Stories of rising levels of synthetic identity fraud have been emanating from the US, but now it seems, this crime could well become a major problem over here. So, what is it and how can it be combated?
Synthetic identity fraud occurs when a criminal combines a real person’s details – which are often stolen – with fake information to create a new identity, which can then be used to open fraudulent accounts and obtain cards.
Time and effort
Equifax has described the crime as the “go-to tactic for highly organised fraudsters” and that it accounted for around 80% of all credit card fraud losses in the US. The authorities are widely publicising the crime, with the FBI releasing details of a number of recent cases.
In some of these, the attention to detail has been considerable – with the criminals putting an enormous amount of time and effort into their work. It is reported that the criminals would start off with a real social security number (or in the UK an NI number) – which may be purchased on the dark web - and then add on false credentials, such as the name, address and date of birth.
Initially, the crook will try to get the details passed for mobile phone contracts and credit cards, before taking out larger loans that will not be paid back. It is the fact that criminals are now ‘nurturing’ these identities for many months in order to build the profile and credit history, which is leading to larger thefts that in many cases have proved almost impossible to track down.
Once the identity is up and running, they have a window to take full advantage of open lines of credit, with the lender often not making full investigations until losses are considerable.
Last year, fraud prevention body Cifas, said identity fraud was reaching “epidemic levels” in the UK, with people in their 30s being the most targeted group. It found a total of 89,000 cases were recorded in the first six months of last year and this was a 5% rise on the same period last year and also a new record high.
Simon Dukes, Cifas’ chief executive said identities were being stolen at a rate of almost 500 a day, commenting: “These frauds are taking place almost exclusively online. The vast amounts of personal data that is either available online or through data breaches, is only making it easier for the fraudster.”
The fact that these synthetic identities are now becoming more commonplace makes it increasingly difficult for counter fraud professionals to track down the perpetrators and to stop the crime in its early stages.
Tackling synthetic identity fraud takes resources, whether in terms of state-of-the art systems and human intervention. It means collections departments needs to be on their guard and there will also no doubt need to be greater collaboration between a range of stakeholders such as credit referencing agencies, banks and other financial services companies, mobile phone companies, and the police.
Increase application checks
While e-commerce has brought huge benefits to customers in terms of speed of delivery, number of providers and reduced costs, there may also need to be a re-think as to what extra safeguards need to be built in, specifically at application stage.
In the meantime, it also makes sense for everyone, whether in business or as an individual, to ensure that there is awareness of the risk of crime and in ensuring personal data is not readily accessible. In particular, this means taking extra precautions with:
- Social media – this is becoming the easiest way for fraudsters to uncover personal information
- Passwords – changing these regularly and making them deliberately hard to decipher
- Ensuring firewalls and anti-virus/spyware programmes are up to date.
While synthetic identities appear to be more of a problem in the US, financial crime is not localised. Fraudsters will exploit any weaknesses and now is the time to ensure we have defences at home.