What Do You Mean By Synthetic Identity Theft

Synthetic identity theft, sometimes referred to as synthetic identity fraud, is a fast-expanding kind of identity theft that makes up most identity fraud. Additionally, application fraud is mostly committed using this method. Unlike traditional identity theft, synthetic identity theft involves the creation of a false identity by fraudsters rather than the use of an actual one.

How do con artists fabricate false identities?

By merging personally identifiable information (PII)—such as birthdates, addresses, and social security numbers—or by fusing authentic information about a single individual with fake information, fraudsters can build a synthetic identity. When fraudsters utilize social security numbers belonging to minors, criminals, the homeless, or the elderly, they can also establish synthetic identities. Since 2011, social security numbers have been randomly allocated; hence, there is no discernible relationship between an individual’s SSN and date or place of birth. That greatly facilitates the commission of synthetic identity theft.

Once fraudsters have created a false identity, they can apply for loans, ask for credit or a credit line, and perpetrate various types of fraud.

How is PII obtained by fraudsters?

Building a synthetic identity and pilfering information may be done in many different ways. Dark web markets provide social security numbers that have been stolen. In addition, nefarious actors can pilfer wallets, cellphones, or credit cards, breach your computer or an unprotected network, control online purchases, or directly get information through social media or phone fraud. While playing games or taking on challenges on Facebook and other social media, a lot of individuals unintentionally provide scammers with access to personal information. Social security numbers, birth dates, addresses, passwords, credit card numbers, credit reports, and bank account numbers are examples of personally identifiable information that must always be protected.

How frequent is the theft of a false identity?

These kinds of identity theft have quadrupled in 2019 and 2020. The Payments Journal reports that fraudulent load applications, refunds, buy-now-pay-later schemes, and other forms of fraud cost banking institutions $20 billion in 2020 alone. Furthermore, according to Aite Group, the United States suffered $820 million in credit card losses from synthetic identities in 2018, and by 2020, the predicted amount of losses from these accounts might have reached $1.257 billion. The FTC says that losses associated with synthetic identity fraud increased from $1.8 billion in 2019 to $5.8 billion in 2021, indicating that the problem is only going to get worse.

What distinguishes identity fraud from identity theft?

Identity fraud is the act of committing fraud using a stolen identity, whereas identity theft is the act of stealing someone’s identity. The information utilized to carry out criminal conduct in synthetic identity fraud doesn’t even need to be true. When a criminal applies for a loan, runs off with the money, or opens a phoney account and faces accusations, that is when the damage happens. They could also use stolen or false identities to steal jobs or medical benefits.

What Information About Synthetic Identity Theft Should Financial Institutions Know?

Financial institutions have a severe issue with synthetic identity theft due to its high cost and difficulty in detecting it. Fraudsters employ complex strategies to evade detection using conventional fraud detection procedures. Financial institutions also need to be aware that the theft of synthetic identities is frequently mislabeled. The continuous behaviour of the synthetic identity while a fraudster incubates a loan account resembles that of a real borrower. Therefore, the lender can mistakenly categorize the fraudster’s eventual loan failure as a credit loss rather than a loss brought on by fraud.  This is a challenge since the financial institution is powerless to stop the fraud once an account opened under a false identity is placed in collections.

Account incubation is one method that scammers employ to steal identities synthetically. Some con artists cultivate many false identities and establish excellent credit over months or even years. For optimum profit, they can open many credit lines and loans once solid credit has been established. Because each account looks to be authentic-looking and in good standing, incubating accounts makes it particularly difficult to identify synthetic identity fraud.

Financial institutions run the danger of fraud and financial loss if they don’t have a reliable way to identify synthetic identity theft.

Why is it so hard to identify synthetic identities?

Fraudsters employ a range of advanced strategies to make it challenging to identify fake identities. For instance, while creating false identities, fraudsters frequently use legitimate social security numbers. A fraudster may apply for a credit card using a legitimate social security number that they purchased on the dark web, but the home address, email address, date of birth, and name may be from other identities. When taken as a whole, the data suggests a genuine identity.

Long lengths of time are needed for fraudulent accounts to develop, and on the surface, they appear to be active users. When individual accounts are considered in isolation, it is nearly impossible to proactively mark them as dangerous. Financial institutions stand to lose a great deal of money if fraudsters step up their efforts and establish large-scale, intricately coordinated, organized fraud rings.

How may Synthetic Identity Theft be identified and avoided?

Several telltale signs exist that may point to the theft of a synthetic identity:

• Using the same social security number over and over
• The same IP address is being used to create several accounts
• The creation of several accounts using the same personal data

To stop synthetic identity theft, comprehensive fraud and risk management systems that can identify these patterns early in the process should be put in place. However, not all solutions are created equal, and several essential elements work together to lessen the possibility of a fraudster employing a synthetic identity.

The following are some crucial qualities to search for:

• The capacity to evaluate several data points at once, such as device, behavioural, and account-level data.
• Tools for visualizing networks of attempted fraud and identifying links between accounts and occurrences
• Machine learning, both supervised and unsupervised, enables early detection.
• One-click maintenance of blacklists and investigations.
• Batch and real-time processing, as well as efficient case management.
• Unconventional connections exist between data enrichers and identification partners.

Conclusions:

The Synthetic Identity Theft is something which needs much of consideration. Here are few ways you can prevent SIT such as: evaluating multiple source of identifications, leveraging machine learning, and by joining an anti-fraud network.

In the upcoming years, there will probably be an increase in synthetic identity fraud. The entrance hurdle is lowered as bad actors have more access to data and more advanced technology than ever before.

Fintech applications and financial institutions need to keep on the cutting edge of fraud protection in order to stay competitive and reduce the risk of fraud. To do this, one must make use of technologies such as strong identity verification, machine learning and artificial intelligence, and anti-fraud networks to interact with other platforms. To learn more visit www.gurucent.com.

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