White Paper: Synthetic Identity Fraud — Catching the Thief Who Doesn’t Exist

Topics: Digital Identity, Financial Crime, Financial Fraud & Anti-Money Laundering, Fraud, Government, Reports & White Papers, Risk Management, Thomson Reuters

synthetic id

A newly published white paper, Synthetic Identity — A New Path for Government Fraud? by author Tad Simons, asks the question: How do you catch a thief who doesn’t exist?

The paper, published by Thomson Reuters Legal, examines the growing problem of synthetic identity fraud (SIF), a relatively new form of identity theft in which criminals combine pieces of real personal data with fake information to create an entirely new identity that’s almost impossible to trace.

Unlike traditional identity fraud where someone steals a person’s actual identity, the paper explains how SIF perpetrators often begin with just a single piece of legitimate personal data, like a Social Security number, for example, and construct a full, albeit false identity around it. The perpetrators will bolster their legitimate identity data with fake address, phone numbers or other information, concocting a package that looks very much like the identity of a real person. They will then use this false identity to apply for credit, secure loans, or even fool government agencies to allow the fraudsters to intercept tax returns or types of paid benefits.

You can read the full white paper, Synthetic Identity — A New Path for Government Fraud? here.

While firm numbers on SIF losses are murky, the advisory firm Aite Group found in a May 2018 study that U.S. credit-card accounts lost $820 million in 2017 to SIF, and losses are projected to climb to $1.25 billion by 2020, according to the white paper.

Further, there are several factors the paper cites that have combined to make SIF activity a more prominent threat, leaving governments and their financial systems more vulnerable today.

As the paper points out, the growth in SIF, ironically, is partially being driven by improvements in the security behind how we use credit cards. The introduction of EMV-chip security in debit and credit cards has made it more difficult for thieves to standard identity fraud, pushing them to find more creative ways to separate consumers from their cash.

Indeed, technological developments that have made almost all financial transactions digital have created opportunity for these cyber-criminals, especially in the area of government benefits, such as Medicare and Social Security benefits. As the paper demonstrates, it’s much easier to impersonate someone online than it is in person, especially if the “person” is really a false identity made up from a mix of fake and real identity data points.