Synthetic Identity Fraud: A Costly Challenge

Synthetic Identity Fraud: A Costly Challenge

Read an excerpt of our newest eBook, Synthetic Identity Fraud: A Costly Challenge, below.

Real-life scammers continue to come up with creative ways to commit crimes, notably in the financial services arena. This is especially true with schemes like synthetic identity fraud where identities are assembled using a number of different components that make up an identity.

While both are typically used for financial gain, synthetic identities differ from more traditional identity theft in how the stolen personally identifiable information (PII) is actually used. Unlike identity theft where a fraudster uses a specific individual’s stolen—yet real—information, synthetic identities are created by fraudsters using elements of both real and fictitious PII. This “identity” is then used to obtain a loan or large credit line, but it’s never paid back.

Synthetic Identity Fraud is Top of Mind

Synthetic identity fraud is one of the fastest growing types of fraud and is top of mind for risk and fraud executives in financial services. In their report, GBG found that of all the fraud perpetrated across industries, 23% of businesses see synthetic identity fraud as the most prevalent fraud scheme in their industry.

Synthetic identities have also become a compliance issue. With the increased regulatory focus on Know Your Customer (KYC) checks, if a firm is approving a fabricated identity, then there is an issue with their KYC process. It’s unlikely they truly “know their customer” if a synthetic identity was approved and now lives on their books.

What’s Fueling Growth?

Cyberattacks and data breaches continue to be a significant threat to an individual’s PII and are a resource for criminals looking to illicitly access this information. More so, these breaches have fueled synthetic identity fraud. With people’s personally identifiable information exposed and readily available on the Dark Web, fraudsters have the key ingredients to create synthetic identities.

Some of the data sources criminals use for synthetic identity fraud include but are not limited to:

    • Cyberattacks
    • Data Breaches
    • Dark Web
    • Identity Theft
    • Fraud Scams
    • Account Takeover
    • Credit History Sources (e.g., Credit Bureaus)

Patience is a virtue in the world of synthetic identity fraud—fraudsters play the long game, typically lying dormant for several years. Attackers may keep accounts open and active for as many as five years making seemingly routine transactions and payments to avoid detection. Finally, though, the fraudster will ‘bust out’ or draw down all the available credit and there is no real person to collect losses from.

Preventing Fraud with Orchestration Layers

Orchestration layers have been touted as an effective way to detect synthetic identity fraud but not all orchestration solutions are created equal. Unfortunately, most of the orchestration solutions in the market today act as a gateway to services, without the clear capability for modeling, and without comprehensive business logic. This means firms have to come up with their own models and insights to determine identity authentication. Synthetic identity fraud has put additional demands on orchestration solutions, so advanced, full-featured solutions with robust orchestration layers are increasingly required.


To learn more about the threat of synthetic identity fraud, why traditional fraud prevention measures are no longer enough and how the right orchestration solution can be an effective mitigator against synthetic fraud, read our eBook: Synthetic Identity Fraud: A Costly Challenge.


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