What is Synthetic Identity Fraud?
Synthetic identity fraud is a relatively new type of fraud which involves fraudsters using a combination of fake information, such as a fictitious name, and real data – like a child’s Social Security number – to create fraudulent accounts.
The scope of the problem is difficult to determine because the crime can go undetected for years.
In a relatively short amount of time synthetic identity theft has become the fastest-growing financial crime in the U.S. according to McKinsey. In addition, LexisNexis Risk Solutions found that “61% of fraud losses for [large] banks stem from identity fraud [and] 20% of the identity fraud incurred by these larger banks is synthetic identity fraud.
What are the uses of a Synthetic Identity?
According to the Government Accountability Office, there are three main reasons people create these false identities:
- Identity fraud for nefarious activities: stealing money or benefits. This is the one that costs businesses the most in terms of credit card fraud.
- Identity fraud for residency or work: a false identity created to live or work in the U.S.
- Identity fraud for credit repair: the perpetrator combines his or her real name with an unblemished Social Security number to create an alternate credit history.
Who is most at risk?
Randomized Social Security numbers put children born after 2011 at especially high risk for synthetic identity theft — and the theft of a child’s Social Security number can go undetected for years.
Detecting Synthetic Identify Theft
Synthetic identity theft is one of the most difficult types of fraud to detect. Filters employed by financial institutions may not be sophisticated enough to catch it. When the synthetic identity thief applies for an account, it may seem like a real customer with a limited credit history.
Financial institutions can’t even tell synthetic identity theft has occurred. This is because the criminal establishes a history of using the fraudulent account responsibly before it becomes delinquent to make it look like a real person experiencing financial problems and not a criminal who racks up charges and becomes delinquent on the account at the first opportunity. This type of fraud is called bust-out fraud.
The takeaway? Prevention over detection.
How Q5id can help Prevent Synthetic Identity Theft
A common issue with synthetic identity theft is falsified ID documents as well as using disparate data points that don’t match up when creating new accounts.
To combat this, Q5id’s patented process uses robust biometric data collection, advanced identity verification, and a live video interview. With a simple scan of the user’s face and palm, Q5id can verify that the person conducting the transaction is who they say they are, and because it uses advanced biometrics, even with stolen personal information, fraudsters can’t authenticate.
In short, Q5id provides frictionless identity protection and simplifies remote, new account onboarding without sacrificing security. This one-time signup process takes as little as 3 minutes and creates a proven Q5id that unlocks an unlimited array of future interactions.
Curious? Learn more about how Q5id works.