They are coming to be your evil “twin”; will you allow them?
The threat of identity fraud to businesses has been severe. The most impacted sectors are those in the industries of tourism, hospitality, commerce, and financial institutions. Synthetic identity fraud is a serious challenge and a popular trend among fraudsters, even though con artists utilize various techniques and dirty tricks for identity theft.
Synthetic identity fraud detection is essential if you want your business to stay untouchable and out of the reach of these criminals.
Many organizations must deal with the problematic issue of how to ensure that only actual people use their services as fraudsters increasingly exploit synthetic identity fraud to perpetrate crimes.
This article was specifically written with you in mind -to ensure that you are fully informed about synthetic identity fraud and how to avoid becoming a victim,
What Is Identity Fraud?
According to McKinsey, synthetic identity fraud is the fastest-growing category of financial crime.
Synthetic identity fraud, also known as Synthetic ID Fraud or Frankenstein Fraud, is a form of fraud in which a criminal creates a new identity using a combination of true and false information.
Synthetic identity fraud enables thieves to steal money from creditors, particularly credit card firms, who provide credit based on a false identity.
Fraudsters use real and bogus information, such as Social Security Numbers (SSNs), names, and birthdates, to build a new identity.
It consists of several made-up credentials, and the inferred identity is not connected to a real person.
These criminals use the stolen data to open fictitious accounts and make fraudulent purchases to defraud financial institutions, governmental organizations, or private persons.
Recognising and detecting Synthetic Identity Fraud
Synthetic identity fraud detection is challenging because the fraudsters use factual information. With these IDs, scammers can open bank accounts, ask for loans, and get credit cards without ever having to pay them back.
Criminals frequently build fake identities using stolen credit privacy or Social Security numbers. This data may be taken through phishing scams or included in a data dump on a dark web market.
Fraudsters will frequently make up the address, email address, and phone number once they have this information. These precise details can even be created and randomly generated using web resources.
Synthetic identity fraudsters can use many identities at once and may maintain open and active accounts for months or even years before you notice.
They could open accounts and appropriately manage them for a while to increase their credit history and score.
A more significant future windfall is possible for the fraudster, thanks to a higher credit score. In certain instances, thieves run up fraudulent charges before posing as fraud victims to reinstate their credit lines by using truthful information to build their false identities. They then carry out more thefts using the extra credit.
There are primarily two types of synthetic identity fabrication techniques that fraudsters employ:
1. Manufactured Synthetics
Since fraudsters link bits and pieces of Personally Identifiable Information (PII) from genuine persons to construct fake identities, these synthetic identities typically consist of factual data built from several identities.
Recently, they have been constructed using false data, including SSNs that fraudsters select from the same pool of numbers that the SSA draws randomly to assign SSNs. The account was created using PII that is not associated with known customers.
With today’s tools, it is challenging to recognize this new type of fabricated synthetics.
2. Modified Identities
There are few alterations to the SSN and other components of synthetic identities based on real identities.
People frequently use these modified identities to conceal their past, secure access to credit, and for other reasons that may or may not be harmful.
People with poor credit histories may construct false identities to obtain new credit for necessary expenses they intend to pay back.
The good news for businesses is that you can uncover false identities. The fact that modified synthetics frequently conflict with the real identity they are supplementing and fail validity checks is the key to spotting them.
Synthetic Identity Fraud vs Traditional Identity Fraud
Seeing what synthetic ID fraud is and how it works, you must be interested in learning how it is different from conventional identity fraud.
In the old-fashioned kind of identity fraud, the perpetrator pretends to be someone else while using stolen identification.
The victim is usually informed of the fraud because they often use the entire credit limit at once.
Therefore, people notice conventional identity fraud faster than synthetic identity fraud.
Additionally, investigation authorities do not hold victims accountable because it is simple for them to identify abnormal activities in reported accounts or obtained financial statements.
On the other hand, because these criminals exploit authentic information during the crime, victims of synthetic identity theft are constantly going unnoticed. Also, it is completed in little increments, enabling fraudsters to remain undetected for longer.
What Makes Detecting Identity Fraud Difficult?
Fraud involving synthetic identities has become worse than we could have ever imagined. The level of sophistication, intensity, and quick growth rate are highly problematic.
Financial institutions may not have sophisticated enough filters to detect it. When the fake applicant for an account applies, they can pose as a real customer with a modest credit history.
Financial organizations aren’t even able to detect real identity theft. This is due to the fact that the fraudster creates a history of using the false account responsibly before it accumulates debt.
This gives the impression that a person is a real person with financial difficulties rather than a criminal who amasses charges and starts to fall behind on the account immediately.
Detecting Identity Fraud
It is challenging to assess the effects of synthetic identity theft. That shouldn’t be surprising for a crime that you can barely detect. It can be challenging to spot synthetic identity fraud, and there is no established procedure for recording losses when it occurs.
Hence, it is essential to know how to detect it early enough before it causes so much damage to your business. Here are some key indicators to help you see when you’re already a victim of this fraud:
- Using the same IP address to create several accounts.
- You create multiple accounts using the same personal information.
- Usage of the same Social Security Number (SSN) again and over again.
Asides from knowing and recognizing signals of synthetic identity fraud activities, you can adopt some measures to detect this fraud:
- Understanding patterns of client behavior and identifying anomalies using Machine Learning and Artificial Intelligence. Another important initial step in preventing fraud is verifying the customers’ identities.
- Businesses must invest in increasingly advanced identity verification techniques, such as document and biometric verification backed by AI algorithms. By requiring the submission of a synthetic identity document, document verification will need the fraudster to provide one. They won’t have a real identity paper that matches the fake identity.
- Putting tools and software programs in place to identify linkages between accounts and events and fraud attempt networks
How to Prevent Identity Fraud
True, detecting synthetic identity fraud is more complex than detecting other crimes. Nevertheless, there are proven ways to protect yourself, your business, and even your loved ones from the menace of synthetic identity fraud. In no particular order, here are steps to take to protect yourself:
- Spend money on a service that protects your identity entirely and mitigates all types of fraud. The services could include fraud monitoring, management of digital footprints and fraud detection.
- Use biometrics when onboarding new customers to reduce the likelihood that their accounts will be compromised. Examples of biometrics include facial recognition, fingerprint identification, and iris recognition.
- Implement multi-factor authentication to deter would-be criminals. You may simply ask your customers to input their login, password, and a code from an email or SMS in addition to these details.
- Employ advanced systems that gather data from numerous public or private databases and analyze a broader range of data points to find anomalies and discrepancies.
- Freeze the credit reports for your kids. Credit rating agencies will create children’s credit records and freeze the records. Freezing the records would prevent others from using your children’s SSNs to open new credit accounts.
- Don’t share your SSN unless it is required to do so to reduce exposure. It’s a good idea to find out how the organizations, establishments, and individuals who gather the information plan to safeguard it.
- Never share private information on social media, even though it can seem like a good idea at the moment, such as phone numbers, addresses, and financial information. Unexpected financial issues, including security breaches and financial data hacking, are possible.
Wrapping Up
It takes effective techniques that look at the fundamental problem of identity legitimacy and typical results to address the complicated challenge of synthetic identity fraud, which is getting worse by the day.
Businesses can retain performance more effectively even when synthetic fraudsters change tactics by building a comprehensive defense that can address the whole problem.
Applying these best practices will enhance your capacity to identify and reduce synthetic identity fraud.
Author Bio
Martins Favour is a creative content writer with over five years of experience writing SEO content for various brands. She finds a home in weaving worlds out of words. Stories are her life and LinkedIn is her favorite tool.