Identity & Fraud

Synthetic ID Fraud: One of the Trickiest Tactics We’ve Seen

Synthetic ID Fraud: One of the Trickiest Tactics We’ve Seen

October 26, 2018 | Daniel Jean

Synthetic IDs are Like Digital Frankensteins

Halloween is always a fun time of year. It inspires a childlike excitement in us all when we see children in costumes trick-or-treating. Remember when Charlie Brown got a rock or two in his bag of treats? Well, no one is really passing out tricks anymore. Maybe that's because today’s fraudsters have that locked down – especially when it comes to synthetic ID fraud. It’s one of the trickiest tactics we’ve seen in recent years. Fraudsters build these synthetic identities from bits and pieces of real identities… like a name from one person, an address from a different person or the Social Security number of a minor or deceased person.

Think of it as a modern-day, digital Frankenstein (in keeping with our Halloween theme). Then, they introduce the fake identity into the system by requesting a service or applying for something that doesn't require stringent identity verification measures.

Fraudsters Use Synthetic IDs to Get Credit

Once there is a record of that identity, they use that business relationship to build upon the credit profile. For example, they sign up for a pre-paid phone or a rental agreement. As the falsified identity begins to have “legs,” the fraudsters move on to larger account requests – like credit cards, loans, telecomm/utility services, etc. Most times, they charge the maximum amount on credit cards and default on paying the bill – or they may even launder the money between multiple accounts. These fraudsters have built a well-organized activity of fraud rings looking for ways to create and then nurture fake identities over a long period of time. What’s even trickier? There is no real victim. The fictitious identity leaves the lender out of pocket to collect funds, making it difficult to classify the loss.

Identity Verification Solutions Can Stop Them in Their Tracks

That’s why it’s important for businesses to have fast, reliable identity-verification solutions. These solutions check applications against multiple sets of public and proprietary data. It’s also a good idea to use data that detects linkages and suspicious patterns. This helps determine if the applicant is a real person. These types of analytic capabilities can help deliver lower false-positive rates – allowing you to flag the application for further screening, if needed. It may not be Michael Myers or Pennywise, but when synthetic ID fraud goes undetected and increases your losses, it can be pretty scary. Happy Halloween!