Synthetic identity theft or synthetic identity fraud occurs when a crook creates an identity rather than stealing one that already exists. In the scam, names, addresses, and birthdates are combined with actual or fake Social Security numbers to create a whole new identity, frequently using partially false information. The more popular form of identity theft, in contrast, uses the real name, Social Security number, and other personal data of a single victim.
Other attack strategies, such as account takeover fraud and clean fraud, rely on recognized identities. When a cardholder's account or personal information is compromised, the fraudster makes as many purchases as they can before being caught.
With the long run-in mind, synthetic fraudsters are more daring. Using a stolen Social Security number and a real address, they're fabricating false identities (often a PO Box). The scammers start by submitting credit account applications while posing as these "fake" clients.
Banks frequently deny credit requests from people without a credit history. Ironically, though, asking about an account makes credit bureaus think a fake consumer exists. There is a significant chance that a lender will finally grant credit to a requester.
The fraudster will "bust out," maxing out all the accounts connected to the false consumer, before discarding the identity completely and disappearing after they have decided the credit limits are high enough. This is a process that might take years.
Each year, banks invest a significant amount of time and resources in the hunt for counterfeit identity fraudsters. It becomes challenging, though, because they are pursuing fictitious individuals. The top three credit agencies typically deal with a variety of information that may not exactly coincide with the information in their files while assessing credit histories in connection with credit applications.
Typographical errors, name changes, address changes, misspellings, and other problems might be to blame for this. These vulnerabilities are targeted by identity thieves to open fake bank accounts, construct false identities, and other things
One of the trickiest forms of fraud to spot and avoid is synthetic identity theft. Financial institutions' filters might not be sophisticated enough to catch it. The synthetic identity thief may present as a legitimate customer with a modest credit history when they apply for an account. Even financial institutions are unable to detect synthetic identity fraud.
This is because the fraudster creates a history of using the fake account responsibly before it goes into default to make it appear as though a real person is having financial difficulties rather than a criminal who charges up debt and neglects the account right away. Bust-out fraud is the name for this kind of fraud.
Therefore, fake identities are enticing to scammers and challenging to identify individuals who fall victim to them. Synthetic identity is frequently built using a real Social Security number (SSN) or credit privacy number, coupled with an address and other personal details, like login information for social networking sites that include actual people in their photos.
Additional red flags that could point to the use of a synthetic identity include the submission of multiple account applications from the same IP address or device, the use of Social Security numbers that were issued after 2011, the submission of multiple applications from the same address or phone number, the use of multiple identities that share the same Social Security number, and addresses that are close to crowded international airports or shipping hubs.
Credit repair: Used to conceal past bad debt or credit history to seem creditworthy.
Fraud for a living: Used to apply for jobs or services (like utilities, housing, or bank accounts) when a person is unable or unable to use their primary Personally Identifiable Information elements to do so and has no intention of defaulting on payments. Payment default schemes are employed to collect goods, money, or services without the intention of reimbursing over time.
Other criminal activity: Used as a tool to further unlawful activities. These criminal operations can be conducted by people or groups and might involve things like evading your legal obligations, money laundering, trafficking in people or drugs, or financing terrorism.
Stay safe from all forms of identity fraud: Fraud is a major issue, and true name identity theft is no longer the sole type. Knowing what synthetic identity fraud is will help you spot it and stop it, protecting your children as well as yourself.
It takes a lot of time, patience, and focus to cultivate artificial identities. When a synthetic identity has "matured," the game usually entails opening several credit accounts, abruptly maxing them out on expensive purchases, and then vanishes in mysterious "cash out" or "bust out" scams. The reward may be enormous.
The average synthetic identity profile is utilized to effectively steal between $81,000 and $97,000, according to the ABA. One scammer secured 558 credit cards using fake identities to buy a small fleet of luxury automobiles. Another allegedly used fake identities to obtain credit cards worth $3.4 million that were used to buy untraceable prepaid cash cards.
Synthetic identities are also frequently used by organized crime organizations to hide assets and evade taxes. Criminals might buy cryptocurrencies to fund other crimes while evading taxes by using a fake name. Due to the decentralized nature of most cryptocurrencies, it is quite challenging to ever recover the money or locate the true fraudster.
Many people are not aware of the potential harm that this kind of identity crime might cause. This is because it frequently takes a victim a long time without fraudulent activity showing up on their report before it is discovered.
It is your responsibility to take precautions to keep yourself safe if you consider yourself to be a victim, which includes EVERYONE. Although there are no assurances, safeguarding your Social Security number is a smart place to start.