Opinion: How to prevent or detect synthetic identity fraud
One of the fastest growing financial crimes is synthetic identity fraud. Experts call it “Frankenstein Fraud” because it involves combining personal information stolen from a real person with fake information to create a brand new identity for criminal purposes. Former Suffolk County (New York) District Attorney Timothy Sini, who prosecuted one of the first cases of synthetic identity fraud, said, “They exist nowhere except in a credit profile.”
Crooks often start with a Social Security number stolen from someone with little to no existing credit and/or someone who isn’t likely to be checking his or her credit file or applying for credit. The most valuable Social Security numbers are those of children, but the numbers of the elderly, lower income consumers, recent immigrants, homeless people, and even prisoners have been misused.
The crooks may take months to years to build up the fake profile to the point that they can get approved for credit cards or other loans. They may get declined at first, but eventually some lender will approve an account based on what appears to be a thin but clean credit record and then the scheme picks up steam. Eventually they max out all the credit limits and disappear, known as “busting out.”
In addition to opening fraudulent accounts, crooks also use synthetic identities to:
Hide from previous credit problems or debts to appear creditworthy.
Apply for unemployment and other government benefits or utilities.
Obtain employment, file fake tax returns, or get medical care.
Commit criminal acts including money laundering, human and drug trafficking, and terrorist activities.
The Federal Reserve estimated synthetic identity fraud accounted for $6 billion in losses in 2016. Software company FiVerity put the number at $20 billion by 2020. It said the average synthetic identity fraud profile cost banks and other financial institutions between $81,000 and $97,000.
In 2020, District Attorney Sini joined with other regulators to indict 13 individuals and three companies in a nationwide synthetic identity fraud scheme that stole more than $1 million from 19 banks and credit unions. The crooks opened phone accounts, email accounts, library cards, and other accounts with minimal verification requirements to make the fake identities appear legitimate. The ringleader even set up phony companies that reported the synthetic identities to credit reporting agencies to bolster their files there. Another perpetrator inserted the names into public databases that financial institutions use to verify information on prospective customers.
Preventing or detecting synthetic identity fraud is more difficult than with other forms of identity theft. Do your best to protect your Social Security number and other personal information, although the increasing number of data breaches we have no control over makes that more difficult. Social Security numbers can be bought on the dark web for as little as $1.
You should also:
Monitor your credit reports for free through AnnualCreditReport.com.
Consider freezing your credit reports to prevent fraudulent accounts being opened in your name or maybe using some of your information. Ask the credit bureaus to create and then freeze reports for your children.
Be careful what you share on social media.
Use strong, unique passwords and enable Multi-Factor Authentication wherever it’s offered.
Be alert to unusual mail indicating your information has been compromised.
Randy Hutchinson is the president of the Better Business Bureau of the Mid-South. Reach the BBB at 800-222-8754.
This article originally appeared on Memphis Commercial Appeal: How to prevent or detech synthetic identity fraud
