding companies nationwide. For individuals like Bob, this fraudulent endeavor becomes a full-time occupation, resulting in estimated losses exceeding 20 billion dollars annually.

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How to Prevent Synthetic Identity Fraud: A Step-by-Step Guide

To combat synthetic identity fraud effectively, businesses must utilize state-of-the-art technology available in the market. This technology should encompass automated identity verification, document authentication, and in-depth analysis of public records. The prevention process involves two crucial steps:

Step 1: Authenticating the Person and Their Identity
Government-issued ID authentication and biometric verification are essential. However, it cannot stop there. Step 2 is equally vital.

Step 2: Establishing Identity Verification and Consistency
It is crucial to verify if a person truly matches the identity they claim and if their government-issued ID aligns with public records. This verification process requires thorough analysis and proprietary database verification, supplemented by public records investigation.

This may seem like a laborious task, but fortunately, there are automated tools available to streamline the process. Take, for example, Thomson Reuters partner solution AU10TIX, which employs biometric screening technology that seamlessly links physical and digital identities. Within a mere 8 seconds, AU10TIX can verify the authenticity of a government-issued ID and a user-initiated selfie using hundreds of data points and forgery tests. The tool also employs biometrics and liveness testing to compare the selfie with the ID, ensuring the selfie itself is legitimate.

Even the most sophisticated fraudsters face an uphill battle when trying to bypass AU10TIX’s comprehensive identity tests. Moreover, it is imperative to conduct due diligence on the underlying information found in public records and proprietary databases to confirm the legitimacy of the data on the ID. Does the provided name, address, and personally identifiable information have solid proof? This is where Thomson Reuters CLEAR platform comes into play, providing public records analytics, verification, and, if necessary, deep-level due diligence.

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Together, AU10TIX and CLEAR form an unbeatable duo capable of automating document authentication, biometric verification, and comprehensive analysis of underlying source data. For fraudsters, it becomes nearly impossible to overcome this one-two punch in synthetic identity fraud prevention.

For more information on synthetic identity fraud and how to protect yourself, visit Garrity Traina.