What Is Synthetic Identity Theft? Unmasking the Invisible Enemy  

Identity theft has become an alarming concern in today’s interconnected digital landscape. From stolen credit card information to compromised personal data, we often hear about traditional forms of identity theft. However, a newer, more insidious threat lurks in the shadows – synthetic identity theft. Unlike traditional identity theft, this cybercrime involves the creation of entirely new, fictitious identities by combining real and fake information. The resulting synthetic identities are virtually undetectable and can wreak tremendous havoc. 

Definition of Synthetic Identity Theft 

Synthetic identity theft is an advanced form of cybercrime where criminals combine real and fake information to create entirely new identities. Unlike traditional identity theft, which involves stealing and misusing existing identities, synthetic identity theft fabricates new ones that are difficult to detect. 

Fraudsters use stolen social security numbers and invent personal details to construct seemingly legitimate identities. They then exploit these synthetic identities to establish credit profiles, build a positive financial history, and eventually rack up debt before disappearing. The deceptive nature of synthetic identities makes detecting and preventing this theft challenging, necessitating increased awareness and protective measures.

Synthetic Identity Theft vs Traditional Identity Theft 

Conventional identity theft entails intentionally abusing someone’s data, like their social security number or credit card information, resulting in monetary losses and credit harm. On the other hand, synthetic identity theft is a more intricate form of cybercrime where fraudsters create new identities by blending real and fake information. 

Since these fake identities are created to look real, it is challenging to identify and stop fraud. Fraudsters gradually build credit profiles for synthetic identities, exploiting them for financial gain before disappearing. Both traditional and synthetic identity theft pose significant risks, and individuals and organizations should employ strong security practices and remain vigilant to protect themselves against these threats.

How Synthetic Identity Theft Works [The 5-Step Cycle]

Synthetic identity theft operates through a multi-step process involving creating and exploiting fraudulent identities. Here’s a breakdown of how synthetic identity theft works:

1. Identity Construction 

Synthetic identity theft starts with fraudsters merging stolen social security numbers with fabricated personal details like names, addresses, and dates of birth. This creates a genuine synthetic identity that can initially pass verification checks.

2. Building Credit

Fraudsters carefully build a credit history for the synthetic identity by gradually applying for credit cards, loans, and other forms of credit. They start with small amounts, ensuring they appear responsible, and make consistent payments to enhance the synthetic identity’s creditworthiness and obtain higher credit limits.

3. Credit Piggybacking

Fraudsters may exploit the technique of “credit piggybacking” by linking the synthetic identity to a genuine person’s account as an authorized user or joint account holder. This enables the synthetic identity to gain advantages from the positive credit history associated with the legitimate account, further strengthening its credibility.

4. Exploitation and “Bust Out”

After building a strong credit history and obtaining high credit limits, fraudsters carry out a “bust out” scheme. They rapidly accumulate debt across multiple credit accounts, including maxing out credit cards and obtaining cash advances. Once this stage is complete, they vanish, leaving unpaid debts and causing significant financial losses for creditors and financial institutions.

5. Repeat the Cycle

Fraudsters may repeat the process with multiple synthetic identities, perpetuating the scheme and maximizing their illicit gains. By continuously creating new synthetic identities, they avoid detection and prolong the impact of their activities.

Ways to Detect Synthetic ID Fraud  

Detecting synthetic identity fraud requires a multi-layered approach. For example, utilizing machine learning and AI can help identify behavioral anomalies while analyzing diverse data sources, including third-party data, can uncover patterns across accounts and organizations. Implementing advanced identity verification methods such as document and biometric verification powered by AI algorithms strengthens fraud prevention efforts. 

Here are some ways to detect synthetic ID fraud:

• Analyze Application Inconsistencies: Look for discrepancies or inconsistencies in the information provided on credit applications, such as addresses, dates of birth, or employment details. Synthetic identities often contain elements that do not match or follow typical patterns.
• Monitor Social Security Number (SSN) Usage: Keep a close eye on SSN usage patterns, such as multiple individuals using the same SSN or a high number of SSNs associated with a single address. Unusual SSN activity can be a red flag for synthetic ID fraud.
• Verify Identity with Multiple Data Sources: Utilize multiple data sources to verify the authenticity of an individual’s identity. Cross-reference information provided in credit applications with public records, utility bills, and government databases to ensure consistency and legitimacy.
• Employ Advanced Analytics and Machine Learning: Use cutting-edge analytics and machine learning techniques to evaluate massive amounts of data and spot trends related to synthetic identity fraud. These technologies can help uncover hidden relationships, detect anomalies, and flag potential fraudulent activities.
• Monitor Credit Reports: Regularly monitor credit reports for suspicious activity, such as unfamiliar accounts or credit inquiries. Unexplained changes or inconsistencies in credit reports may indicate synthetic ID fraud.
• Collaborate with Industry Networks: Participate in industry networks and collaborate with other organizations and financial institutions to share information and insights about known or suspected synthetic identity fraud cases. Collective intelligence can enhance detection capabilities and aid in early identification.
• Implement Identity Verification Measures: Strengthen identity verification processes by incorporating multi-factor authentication, biometric verification, or enhanced document validation techniques. By taking these steps, fraudsters may find it more challenging to build false identities.
• Stay Updated on Emerging Trends: Stay informed about emerging trends, techniques, and tools used in synthetic identity fraud. You can modify your detection tactics and implement efficient countermeasures by staying current with advancements.

These are the most common ways to spot synthetic identity theft. However, they are not the only ways. If you suspect your identity has been compromised, it’s important to take immediate action. Learn more about how to file a report of identity theft with the Federal Trade Commission (FTC). 

9 Ways to Protect Yourself Against Synthetic ID Fraud

Protecting against synthetic identity fraud requires a proactive and comprehensive approach. Here are key steps to safeguard against this type of fraud:

1. Strengthen Identity Verification 

Implement robust identity verification measures that go beyond basic information checks. Utilize advanced technologies such as biometric verification, document validation, and multi-factor authentication to ensure the authenticity of individuals’ identities.

2. Monitor Credit Reports

Regularly review credit reports for suspicious activity or accounts that don’t belong to you. Report any unauthorized accounts or inquiries immediately to the credit bureaus.

3. Educate Employees (and Customers)

Provide training and education to employees and customers about the risks of synthetic identity fraud. Increase public awareness of the value of protecting personal information and being on the lookout for potential fraud.

4. Secure Personal Information  

Safeguard personal data using strong passwords, encryption, and secure storage systems. Limit access to sensitive information and be cautious about sharing personal details online or over the phone.

5. Regularly Update Security Measures 

Stay current with the latest security technologies and practices. Regularly update software, firewalls, and antivirus programs to protect against cyber threats and vulnerabilities.

6. Implement Fraud Monitoring and Detection Systems 

Utilize advanced fraud monitoring systems and analytics to detect suspicious activities and patterns associated with synthetic identity fraud. These systems can help identify anomalies and trigger alerts for further investigation.

7. Collaborate with Industry Networks 

Participate in industry networks and share information about known or suspected synthetic identity fraud cases. Collaborating with other organizations and financial institutions can help combat this fraud.

8. Establish Strong Partnerships 

Work with trusted vendors and partners who prioritize security and have stringent identity verification measures. Verify the security practices of any third-party providers with access to sensitive customer data.

9. Stay Informed About Emerging Threats and Scams 

Keep up with the newest trends and tactics in synthetic identity fraud. Regularly review industry reports, attend conferences, and collaborate with fraud prevention communities to stay informed and adapt security measures accordingly.

By implementing these protective measures and maintaining a proactive stance against synthetic identity fraud, individuals and organizations can significantly reduce the risk and impact of this type of fraud.

Bottom Line 

Synthetic identity theft is a complex and evolving form of fraud that blends real and fake information to create seemingly legitimate identities. Detecting and preventing this type of fraud requires advanced technologies, collaboration, and constant vigilance. Individuals should regularly monitor their credit reports, report suspicious activity, and adopt strong security practices. 

Frequently Asked Questions (FAQs)