In an age dominated by digital transactions and online interactions, the rise of synthetic identity fraud poses an unprecedented threat. This new form of fraud combines real and false information to create a new, fictitious identity. This poses a complex challenge for companies and individuals alike. In this article, we'll look at the subtleties of synthetic identity fraud, explore its evolution, its impacts, and above all, the strategies for detecting and preventing it.
What is synthetic identity fraud?
Synthetic identity fraud is innovative and difficult to spot. Criminals meticulously blend fake and real elements, creating a new identity to fool financial institutions and individuals. The lack of identity control by these organizations makes them vulnerable to identity theft.
The nature of synthetic identity fraud
Definition
Synthetic identity fraud involves combining real and fake elements, such as social security numbers and names, to create a fraudulent identity.
Prevalence
McKinsey estimates it to be the fastest-growing financial crime in the United States.
Detection challenges
Difficult to detect due to victims' lack of vigilance. Synthetic identity fraud often targets less attentive demographic groups such as children and the elderly. It is estimated that 95% of synthetic identity fraud today goes undetected. Why is this? Because many companies and organizations have not yet secured their onboarding processes.
Synthetic vs. traditional identity theft
Unlike traditional identity theft, synthetic identities are created, making detection more difficult. Fraudsters gradually develop synthetic identities over a period of years before exploiting them.
How does synthetic identity theft work?
Let's now turn to the meticulous process undertaken by fraudsters to create and exploit synthetic identities.
Creating a synthetic identity
In the synthetic identity creation stage, false information is linked to real information. The counterfeiter may use a stolen social security number and falsified details. In this way, they gradually build up their fictitious identity, using information obtained via fake profiles on social networks. They then use this initial identity to open a bank account.
Opening a bank account and credit facility
The counterfeiter opens a bank account and builds up his credit. Initially, he uses only small amounts, makes small purchases and proves his good credit management. The banking institution becomes increasingly confident. Gradually gaining access to high-risk lenders and increasing credit limits over months or years.
Disappearance of the fraudster
Fraudsters exploit established credit to the full. Once trust has been established, they are able to carry out larger transactions. The bank lends a larger amount. These amounts are never repaid, leaving the bank overdrawn. The bank can then turn to the person holding the social insurance number, who then realizes that theiridentity has been stolen. But usually, the bank doesn't get its money back!
Impact of synthetic identity fraud
The widespread impact of identity fraud goes beyond financial institutions, affecting individuals and businesses in a variety of sectors. For individuals, it is difficult to prove the identity of the social insurance number and its distinction from the open line of credit. This makes it difficult for individuals to prove that they have been victims of identity theft. For businesses, losses linked to this method of identity theft are estimated to have been $1.25 billion in the year 2020.
Detection and prevention strategies
In response to the growing threat, companies need to adopt sophisticated measures to detect and prevent synthetic identity fraud.
Current detection challenges
On average, 95% of uses of this new type of fraud go undetected. This is due to a lack of control and authentication on the part of the companies in question.
Efficient detection tools
Innovative identity verification tools help prevent fictitious identity fraud. These tools take a more global approach. They combine document verification, biometric identification, verification of specific signals andcalls to external databases. Such advanced control enables the detection of identity theft, including fictitious identities.
Checking specific signals
This technology combines theidentification of abnormal behavior patterns with the use of facial recognition. These specific signals are now needed to counter the most advanced fraud techniques.
Calling up external databases
A complete check includes calls to public registers. Telephone numbers and additional information, such as a driver's license, enable more precise authentication. These external databases are a secure source of data, which must be cross-referenced with the information submitted by the user.
Conclusion
As synthetic identity fraud continues to evolve and adapt, it is imperative for businesses and individuals to strengthen their defenses. Adopting advanced detection technologies and a multifaceted approach to identity verification will be key to mitigating the widespread impacts of this sophisticated form of fraud. Stay vigilant, stay informed and stay one step ahead in the ongoing fight against synthetic identity fraud.
