Synthetic identity fraud is another form of identity fraud, where cyber criminals combine stolen customer information with fabricated pieces of information—or use completely made-up information—to stitch together a digital identity, which in effect does not belong to any genuine person. This synthetic identity is then used to orchestrate fraudulent activities over a period of time.
Unlike credit card fraud, where cyber criminals must act quickly to exhaust the monetary value of the card before the fraud is detected, synthetic identities allow them to orchestrate fraudulent activities over a longer duration. This also makes it possible for cyber criminals to take the time to nurture these synthetic identities—for instance, by creating fake social media profiles.
Personal details of children and elderly are at a higher risk
Although cybercriminals can use the personal details of anyone, they prefer using data of children and the elderly. A Carnegie Mellon Cylab study has found that cybercriminals are 51 times more likely to use children’s personal details over those of adults for synthetic identity fraud. This is largely because children are yet to begin their credit histories, while most elderly people do not monitor their credit histories actively. This allows cybercriminals ample time to cultivate the synthetic profiles and amass significant amounts of money without getting detected.
There are three ways that cybercriminals use to create synthetic identities for fraud. These include:
- Applying directly for credit with a lender
- Piggybacking on genuine cardholders
- Data furnishing
Ultimate loser is the end customer
Losses caused due to synthetic identity fraud are hard to quantify as this is a ‘victimless’ crime, where the crime usually goes unreported. Further, in trying to locate the perpetrator, businesses are often sent on a wild goose chase as the identity does not belong to any genuine user. Businesses often club these losses with the cost of doing business.
It is estimated that businesses lose nearly $6 million every year to synthetic identity fraud. However, given the other associated tangible and intangible losses—including remediation costs, customer churn, and adverse publicity—the actual losses businesses bear are much more. The ultimate losses are borne by the end customers, as in worst cases, their entire digital lives can be obliterated.
Protect yourself from synthetic identity fraud
The best defense against a synthetic identity fraud is to keep vigilant. There are signals that can indicate a possible synthetic identity fraud that you must look out for. For instance, you, your child, or any other family member may be denied the due government benefits or you start getting bills for services that you didn’t solicit or use.
Take abundant precautions to protect yourself and your children. Do not share personal details unnecessarily anywhere. Remember to shred the papers that contain personal information before discarding them. In case of theft or loss of credit cards, immediately report it to the concerned authorities, block the credit cards, and change the passwords, if applicable.
The article has been written by Neetu Katyal, Content and Marketing Consultant
She can be reached on LinkedIn.