It’s nothing new that the world has been moving to digital shopping and digital payment methods. But the impact that COVID-19 has had on the way we shop has been nothing short of seismic. With so many people on lockdown, e-commerce exploded and along with it came the rapid rise of digital payments. Sadly, wherever there is business, fraudsters lurk. Synthetic identity fraud (or theft) is the newest method criminals are using to commit fraud against businesses.

In fact, McKinsey expects that synthetic identity theft is the fastest-growing type of fraud, making up 10-15% of credit charge-offs.

To combat this acceleration, your business must understand the details of synthetic identity fraud that make it so challenging to identify. It’s also prudent to use all solutions at your disposal to head off issues as soon as possible.

What is synthetic identity fraud?

Synthetic identity fraud involves a fraudster creating an identity using a mix of fake and real data. The real data is often a Social Security number (usually of a child) that a fraudster uses to create the new identity.

Often, the fake identity is first added as an approved user to an unsuspecting account holder. This is called piggybacking.

Further, fraudsters will create several identities using the valid data. Personally identifiable information has become available on a larger scale. In fact, it has risen as much as 126% due to larger and more frequent data breaches. This gives fraudsters more data to work with.

How does it work?

Fraudsters craft new identities using the methods above. They open bank and credit accounts. And they even use the identities to obtain health care.

If their first credit applications are rejected, the act of applying still creates a profile. Fraudsters use this profile as proof of existence to open another account.

They’ll use these accounts responsibly for a period of time to build up credit scores and payment history.

With a higher credit score, they’ll get more loans. At this point, they’ll typically disappear, leaving the retailers and banks with lost money.

What makes synthetic identity fraud unique?

Synthetic identity theft is different in three key areas.


People consider synthetic identity theft as a victimless crime from an identity perspective. While the Social Security number does belong to someone, the other data (name, address, etc.) is different.

This shifts nearly 100% of the detection to the business side of the equation.

Because of the difficulty with detection and classification, institutions often just write it off as bad debt. Banks don’t think to label it as fraud. They treat it as if the person simply walked away from their duty.

Because it’s not often reported as identity theft, this then makes it even harder to spot.

To further complicate matters, one other aspect sweetens the deal for fraudsters. In 2011, the government began randomizing SSNs. That means numbers are no longer tied to geographic areas. So, synthetic identities are easier to create and harder to track. Fraudsters can now use a randomly formed SSN without fear of a geographic check.


Typically, when identity theft occurs, it’s in the smash-and-grab style. The criminal gets the data and uses or sells it right away. They sometimes do both.

With synthetic identity theft though, the process is much slower. Often, fraudsters use the identity for six months to five years. It’s harder to detect, and for maximum effect, it requires that cultivation.

By having the accounts open longer and using them in real ways, it makes it all the more difficult to combat.


In addition to the typical fiscal damage, synthetic identity theft is often used in human trafficking and money laundering.

In terms of specific impact, synthetic identity theft messes with the Paycheck Protection Program (PPP). The government enacted PPP to help small businesses recover from COVID-19 business losses. Fraudsters have been abusing the program through this technique. This not only costs taxpayers millions of dollars but also takes money away from the people who need it the most.

How can you protect your business?

With synthetic accounts making up 15% of all credit-related fraud, you can’t afford to not protect your business. By working with, you detect and stop synthetic identity fraud.

Our solutions work by:

  • Examining key identity factors during account creation.
  • Cross-verifying critical identity data.
  • Flagging potential high-risk behavior that’s often connected with synthetic identity fraud.

One of the best defenses against synthetic identities is information sharing.’s Collective Intelligence Network contains billions of transactions and 200 participating organizations. As many financial institutions are realizing, businesses need this type of collaboration to root out this complex fraud.

Also, our AI solutions cross-verify critical identity information and flag potential high-risk behavior associated with synthetic identity fraud.

Contact us today to learn more or schedule a free demo.