FRAUDLIFESTYLE & TRAVEL

Understanding Synthetic Identity Theft

“Imitation is the sincerest form of flattery,” except when it comes to your finances. Synthetic identity theft — when a fraudster creates a fake identity using your Social Security number (SSN) — has become increasingly common. Unfortunately, this trend has become a prevalent part of today’s financial landscape.

According to a report done by one of the three major credit bureaus, TransUnion, synthetic identity theft reached nearly $3 billion for financial institutions. Auto loans were a major focus for synthetic identity theft, accounting for $1.8 billion or more than 60% of total exposure. That’s a whole lot of auto loans, credit cards, retail credit cards and unsecured personal loans being taken out by fraudsters.

This type of fraud leads to unpaid balances going to collections and collectors trying to find someone who doesn’t exist.

Talk about a wild goose chase.

What is synthetic identity theft?

Often, a fraudster attempting to create a synthetic identity will first seek out and steal a person’s real SSN. They will then create a fake name, phone number and email address to form a new identity for that SSN.

Then they will apply for accounts that may be easier to obtain from places where there isn’t a formal or strict approval process. Once they’ve established one account, they may springboard off that by being added to an already established account as an authorized user. These tactics help build credit over time and allow the fraudsters to develop a higher credit limit for their synthetic identity. Once a positive reputation has been established, the fraudster will max out all lines of credit and then disappear into thin air.

Who does it affect?

The most common victims of synthetic identity theft are children, the elderly, incarcerated people and unhoused individuals. The reason these groups are more heavily impacted by this type of fraud is they are less likely to check their credit report regularly.

Often, synthetic identity thieves will open an account that can be active for days, months or even years. They utilize this account responsibly — if necessary to their overall scheme — which may make it more difficult to detect that fraud is occurring.

How does it happen?

Fraudsters will obtain an SSN by stealing the physical card, hacking into your computer, or utilizing a phishing email or spam phone call to get your information. They may also purchase your SSN on the dark web from another fraudster who obtained the SSN from a data breach.

Data breaches in the United States increased by more than 83% over the past two years according to TransUnion, leading to an increase in SSN sales on the dark web.

How can you prevent synthetic identity theft?

• Monitor your credit. Actively check your credit score by utilizing free resources like AnnualCreditReport.com, which allows you to complete free yearly credit checks. Reviewing your report regularly will help monitor if any suspicious lines of credit have been opened using your SSN.

• Keep your SSN in a safe place. Never carry your physical card with you unless it is absolutely needed. Memorize your SSN so you can provide it when requested without removing the physical card from its secure location. Be aware of when and where it is appropriate to use your SSN as well.

• Stay informed about current scams. Many times, fraudsters obtain SSNs by utilizing common scams like phishing (scam emails), smishing (scam text messages) and vishing (scam phone calls). Stay up to date on fraud trends by doing research regarding new happenings when it comes to fraud and identity theft.

• Install security software. An easy way to prevent unwanted access to your information is to get security software for your computer. There are a variety of different options to choose from that will grant you an added layer of protection from online threats. It's important to research the different software to insure you are downloading a reliable one.

Synthetic identity theft continues to be a major problem in lending situations due to the advancement of technology. The emergence of readily available artificial intelligence has made it easy for fraudsters to replicate likenesses of individuals. Always be skeptical and ask questions when someone is asking for sensitive information.

Sources:

https://www.experian.com/blogs/ask-experian/what-is-synthetic-identity-fraud-theft/#:~:text=Synthetic%20identity%20theft%20is%20a,commit%20acts%20of%20financial%20fraud.

https://www.investopedia.com/terms/s/synthetic-identity-theft.asp

https://www.equifax.com/personal/education/identity-theft/articles/-/learn/synthetic-identity-theft/

https://www.transunion.com/blog/are-your-customers-real-synthetic-identities-driving-fraud#:~:text=TransUnion's%202024%20State%20of%20Omnichannel,increase%20since%20end%20of%202022.