Sleeper Fraud

What is Sleeper Fraud?

Sleeper fraud is a type of synthetic identity fraud that involves a fraudulent identity — referred to as a “sleeper” — that is established and then left dormant for an extended period. This technique is used to bypass fraud detection systems that flag newly established identities as high-risk and prevent them from accessing credit immediately.

The fraudster may use a combination of real and fake information to create the synthetic identity and then add it to multiple financial accounts. The identity is left inactive for a period, often several months or even years, to build up a positive credit history and avoid detection by fraud detection systems. Eventually, the sleeper is activated to make large purchases or obtain credit, allowing the fraudster to profit from the fraudulent activity. 

How does sleeper fraud work?

Sleeper fraud criminals steal personal information from the victim and then use it to commit fraudulent activities. The fraudster typically waits for an extended period before using the stolen information, making it more difficult for the victim to detect the fraud. The information can be obtained through various cybercrime activities such as phishing, data breaches, and social engineering. The fraudster can use the information to open new credit accounts, apply for loans, and conduct unauthorized transactions.

The impact of sleeper fraud

Sleeper fraud can have a severe impact on the victim’s credit and financial well-being. The victim may not know that their personal information has been compromised until they discover unauthorized transactions on their account or receive bills for credit accounts they did not open. The delay in detecting the fraud can make it more difficult to correct the damage done to the victim’s credit report and financial accounts. The victim may also face legal and financial consequences if the fraudster commits crimes in their name.

How to detect sleeper fraud

Detecting sleeper fraud can be challenging because the fraudster will typically wait for an extended period before using the stolen information. However, there are some signs that may indicate sleeper fraud including receiving bills for accounts that you did not open, seeing unauthorized transactions on your account and receiving notification from a financial institution about a change in your account information that you did not authorize. Monitoring your credit report regularly can also help you detect sleeper fraud.

Preventing sleeper fraud

To prevent sleeper fraud, it is necessary to take steps to protect your personal information. You should be careful about giving out personal information, especially online. Use strong and unique passwords for your accounts and enable two-factor authentication whenever possible. Regularly monitor your financial accounts and credit reports for any unauthorized activity. Consider using a credit monitoring service that will alert you to any changes in your credit report.

What if you suspect sleeper fraud?

If you suspect sleeper fraud, you should act quickly to minimize the damage. Contact your financial institution and report any unauthorized activity suspected. Place a fraud alert or freeze on your credit report to prevent the fraudster from opening new accounts using your identity. Consider contacting the major credit bureaus and requesting a copy of your credit report to check for any unauthorized activity. You may also want to contact law enforcement and file a report.

Sleeper fraud is a prevalent technique used by fraudsters to bypass fraud detection systems and access credit. The fraudster establishes a synthetic identity and leaves it dormant for an extended period to build up a positive credit history before activating it for fraudulent activities. This technique can be challenging to detect, and financial institutions use advanced fraud detection systems and identity verification measures to prevent it. Consumers can protect themselves from synthetic identity fraud by monitoring their credit reports regularly and reporting any suspicious activity to their financial institutions.