What is Synthetic Identity Theft?

Synthetic identity theft, also known as synthetic identity fraud, is a rapidly growing fraud that occurs when hackers use stolen data and hide a previous history to create new identities rather than stealing and using existing accounts. They can use these fake identities to create fraud attacks.

Synthetic identity theft, a type of fraud scheme that uses fabricated identities, is growing rapidly, with banks and digital merchants particularly vulnerable. If you don’t notice synthetic identity accounts early on, they can be difficult to detect because they show all of the characteristics of an ideal client. Other third-party fraud attack methods, such as account takeover or clean fraud, rely on existing identities. The fraudster gains access to a cardholder’s account or personal information and then makes as many transactions as possible within the short time frame before being discovered.

Little information is available to assist you in correctly detecting a case of identity theft before it happens. Merchants can identify one after the fact. Once the dust has cleared and the thief has abandoned the account in issue, the only thing left is figuring out which method they used.

• Manipulated Synthetic Identities: Identities based on real persons are less likely to raise suspicion, which is why this synthetic fraud is so common. To do this, fraudsters will make small changes to an SSN to hide a previous credit history and obtain credit.

• Manufactured Synthetic Identities: They are sometimes called ‘Frankenstein’ identities since they comprise personally identifiable information (PII) gathered from various sources. For example, fraudsters might create a phony identity with verifiable data points using one person’s SSN, another’s address, and a third’s account information.

Unlike other kinds of fraud, synthetic identity theft seldom involves an identifiable customer victim. Since fraudsters are receiving card statements, no one will detect anything unusual. Real cardholders with stolen SSNs are unlikely to be aware that their information has been stolen until it appears on their credit report, which could take years.

Some fraudsters are “double-dipping,” purchasing items using fake cards, and claiming that the purchases were not as assured or never delivered. The fraudster files a chargeback with the banks, and all of the associated charges are borne by the merchant. They commit criminal fraud and then target the merchant with a friendly fraud attempt to further victimize them.

Social Security Statements: Social Security Statements show when payments are made to the Social Security fund as part of withholding taxes. If a business or user finds anomalies in Social Security payments, it’s possible that a fraudster exploited fraudulent credentials to get work.

Strange Bills and Multiple Addresses: If you check any official documents, online invoices from lenders and credit companies, or other organizations, you may see new, odd addresses. You can start receiving strange bills in the mail. These signs can indicate that someone is using part of your information to create a fake identity.

Abnormal Credit Reports: If you work for a company that examines consumer credit reports (or if you are a customer reviewing a credit report), you may check to see if there has been any strange activity with your SSN.

Synthetic identity is mostly used to commit financial fraud. Synthetic identity theft creates an identity from several bits of information, but no real person exists. This becomes quite more difficult to detect.

Synthetic identity theft can be a long-term process that involves carefully building a new identity over time. It can sometimes be to develop a complete and believable synthetic profile, a long credit history, and a suitable credit score.

The detection of synthetic identity theft is one of the most difficult problems. Most lenders and banks struggle to detect suspicious accounts since the identities created by fraudsters can look legitimate. Thieves also target customers who don’t use their credit cards often, making early detection of the problem less likely.

A fraudster using your SSN to commit synthetic identity theft may cause a split or fragmented credit file. Fragmented credit files occur when information from another person in a synthetic identity created using your SSN is attached to your credit history.

• Use digital security software: Do not leave your personal information and passwords vulnerable to hackers and viruses. Consider a full suite of digital security software to provide optimal protection.
• Review your credit reports: Check your credit reports and scores regularly so that you can prevent sharing unusual information.
• Secure your SSN: To avoid synthetic identity theft, you need to protect your personally identifying information, particularly your Social Security number.

• Authenticate Buyers Based on Risk: Merchants should use AVS (Address Verification Services), CVVs, geolocation services, and other fraud protection methods to separate low-risk transactions from high-risk ones. Using this program, businesses can categorize transactions more effectively depending on risk. This also allows them to remove friction points with existing clients.

• Keep Software Up to Date: The software has to be updated for a reason. If merchants fail to upgrade, they risk data breaches, malicious software problems, and other readily preventable difficulties.

• Deploy AI & Machine Learning: Machine learning technology can decide whether to approve or reject a transaction. The system analyzes prior data to predict logical outcomes. The program is self-learning, which means it learns as it is used, therefore improving its accuracy.

• Conduct regular audits: It is better to routinely audit systems for efficiency and ensure systems are operating smoothly. Merchants can’t solve issues they don’t know about. They are also unable to address a sequence of problems if the cause is not discovered.

In this article, we have learned about synthetic identity theft. Synthetic identity theft is a group scheme that uses a completely fake identity is on the rise and hitting financial institutions especially hard.

Who is most affected by synthetic identity theft?

Synthetic identity theft can be difficult to detect with typical fraud detection techniques. Its most common victims are youngsters, the elderly, and homeless people. These groups may be less likely to use credit or track their credit history.

What is the most common way identity is stolen?

Financial identity theft is the most common way identity is stolen.

What are synthetic identities used for?

Synthetic identity theft is used to hide a previous history and acquire access to credit, and it may or may not be done maliciously.