Synthetic Identity Fraud Is The Fastest Growing Financial Crime — What Can Banks Do To Fight It?
10 Oct 2019

Synthetic identity fraud is a relatively recent phenomenon that is on the rise. McKinsey claims synthetic ID fraud is the fastest-growing type of financial crime in the U.S. LexisNexis Risk Solutions found that “61% of fraud losses for [large] banks stem from identity fraud [and] 20% of the identity fraud incurred by these larger banks is synthetic identity fraud.”

Synthetic fraud differs from traditional identity fraud in that instead of assuming the identity of a real person using their credit, it creates a new identity using a real social security number with a fictitious name, driver’s license and address. How is this possible?

Traditional identity fraud is usually detected and reported relatively quickly because there is a real victim who is being affected. To create a synthetic identity, a scammer simply needs an unused social security number, often from a child. With this fresh social security number, they can establish a new identity with the credit bureaus.

The fraudster starts by applying for a loan with the synthetic identity. Because there is no credit history on file for this person, the loan will be declined. However, the fact the request was made will create a new credit profile in the database, and now they “officially” exist. Then the perpetrator continues to apply for credit at various institutions until they finally get approved — often for a secured credit card or some other product from a lender willing to work with high-risk borrowers.

These scammers are playing the long game: They can take months, even years, to build up good credit with small purchases that they promptly pay off, continuing to legitimize the identity. They use false identification documents, social media and P.O. boxes to make the identity appear real. Over time, they increase their available credit with new cards and higher limits.

By Glenn Larson, Forbes, 8 October 2019

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