Synthetic Identity Theft

The ability to prove your identity has been dependent on a wide range of devices throughout the ages. From documents to official seals to the family Bible, almost every means of proving someone's identity all rely on some type of external device that can almost invariably be stolen or forged in some way. The advent of the internet created a wealth of opportunity for fraud. At one time, most business was conducted face-to-face. If you wanted to withdraw money from a bank, you had to walk into a bank and deal with a teller who was likely to be more suspicious of a face they didn't recognize. When most interactions moved online, however, it created a greater opportunity than ever for identity theft.

What is Synthetic Identity Theft?

Identity theft can occur in several different ways. In some cases, a person's identity can simply be appropriated for a day or two for a specific purpose such as using a counterfeit or stolen credit card to go on a shopping spree. In other cases, fake identities are carefully crafted and can be cultivated for years before being used. In some cases, an individual may even take on a fake identity to use for the rest of their lives.

This type of identity theft is called synthetic identity theft. Synthetic identity theft is the practice of taking parts of a real identity and pairing it with false information to create a fake identity with verifiable parts. The most basic component of almost anyone's identity is a social security number. Since SSNs are almost always issued at birth, they become the primary way that all information about an individual is sorted and paired with that person.

One of the most common ways to create a synthetic identity is to use the SSN of a real person and create a fake identity around that number. The SSNs of children and deceased individuals are a common target, but adults with little to no credit history or that do not actively use credit can also be a target. Generally, the goal of synthetic identity theft is to use the identity for a long period, sometimes for years but not always.

Ultimately, in order for an identity to withstand scrutiny, it needs to have a solid paper trail behind it, which also means a long-term credit history. Generally, the way a synthetic identity is created is by using a stolen social security number to open a few small credit accounts, use the credit lines occasionally and then pay them off quickly or make regular payments on them. As a good credit history is established, it not only creates a more solid identity but it also gives greater access to larger lines of credit.

Eventually, the identity may be used to make a single large purchase like an expensive car or RV. Then the identity thief can simply sell the property and walk away with the profits. The bank or financing company may try to recover the property, but if they or they buyers try and prosecute anyone, they will either have no one to prosecute because the person is deceased or they will go looking for the real person the fake identity was built around. In other cases, the identity may simply be used to open several credit accounts with large lines of credit. The lines of credit can simply be maxed out and left unpaid, leaving the real individual with severely damaged credit.

Not all synthetic identity theft is for the purposes of financial gain, however. In some cases, synthetic identity theft is used to create fake documents that would allow an otherwise illegal immigrant to live and work in the US or individuals with a criminal history to get a fresh start. Sometimes people may need a new identity after faking their death to commit life insurance fraud or to avoid prosecution if they are in trouble with the law. Synthetic identity theft can also be more harmless as well, such as an underaged person using someone else's legitimate state-issued ID card to get into a bar or other adult establishment.

Why Synthetic Identity Theft is a Problem?

When the social security number of a deceased person is used, synthetic identity theft is not as destructive since the individual will not ever be attempting to establish their own lines of credit or credit history and also cannot be prosecuted if their identity is used for any type of criminal activity. Children, on the other hand, are a different story.

According to the CDC, reported instances of synthetic identity theft went from around 100 cases in 2009 to several thousands of cases per month in 2014. It is also estimated that the SSN's of children are 51 times more likely to be used than those of adults. This can be a double-edged sword. If a child's SSN is used to create an identity that is used for criminal activity, then the child is unlikely to be prosecuted for the crime. On the other hand, when the child reaches the age of 18 and wants to establish their own credit history, they may potentially find a nasty surprise waiting for them.

iovation is a leading provider of fraud prevention and detection solutions as well as advanced multifactor authentication software for online banking, e-commerce, insurance, online gambling, online communities, and travel and ticketing organizations.

Ready for the next step?

In just minutes, we’ll show you how to improve your customer authentication experience, stop fraud and save money.

Fraud Prevention

Spot user behaviors and device information that’s suspicious, and stop those fraudsters in real time. We track billions of devices and our fraud analysts add evidence to make this intelligence even more effective.

Stop Online Fraud

Ready for the next step?

In just minutes, we’ll show you how to improve your customer authentication experience, stop fraud and save money.