Synthetic identity

What is a Synthetic Identity?

A synthetic identity is a false identity created by combining real and fabricated information. Criminals use pieces of personally identifiable information (PII)—like Social Security Numbers (SSNs), email addresses, or phone numbers—with fictitious details to build a new, fraudulent identity. Unlike traditional identity theft, which involves stealing a real person's identity, synthetic identity fraud mainly relies on the creation of personas that are partially or completely fake. This type of fraud poses a significant challenge for businesses and financial institutions, as it can be difficult to detect in its early stages.

Examples

• Financial Fraud: A fraudster uses a valid, unassigned SSN (often belonging to a child or deceased individual) combined with fake names and addresses to create a synthetic identity. They then apply for credit cards, loans, or open bank accounts, eventually “busting out” with large unpaid balances after building a credit history.
• Healthcare Fraud: A synthetic identity is used to fraudulently obtain healthcare services or insurance reimbursements. For instance, criminals may use non-existent patients with fictitious PII to file false insurance claims.
• Online Marketplace Scams: Fraudsters use synthetic identities to create trusted buyer or seller profiles on e-commerce platforms, eventually executing scams to exploit unsuspecting users.

Risks to Businesses

Synthetic identity fraud is one of the fastest-growing types of fraud, with significant ramifications for businesses, including:

1. Financial Losses: Companies may face chargebacks, unpaid debts, or delinquent loans as fraudsters exploit synthetic identities to extract monetary value.
2. Reputational Damage: A business that processes transactions involving fraudulent identities may lose consumer and partner trust over time.
3. Operational Costs: Detecting and remediating synthetic identity fraud often requires substantial system upgrades, employee training, or third-party tools, driving up operational expenses.
4. Compliance Risks: Companies may unknowingly violate Know Your Customer (KYC) and anti-money laundering (AML) regulations if they fail to catch synthetic identity fraud during onboarding.

How Fraud.net Products Solve for Synthetic Identity Fraud

Fraud.net's suite of fraud prevention solutions plays a pivotal role in tackling synthetic identity fraud. Here's how our products address this growing threat:

• AI-Powered Risk Detection: Fraud.net leverages advanced machine learning algorithms to analyze behaviors, patterns, and anomalies in real time. This allows for identifying suspicious accounts that exhibit unusual activity, even at scale.
• Identity Verification Tools: Fraud.net’s platform integrates comprehensive identity verification capabilities, such as multi-factor authentication and real-time document checks, to flag mismatched or synthetic PII during user onboarding.
• Cross-Network Intelligence Sharing: Fraud.net's global network aggregates signals and fraud data across industries, providing businesses with enhanced insights to detect synthetic identities linked to other fraud attempts.
• Transaction Monitoring: The platform continuously evaluates transaction patterns to spot red flags, like inconsistent purchase behaviors or geographical mismatches, which are common indicators of synthetic identity fraud.
• Customizable Rules Engine: With Fraud.net’s flexible rules engine, businesses can create tailored policies to suit their industry-specific risks, making fraud detection both thorough and efficient.

Synthetic identity fraud is a rising challenge, but businesses don’t have to face it alone. Explore how our technology platform can protect your organization.