The Nightmare of Fake Identities: Understanding Synthetic Identity Fraud

Synthetic identity fraud, also known as SIF, has become the fastest growing financial crime in the United States and is a major concern for businesses and consumers alike. In 2023, Identity Theft cost Americans $126,203,809 in losses¹.  Unlike traditional identity theft where a real person’s identity is stolen, SIF involves creating an entirely new fictitious identity. This fabricated persona is a blend of real and fake details, making it a complex challenge for fraud detection systems.  

Crafting the Perfect Alias – Franken-Identities

Fraudsters create synthetic identities by combining real Social Security numbers (often stolen from children or the deceased) with fabricated names, addresses, phone numbers, and even employment details. Sometimes, they might even create fake social media profiles to further legitimize the synthetic persona. These “Frankenstein IDs” may appear legitimate on the surface, allowing criminals to open new accounts, obtain credit cards, and even secure loans. 

Why is Synthetic Identity Fraud Dangerous?

• Low Detection Rates: The novelty of SIF makes it difficult for traditional fraud prevention measures to identify it. Unlike stolen identities with a clear trail, synthetic identities lack a credit history or any connection to a real person.
• Long – Term Gains: Fraudsters can use synthetic identities to open new accounts, build credit over time, and then exploit them for financial gain. They can exploit these synthetic identities for months or even years before disappearing, leaving victims with substantial financial losses.
• Multiple Identities, Multiple Opportunities: Criminals can create a multitude of synthetic identities, increasing their chances of success.
• Widespread Impact: Not only are financial institutions targeted, but government benefits and social programs can also be vulnerable to synthetic identity fraud.

The Impact of SIF

The financial losses due to SIF are staggering. Businesses, especially financial institutions, bear the brunt of the damage. But the aftermath extends far beyond:

• Identity Theft Victims: The misuse of SSNs associated with synthetic identities can lead to problems for the real person whose information was used. Their credit score might be negatively impacted, or they could face difficulty opening new accounts.
• Erosion of Trust: Trust in the financial system can erode. Consumers might become wary of online transactions or hesitant to share personal information.

Protecting Yourself

• Regular Credit Report Monitoring: Review your credit report regularly to identify any suspicious activity linked to your Social Security number. 
• Beware of Phishing Scams: Phishing emails, texts, and calls are a common way for criminals to steal personal information that could be used to create synthetic identities. Be cautious of emails, texts, or phone calls requesting sensitive data. 
• Strong Passwords: Use strong and unique passwords for all your online accounts to make it harder for criminals to gain access to your personal information. Do not use the same username and/or password on multiple platforms.

The Fight Against Synthetic Identity Fraud

Synthetic identity fraud is a complex challenge, but by staying informed and taking preventative measures, we can make it harder for criminals to succeed. By implementing stronger safeguards and fostering collaboration, we can build a more secure financial system for everyone.

If you think you may be a victim of a scam, report it to the Federal Trade Commission, your financial institution and your local police. 

For additional fraud prevention resources, please visit our E – Fraud Prevention at
https://efraudprevention.net/us/bask/portal.html

Sources
¹FBI: IC3.gov. Annual Report 2023.
https://www.ic3.gov/Media/PDF/AnnualReport/2023_IC3Report.pdf