Understanding Synthetic Identity Theft

By Cathy Ross for Fraud.net


Synthetic identity theft (or more accurately, synthetic identity fraud, which is also in sharp contrast to stolen identity fraud) has no specific consumer victim. That’s an important advantage for the fraudsters. After all, if Mary Doe steals Jane Smith’s identity, then Ms Smith has every incentive to report the theft to the authorities and credit bureaus. She serves as a key tool in the detection and mitigation of such fraud. But if Mary Doe invents a Ms Smith, then this key tool is missing from the toolbox.

A related problem, from the point of view of lenders and merchant creditors: it is very difficult to get a fix on how big a problem this is. Often the invested Ms Smith’s account will simply be written off as bad credit, and unrecoverable debt. It won’t be accounted for as a cost of fraud.

On a macro level, Gartner Inc. has estimated that synthetic fraud accounts for 20% of credit charge-offs.

Short Description:

Broadly speaking, synthetic identity fraud takes one of two forms. Our Mary Doe can try to create a new cyberspatial identity by slightly altering her own self, or she can start from scratch. The results are sometimes called “manipulated synthetics” and “manufactured synthetics,” respectively.

Sometimes the synthetic identity creator does not intend to defraud those with whom she deals. This (relatively) innocent form of false identity creation is likely to fall under the first of those two headings, manipulated rather than manufactured. Mary Doe might start calling herself Maria Dough, and invert two digits of the social security number she provides, in order to try to get out from under the effects of a bad credit history.  She might make legitimate purchasers and intend to repay them.

But if “Maria” is in fact cobbled together from a variety of sources, the personally identifiable information (PII) of a number of people, the date of birth of one the address of another, the SS number of a third, etc., the perpetrators are more cold-bloodedly fraudulent.  Increasingly, synthetic identities are being created from a single identity element, like a social security number, which a fraudster uses to seed an otherwise fabricated identity.  While the first new credit application filed with lenders may get rejected as having too little history, the second or third has a much better chance of being approved as the credit agencies being queried may now recognize the identity as legitimate.  An example is as follows >>> READ MORE


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