Data reviewed in a new whitepaper from consumer risk management provider ID Analytics suggests the use of synthetic identities, created from a combination of fake credentials which are combined to create a fake identity, is on the rise.
Since the randomization of social security numbers (SSN) in 2011, ID Analytics has seen the number of new SSNs appearing on applications within its ID Network more than double, likely due to an increase in manufactured synthetic identities. While instituted to protect the public, the randomization also makes it harder for systems to detect fraudulent SSNs. In the past it was easier to identify a fraudulent SSN if it fell within an unissued range.
While past efforts involved stealing valid information from actual consumers, much of the current fraud practices involve identification not tied to an actual person. This means it can go undetected for longer periods.
Demographics associated with suspected synthetic identities are similar to new-to-credit customers. Third party fraudsters are three times as likely to have a credit bureau record than suspected synthetic identities.
The whitepaper addresses three types of synthetic identity fraud:
- In cases of traditional synthetics, fraudsters take valid information from several actual people and combine them into a fictitious identity.
- Those employing manipulated synthetics only change the SSN, a common tactic of people avoiding prior behavior.
- Manufactured synthetics have yet to be solved. These identities are composed of invalid information, including SSN’s falling within the random use range. That makes them impossible to identify as fakes. Fraudsters develop these identities over time, beginning as seemingly new credit customers before maxing out their credit lines and disappearing.
Institutions guard against traditional and manipulated synthetics by reviewing credit timelines and using personal identifying information through scoring and fraud models. Manufactured synthetics remain a challenge, vice president of Identity Solutions Ken Meiser said.
“The problem of synthetic behavior continues to grow in sophistication, intensity and frequency, and as it does, it has a huge impact on the financial harm it can do and how easily it can be detected. ID Analytics works with some of the country’s leading wireless, credit card and marketplace lenders, helping them to address the issue of synthetic identities, and we are committed to helping them solve the problem of manufactured synthetics, not just manage the symptoms.”
More information on synthetic identities can be found in the ID Analytics white paper, “The Synthetic Epidemic: Understanding Identity Fraud after SSN Randomization.” Additionally, ID Analytics has an educational webinar on the topic available to play on demand at http://hub.idanalytics.com/the-new-era-of-synthetic-identity-fraud-lp.