We’re all familiar with identity fraud, the criminal practice of stealing someone’s personal information to make purchases, open accounts, take over financial accounts or obtain benefits, among many other things. This is a well-known financial crime with highly effective solutions designed to fight it. However, there’s an even more insidious practice at work called “synthetic identity fraud” that’s more difficult to detect and combat. Here’s what it’s all about:
Synthetic identity fraud happens when a criminal uses someone’s real personal information to create a fake identity, bolstering the new account with other fake information. It might be based on an actual living address or phone number or social security number or a combination of different pieces of information. The idea is to create an account that resembles an actual person, in an effort to fly under the radar of traditional fraud detection methods.
It’s the fastest-growing financial crime in the United States, made easier by the ready availability of personal information online. One of the main reasons synthetic identity fraud works so well is that the criminal who employs it doesn’t simply create a new account and immediately run up a number of purchases; instead, the account is allowed to “bake” for a while, operated as though it were attached to a viable human being. Items and services are bought and paid for responsibly, which builds up a credit score and history. These actions help create the image that the fraudulent account is, in fact, genuine, which spoofs typical automated detection schemes.
Synthetic ID Fraud vs. Traditional Fraud
With traditional identity fraud, when a criminal uses personal information directly, the actions show up on a credit check and the proper actions are taken. Synthetic identity fraud is a more complex issue, made more difficult to detect and solve by the different ways in which a synthetic identity is used. For example, a criminal might rack up fraudulent charges, then use the fake identity to pretend to be the victim of the fraud to get their credit line restored. This is an audacious and creative use of a fake identity that speaks to the ever-more sophisticated methods being employed by criminals every day.
However, it’s not just money that’s being stolen using the synthetic identity method. A frequently overlooked aspect of this crime is the way it can affect the identities of children, who are given social security numbers at birth yet cannot employ them for anything substantial until they are old enough to realistically administer them. However, they might discover that by that time their numbers have already been used in fraudulent ways, leading to any number of account-related difficulties.
It’s not simply the individual who is negatively affected by synthetic identity fraud. Banks and credit card companies lose time and money fighting the effects of this kind of fraud, not to mention the impact on their business reputations.
How To Combat Synthetic Identity Fraud
Businesses fighting synthetic identity fraud need to recognize the limitations of strictly evaluating static identity elements. Socure's multi-layered approach looks beyond PII elements at digital entry points and leverages advanced analytics and diverse, deep data sets to gain conviction on the applicant’s identity. In addition, deploying machine learning to detect synthetic IDs creates efficiencies and avoids manual reviews and human error, without degrading customer experience.