Identity & Fraud

Synthetic Identity Fraud: Not Just for Credit Cards

Synthetic Identity Fraud: Not Just for Credit Cards

August 14, 2019 | Laurie Anderson

Synthetic Identity Fraud is a Growing Threat

We've said it before, and we'll say it again: Synthetic identity fraud is one of the most cunning tactics cybercriminals use. The Aite Group estimates synthetic identity credit card losses in the U.S. will reach $1.25 billion in 2020.1 Additionally, Equifax internal studies of top card issuers reveal that within just a year’s time, one million accounts have been identified as potentially synthetic with an average loss of $1,830 per account. The even darker side of these numbers? They only cover credit card losses, and do not account for the many other avenues where criminals use this method of fraud. Equifax data shows other product types are vulnerable to synthetic identity fraud. An Equifax Data and Analytics study of the top telecommunications and energy accounts shows that 0.3 percent of accounts are potentially synthetic, and among those flagged, 27 percent become delinquent. This translates to a potential loss of $25 million a year.

The average charge-off is $630 for utilities and $1,500 per wireless account.

Auto Industry Hit Hard

Fraudsters also target the automobile industry. In fact, a recent Equifax survey reveals that 76 percent of dealers handle one to three fraudulent transactions each month. Further, they remain focused on collecting information stated on the credit application, such as income and employment, rather than collecting alternate forms of data that may be useful in flagging synthetic identities. Our research also shows that among top auto lenders, more than 200,000 accounts are potentially synthetic. That results in an average bad balance of $15,000 per account.

Fraudsters are now using synthetic identity tactics to penetrate victim accounts, orchestrate money movement, and create drop accounts from person-to-person payment tools, such as Zelle, to conventional ACH payments. That's according to a report from The Aite Group examining the evolution of account takeover (ATO) tactics. Sophisticated, dark marketplaces now take core data acquired from breaches (name, address, phone number) and append it with data from sources like other breaches, social media and public documents.

The result is that it's easier than ever to open a new fraudulent account using a synthetic identity.

Analytic Tools Combat Synthetic Identity

Organizations can use analytic tools to scrutinize behaviors and confirm identities using data sources and industry-specific inquiry patterns. By flagging suspect transactions early in the process, you can identify risks and avoid potential problems before they occur. For example, red flags include patterns such as shared Social Security Number and homeowner mismatches with new accounts. Fraudsters often use the same address for many synthetic identities. Then, they change the address when they “bust out” with maximum charges up to account limits.

Advanced analytics will empower your organization to detect linkages and suspicious patterns. This not only reduces the time and money expended on manual reviews, but also helps protect your organization’s reputation. Analytics-based solutions that use data to detect linkages and suspicious patterns may reduce false-positives by up to 25 percent.  Learn more about how to spot synthetic identities and ways to combat fraudster tactics.

Download our white paper, Synthetic Identity Fraud: A Look Behind the Mask.

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  1. Aite 2018 Analyst Report