As fraud prevention specialists continue to fight the good fight against identity theft, criminals have come up with a new method: combining elements of different people’s identities to create completely new ones.
The methodology known as “synthetic identity theft” is the fastest-growing and hardest-to-detect version and now accounts for 80 to 85 percent of such theft, according to the FTC.
How does it work? A fraudster brings together different people’s Social Security numbers, addresses, dates of birth, phone numbers, and/or other real or fabricated data to devise a singular fake identity that’s used to make fraudulent purchases, open phony accounts, buy insurance policies, enroll in medical benefits, establish cell phone accounts, or obtain driver’s licenses or passports.
Unfortunately, synthetic identities can be difficult to detect by traditional computer systems, which typically troll for fraud under the assumption that a stolen identity will include data that matches one original identity. When that data comes from different people, the computer often fails to flag it as fraudulent. While stolen Social Security numbers are relatively easy to find, those cases become more complicated when they include fragmented information, with the number attached to a fictitious name and address.
In addition, many perpetrators avoid detection by cherry-picking Social Security numbers that aren’t actively used, including those of children, the elderly, and vulnerable adults.
As investigators struggle to find these criminals, the criminals often have time to establish and/or expand credit lines with their victims’ information, and then they max them out with their purchases. In some cases, the fraud goes on for years until the fraudster defaults and the consumer questions why he’s being contacted by debt collectors.
Often, the fraudster causes his victims’ credit ratings to hit rock bottom before the phony charges are straightened out. Nevertheless, the institution allowing the charges often bears the biggest financial brunt of the fraud.
“One of the factors that makes synthetic IDs difficult to combat is that it’s thought of as a 'victimless' crime,” explains Experian fraud specialist Keir Breitenfeld. “When a synthetic ID is used, no single individual is going to be alerted to charges on their account, because the account holder isn’t a real person. Instead, it’s the institution ‘providing services’ to the synthetic identity that is the initial victim.”
How Can You Protect Yourself?
Because of increased sophistication by criminals and the high incidence of data breaches in recent years, fraud prevention gurus continue to grapple with the problem of synthetic identity theft.
Still, the advent of chip-read and PIN-enabled credit cards is expected to help reduce such crime. And increasingly, financial institutions are using advanced analytics, identity element monitoring, and device intelligence to combat synthetic identity, according to Breitenfeld.
Further, consumers are becoming more savvy about guarding their personal information. Here are some other steps consumers can take to ward off their risk:
- Memorize your Social Security number and give it out only after authenticating why it’s needed.
- Shred unneeded documents that contain your Social Security number, your banking and credit card numbers, and other personal info.
- Keep necessary personal documents in a secure lock box.
- Prevent mail theft by installing a mailbox that requires a key for entry.
- Ensure that your annual income is always stated accurately on Social Security statements.
- Consider investing in a dark web monitoring service that continually scans your financial accounts and activities for such fraud.
- Regularly analyze your bank statements and free annual credit reports for any discrepancies.
- If you suspect that a part of your identity has been stolen, inform your financial institution(s) as well as your local law enforcement. Your bank or credit card company may need to freeze your account(s) to prevent further fraud while the discrepancy is investigated.
Read more here to keep up to date on how to protect yourself from financial fraud.