What is Synthetic Identity Theft?

Just as scientists developed synthetic rayon and polyester to imitate real silk spun from the natural fibers of silk worm cocoons, identity thieves can “weave” together “synthetic identities” by taking parts of information from many victims and combining that information to produce a “synthetic identity.” This is known as synthetic identity theft or synthetic identity fraud (SIF).

SIF is a fairly new form of identity theft used to convince someone that the thief is another person, real or fictional. Criminals may use Social Security numbers (SSNs) of children, the elderly, or homeless individuals—or those who may not use their SSN frequently. Or, they may just make up an SSN and attach it to a real name and phone number.

Then, the thief combines the stolen or made-up numbers with false phone numbers or addresses to create new identities with which they defraud financial institutions, government agencies, or individuals. According to the U.S. Government Accountability Office (GAO) 2017 blog on SIF, this “synthetic” identity may be used for the following activities:

• Money laundering

• Fraudulent application for government benefits

• Funding terrorism

• Entering or moving around the United States undetected

Combating Synthetic Identity Fraud

The U.S. GAO held a February 2017 forum on combating SIF that was convened by the Comptroller General of the United States, and included 14 experts selected with assistance from the National Academy of Science. The experts reported that SIF has grown significantly and revealed that in 2016 SIF was responsible for hundreds of millions of dollars of financial industry losses. These losses have also affected state government agencies when fictitious scammers collect millions of dollars in unemployment insurance claims.

There are a number of challenges that both public and private institutions face when combating SIF. Panelists identified these challenges in the July 2017 GAO report to Congress entitled, Highlights of a Forum: Combating Synthetic Identity Fraud.

This GAO schematic is reprinted with the permission of the GAO:

The panelists were from government, law enforcement, credit bureaus, data brokers, financial institutions, and academia, and identified a number of challenges that both public and private institutions face when combating SIF. Some of these challenges as cited by the GAO, are:

SIF is the fastest growing type of ID fraud and accounts for 80 to 85 percent of all identity fraud according to an ID Analytics study. And the consumer may never know SIF has happened to them until they’re stopped for a driving violation and realize that there is an arrest warrant in their name.

The good news is that this type of fraud may show up in national databases. It’s these databases that hold the key for early detection of possible identity theft. Scanning national databases such as credit bureaus, criminal records, DMV data, public records, large data aggregators, large credit companies, non-credit loan companies, and several large insurance companies that link your SSN to other personal identifying information such as your name, address, and date of birth can reveal misuse of your SSN which is a signal for possible identity theft.

Identity theft products that scan public databases and provide a Public Records Report and Dark Web Monitoring may help expose SIF. Internet fraud surveillance also known as dark web monitoring scans the Internet for your registered credit/debit cards, bank accounts and your SSN, based on an extensive search of Internet chat rooms; however, it is impossible to ensure that all Internet chat rooms have been searched for your personal information. Accordingly, your monitoring alert reports may not contain or apprise you of all your personal information that is publicly available or that may have been compromised.

Banks Receive New Tools in the Fight Against Synthetic Identity Theft

Banks may have new tools to fight this modern-day scourge. Under Section 215 of the Economic Growth, Regulatory Relief and Consumer Protection Act which received House and Senate approvals in 2018, the Social Security Administration (SSA) is directed to develop a database to facilitate the verification of consumer information upon request by a certified financial institution. This verification will be provided only with the consumer’s consent and in connection with a credit transaction.

International $200 Million Credit Card Fraud Scammers Busted

In 2013, 18 people were charged with inventing 7,000 fake identities to obtain over 10,000 credit cards in a sting that involved 13 locations in New Jersey, New York, Pennsylvania, and Connecticut.

The defendants allegedly fabricated identities to obtain credit cards and doctored credit reports to pump up the spending and borrowing power associated with the cards. They then borrowed or spent as much as they could based on their fraudulently obtained credit history and did not repay the debts, looting businesses and financial institutions of more than $200 million in confirmed losses.

Even though discovering synthetic identity theft is difficult, with advanced analytics, financial institutions, law enforcement, and government involvement, we’ve come a long way in addressing this modern-day problem.

And if you do find yourself the victim of identity theft, take quick actions by calling your local Police Department, financial institutions, and contacting the Federal Trade Commission at 1-877-ID-THEFT (438-4338) or going to https://www.identitytheft.gov.