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What Is Synthetic Identity Fraud?

 2 years ago
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What Is Synthetic Identity Fraud?

By Shannon Flynn

Published 1 day ago

Cybercriminals don't need to know everything about you to commit fraud. Here's how to prevent and report synthetic fraud.

Identity theft has always been an issue, but, as the internet has taken over more aspects of daily life, the threat has never been greater. It’s become easier to steal people’s personal information, and a new problem has emerged: synthetic identity fraud.

So what is synthetic identity fraud, and how can you stop it?

What Is Synthetic Identity Fraud?

Synthetic identity fraud is where criminals use real information to create a fake identity. Instead of posing as someone else, they piece together stolen credentials to pose as someone who doesn’t actually exist. As strange as it sounds, it’s remarkably common.

One of the most famous synthetic identity fraud examples happened in 2018 in New York. A group of 13 criminals managed to steal more than $1 million by taking out loans as other people. However, unlike a traditional fraud case, none of the individuals they pretended to be have ever existed.

This group created 20 fake identities by combining parts of real information. They started with stolen Social Security numbers of people who had little to no credit history. Then, they paired these numbers with different names, addresses, and the dates of birth of real people to create what looks like a record of an actual person.

Not all synthetic identity theft examples are that elaborate or large-scale, but they all follow the same idea. In some cases, criminals will use a fake name and birthday, but a real SSN and address. They will then take out loans or credit cards, defraud government support programs, or get a job without legal citizenship.

Unlike identity theft using a true name, these fake identities won’t immediately pop up as potential fraud. Combining multiple factors makes them seem real, but since they’re fake, you can’t compare them against previous financial history to identify them as fraud.

Synthetic Identity Fraud Statistics

According to research by Keypoint Intelligence of Konica Minolta, 48 percent of small- and medium-sized businesses say data protection is their biggest IT challenge. Synthetic identity fraud has grown with that trend, costing U.S. banks and financial institutions an estimated $20 billion in losses in 2020 alone.

In 2019, the Federal Reserve said synthetic fraud was the fastest-growing type of fraud in the United States. These crimes accounted for 20 percent of all credit losses in 2016, costing the nation $6 billion.

Synthetic identity fraud stole the identities of 1 million children in 2017 alone. Kids are common targets because they have no credit history. A considerable 39 percent of minors were victims of fraud in 2017, compared to just 19 percent of adults.

How to Prevent Synthetic Identity Fraud

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Synthetic fraud examples can easily pass undetected by traditional fraud models. Despite that, there are a few things you can do to help prevent this.

The best way to prevent synthetic identity fraud is to protect your Personally Identifiable Information (PII). Use strong, unique passwords on all your online accounts. Multi-Factor Authentication (MFA) can stop 99.9 percent of automated attacks, so it’s a good idea to enable that, too.

Never give away private information to an unknown source, and carefully inspect any message that asks for it. Likewise, don’t click any links in emails that seem unusually urgent, too good to be true, or just plain strange. These could be criminals trying to get information like your true name to use in identity theft.

How to Report Synthetic Identity Theft

You can monitor your credit history to check for potential fraud. If you think you’ve become a victim, here’s how to report synthetic identity fraud.

First, call the bank or credit bureau you were looking at when you noticed something unusual. Explain to them what you thought was strange, like a purchase you didn’t make or information that isn’t right. You can also freeze your credit to stop fraudulent activity.

From there, keep an eye on things like your bank history, credit score, insurance, and tax information. File a fraud report with the FTC or contact law enforcement if you see continued suspicious activity.

Stay Safe From All Fraud Types

Fraud is a big problem, and true name identity theft isn’t the only kind anymore. Knowing what synthetic identity fraud is can help you notice and prevent it, keeping you and potentially your children safe. This crime can be scary, but it’s not inevitable.

About The Author

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Shannon Flynn (69 Articles Published)

Shannon is a content creator located in Philly, PA. She has been writing in the tech field for about 5 years after graduating with a degree in IT. Shannon is the Managing Editor of ReHack Magazine and covers topics like cybersecurity, gaming, and business technology.

More From Shannon Flynn

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