EXECUTIVE SUMMARY:
Synthetic fraud makes up 85% of fraud cases. Associated losses are in the tens of billions of dollars annually. In 2020, synthetic fraud resulted in $20 billion in losses among financial institutions alone, says Jim Cunha, executive vice president of the Federal Reserve Bank of Boston.
In the US, the Federal Reserve recently announced the publication of a Synthetic Identity Fraud Mitigation Toolkit to provide businesses, institutions and individuals with insights and resources pertaining to this type of identity theft.
What is “synthetic fraud”?
The term “synthetic fraud” refers to the amalgamation of authentic personal identity information and fictitious information. For example, a synthetic fraudster may combine a stolen social security number with a fake name, date of birth and address in order to fabricate a new identity.
Synthetic fraud and minors
The most at-risk? Children. Experts believe that children are at the greatest risk of this type of fraud because their social security numbers can be used for a long time without detection. In contrast, adults periodically experience reasons to use their social security numbers (filing taxes…etc) and are likely to observe fraudulent use.
In addition, personal information belonging to young people is more widely available than ever before. In 2021, ransomware thieves stole and published the data belonging to more than 1,200 American K-12 schools, potentially affecting hundreds of thousands of children.
While schools do retain a responsibility for protecting data, experts say that children’s general internet use can also lead to information compromise. This is because young people may fall victim to phishing attempts, especially those conducted over social media or messaging apps.
Synthetic fraud fallout
Synthetic identity fraudsters avoid use of a person’s actual name or address. Consequently, victims of synthetic fraud likely won’t know about it for quite some time, if ever. The good news is that, because of the way in which this theft occurs, individuals are less likely to be on the hook to pay the price for losses.
However, synthetic fraud can ultimately make it harder to obtain credit from banks, and it can lead to higher fees and interest rates. Banks are often more stringent with those who lack credit history. Persons who have experienced synthetic fraud may remain unable to build credit for some time, making it more challenging for such individuals to obtain credit when desired.
Further, synthetic fraud can lead to bureaucratic nightmares when you (or your child) need to prove an identity for any reason.
Synthetic fraud hotspots
Experts state that synthetic fraud has proven uniquely prevalent within the Southern United States, specifically within the Atlanta region.
How to prevent synthetic fraud
- When reviewing your tax documents, ensure that all of the information looks correct. For example, if you don’t recognize a listing for unemployment insurance, connect with the IRS, which can help.
- Consider subscribing to a free credit monitoring service.
- Check out the site Have I Been Pwned to see about whether or not your email address and passwords have been breached or stolen.
- As you file your taxes online, use multi-factor authentication where possible.
For more information about protecting your identity and those of your children, see CyberTalk.org’s past coverage.
