What is Synthetic Identity Theft?
Table of Contents
- By Greg Brown
- Dec 05, 2022
Identity theft and fraud have a long history of deception while destroying people’s lives. The term Identity theft was first coined in 1964. Organized crime, small businesses, and global organizations have all used the identity of others to bankrupt financial institutions and untold millions of lives.
In response to the skyrocketing instances of identity theft, Congress passed the Identity Theft and Assumption Deterrence Act of 1998. This law made identity theft or fraud a federal offense. As with most crimes, identity theft has evolved into synthetic identity fraud, a sophisticated assault attacking every aspect of our way of life.
Synthetic identity fraud now accounts for 80 to 85% of all identity theft, costing financial institutions over 20 billion yearly and rising rapidly.
Synthetic Identity Fraud: a combination of factual information, such as a social security number, combined with fraudulent credentials. Swindlers often create multiple synthetic identities to pass financial checks and apply for credit cards and loans, along with medical identity theft.
The rapid rise of online payment systems, combined with the ease at which synthetic identities are created, has caused the financial industry to rely on government intervention. The Federal Reserve has created a Synthetic Identity Fraud Mitigation toolkit offering a wide array of resources.
Categories Of Synthetic Fraud
- Manipulated synthetics are limited changes to real identities. A single number may be changed to the social security number, or the house number may be changed. These manipulated identities are from persons trying to hide previous credit histories. These people may not be inherently criminal; they are just trying to gain new credit for a legitimate purpose. The good news for merchants is that the identities can be easily detected because they often collide with real personalities.
- Manufactured synthetics are bits and pieces of real identities combined to create an identifiable persona. The SSA uses a random number algorithm to issue real Social Security numbers to the public. Fraudsters choose from a range of numbers similar to the SSA. Personally identifiable information is not from any known consumer, making it challenging to detect a manufactured synthetic identity.
2020, the US Federal Trade Commission received over 2.2 million identity fraud reports. Victims often see a dramatic drop in their money and credit scores, adding to a massive amount of anxiety.
Types of Synthetic Identity Fraud
It is essential to notice the signs of synthetic fraud, such as receiving mail to your address with a different name. Pay close attention to phone calls and emails offering new credit accounts or merchandise. Check your credit report regularly and look for any unexplained changes. Place a security freeze and alert on your credit report and lock any debit or credit cards in your name.
- Child identity fraud is one of the most insidious means of synthetic theft. Criminals can easily use a child’s identity to open new credit accounts. Fraudsters may apply for a driver’s license or government benefits in a child’s name. The problem may be solved by a family member who knows the child’s personal information. Many children do not realize the problem with their credit until they are older or may try to take out a student loan. Parents must stay vigilant when it comes to the security of their children.
- Criminal synthetic identity theft happens when a person offers a fake identity to the police instead of using their own. Criminals may create fake identities or apply for a driver’s license to show law enforcement. The significant problem is that police often keep the victim’s information in their database for future use. This can be a significant stumbling block when that person applies for a mortgage or future employment.
- Medical identity theft is a common form of fraud. Criminals create a medical ID to get prescription drugs or access other proprietary medical services. Fraudsters may also use a synthetic identity to obtain wheelchairs, hearing, and visual aids.
- Financial synthetic fraud is the most common type of theft. Criminals use the identity of another person for financial benefit. There are multiple forms of financial theft, including credit card and bank fraud. Fraudsters can rack up millions of dollars by stealing just a few dollars at a time from thousands of accounts.
Protection Against Synthetic Identity Fraud
Synthetic fraud is carried out by some of the most advanced identity thieves worldwide. It is currently one of the biggest threats financial institutions face today. Synthetic fraud costs banks billions of dollars and countless man-hours to track down the culprits.
There are countless bits of personally identifiable information data on the dark web, with more added by the hour. Data brokers are enormous repositories of personal information that collect and aggregate millions of identities. Some brokers offer a few bits of information for free, while others charge for a complete background. Creating fraudulent identities has become much easier with so much information readily available.
- Never give out personal or financial information through texting or email. Always be cautious when you receive phone calls or emails asking for information.
- Continually check credit information and other financial items and set up monitoring for your credit report. Make sure to monitor children and their information closely. It is likely children are more at risk than adults.
- Destroy any documentation that contains personal financial information.
- Use a password manager to create strong passwords. Your financial institutions should have complex passwords changed every 30 or 60 days.
- Businesses should have a fast and reliable identity verification service. Verification should check against multiple public and proprietary databases.
Once a synthetic identity has been created, it is nearly impossible to track down the fraudster. Criminals are shrouded behind fake identity details.
Don’t Be A Victim
If you or your child begin to notice phone calls and emails arriving with a different name, you may already be a victim. Respond at once! Notify your bank that you may be the victim of synthetic identity fraud. Get in touch with credit card accounts and others who have extended credit.
If you are a victim of identity fraud, do not waste time trying to track down the criminal. Instead, prepare, so the fraud never happens again.