The entire world is connected online, around 64 per cent to be exact. With this, a door of opportunity has opened for businesses across the world. However, with this opportunity comes a responsibility. The businesses are accountable for protecting the consumer’s data safe and providing a seamless experience. However, it is not easy.
With the evolution of the digital landscape, there has been a rapid rise in fraudulent activities. One of them is synthetic identity fraud which costs businesses close to $5 billion in 2024.
Imagine spending months to plan that ideal campaign to attract the desired audience as new customers. And you get new customers as well. However, later you discover that the actual number of real users was much less than the number projected.
Reason?
A major chunk of these new users was fraudulent.
The real concern is that this scenario is not hypothetical anymore. Synthetic identity fraud is a real problem existing in the digital landscape.
What is Synthetic Identity Fraud?
Synthetic identity fraud is a type of deception technique where criminals leverage a combination of fake and real data to create a new identity to defraud one or more businesses. These methods bypass KYC verification checks, abuse brand promotions and offers, take out line credit, purchase with stolen credit cards, launder money and many more ways.
The synthetic identity is crafted with such precision that it seems credible, which helps to pass the security checks when opening an account or making a purchase. As quoted by Security Magazine, 46% of organizations faced synthetic identity fraud in 2022. It is among one of the fastest-growing forms of identity theft.
What has resulted in the rise of Synthetic Identity Fraud?
The personally identifiable information (PII) like emails and mobile numbers are available on the dark web. This helps fraudsters to create fake identities that are hard to differentiate from real identities.
The biggest black box in identifying synthetic identity fraud is that fraudsters don’t use it just after creating a synthetic identity. Instead, they create the identities and use these for a year or more like a genuine person before committing fraud.
For example, Fraudsters open an account using the synthetic identity for an existing credit card. This helps them to create a credit file and they do all the activities to appear as a genuine ID. Once the trap is set, they leverage it to claim a larger credit line.
Where Synthetic Identities Are Used by Fraudsters?
1. Financial Institutions:
The most common way for fraudsters to use synthetic identity is in the banking and lending industries. Before executing the synthetic identities for fraudulent practices, the fraudsters set the trap by creating a good credit history with the financial institutions. The organisations believe that the synthetic identity is genuine, eventually leading to the onboarding and creation of an account created by a fake person.
According to a report by Regula, 26% of banks reported over 100 incidents of identity fraud in 2022. 31% of the banks stated that these incidents have cost them an average of $479,000 and more.
2. Online Marketplaces:
There is a loophole in online and eCommerce marketplaces which the fraudsters have identified. To provide a seamless customer experience, they keep fewer checks in place especially when it comes to creating new accounts and making the first purchase.
Fraudsters use synthetic identities to create fake accounts and make high-value purchases to get a chargeback. This results in an increase in the burden of losses for merchants.
Signs to detect and prevent Synthetic Identity Theft?
Some of the hallmark signs that indicate Synthetic identity fraud are:
- A single social security number is used repeatedly
- Multiple accounts created using a single IP address
- Same personal information used to create multiple accounts
How do we fight against synthetic identity fraud?
Identity fraud or Synthetic identities are hard to detect due to their sophisticated movements and processes. Therefore, banking institutions and other organizations need to invest in an in-house expert or an external tech partner with the capability of detecting ever-evolving identity scams. To stay ahead of the ever-evolving threats of digital identity organizations need to rely on a solution that can identify beyond the basic attributes of a synthetic identity while maintaining a seamless experience for customers.
mFilterIt’s comprehensive Identity Scan solution possesses the capabilities to maximize the detection and prevention of the ever-evolving synthetic identity fraud. Leveraging the power of open-source intelligence our solution helps financial institutions and other organizations deal with identity theft.
Our extensive data harvesters and database repository enable brands to utilize digital user data for identity verifications using social risk parameters.
Protect your business from potential identity scams with us!
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