Synthetic identity fraud: The world’s fastest growing online fraud
The most clever and unique type of online fraud the fintech industry is facing since the last decade is synthetic identity fraud. Synthetic identity fraud is such a clever type of fraud because of its distinctive quality. What makes it so unique is the way it works and how easy it is for scammers to go undetected or even save themselves by playing the victim card when they get caught. So, what makes synthetic identity fraud such a silent killer?
Synthetic identity fraud as the name suggests is a unique type of online fraud where the scammer uses stolen real information and combines it with fake information to create a hybrid new identity which is real yet fake. What makes it look genuine is the fact that the SSN (social security number) is real which is usually stolen from unsuspecting individuals. The scammer creates a profile with the stolen SSN and adds fake additional information like phone numbers, addresses, email IDs etc. to it according to his requirements. Scammers create synthetic identities for various reasons, it could be to commit payment or account frauds, pirate bank accounts or it could even be illegal immigrants trying to get financial services.
Synthetic identity fraud is very different from the traditional identity fraud we’ve all seen in Melissa McCarthy’s “Identity thief”. In the traditional way of stealing identities, fraudsters steal information like SSNs, addresses, credit cards, IDs etc. from innocent victims who are usually unaware. The stolen data is sold in black markets or misused to make purchases and is often something which can be tracked. In synthetic identity fraud, since the identity is a mixture of fake and real information, it gets very difficult for tracking these scammers and the they usually go undetected for a long time.
Synthetic identity fraud is a very sophisticated type of online crime as its fraudsters have just been getting better at what they and the banks fall prey to them. This type of frauds is very dangerous as the level of complexity is shocking. The scammers can set up the fake account and maintain a good credit score for a long time before finally committing the fraud and going unnoticed very easily. When they maintain a good credit score, the fraudsters are far away from being seen as delinquent and when they finally strike, banks fall prey to these scams and end up losing money. When the scammers get tracked or are about to get caught, it is quite easy for them to play the victim card by just creating another fake identity with fake information and racking up charges.
Synthetic identity frauds usually go undetected and banks and other financial institutions usually fall prey to these scams. Since there is no clear evidence to the fraud which is committed, the banks treat the money as bad debts and hence a loss. Since the verification of SSNs by lending companies is an obstacle in the way of safe lending, the Government has passed a legislation, “the economic growth, regulatory relief and consumer protection” in 2018 which gives way to verification of SSNs by request of a certified financial institution.
Thus, synthetic identity frauds are very complex and are growing by the day, more efficient and legitimate ways of detecting these frauds is very important.
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