Identity theft continues to be one of the most prevalent cybercrimes today, impacting millions of Americans each year. While traditional identity theft involves directly stealing someone‘s personal information to access their accounts, a new form of identity fraud is on the rise – synthetic identity theft.
Synthetic identity theft is the creation of new, fictional identities by piecing together information from multiple real people. These fake identities allow criminals to open fraudulent accounts and make purchases while evading detection.
Losses from synthetic identity theft have reached billions annually and are predicted to grow exponentially in the coming years:
- Synthetic ID theft losses could reach $6 billion by 2023 according to Auriemma Group
- McKinsey estimates companies lose $50 billion annually from synthetic identity fraud
- In 2020 alone, synthetic identity theft contributed to $6 billion in credit losses according to LexisNexis
In this comprehensive guide, we‘ll break down everything you need to know about this concerning threat – from how it works to preventative measures you can take today.
Contents
What Exactly is Synthetic Identity Theft?
Synthetic identity theft involves cybercriminals manufacturing completely new identities using combinations of real and fabricated personal information sourced from multiple victims.
For example, a synthetic identity may use:
- John Smith‘s Social Security number
- Jane Doe‘s date of birth
- Chris Martin‘s address
- A made up name like "Dave Wilson"
By piecing together attributes from many different people, criminals can create identities that appear authentic on the surface and pass basic verification checks.
Infographic: How synthetic identities are manufactured from multiple sources
With these synthetic IDs, thieves can open fraudulent credit cards and bank accounts, take out loans, file for government benefits, and make purchases without the real person‘s knowledge or consent.
The identities contain just enough valid personal information to avoid raising red flags during applications. This makes the crime much harder to detect than traditional identity theft where someone‘s identity is stolen outright.
According to the Federal Trade Commission (FTC), synthetic identity fraud now accounts for a shocking 80-85% of all reported identity theft cases.
Why Synthetic Identity Theft is Exploding
With losses already in the billions, synthetic identity theft is predicted to skyrocket in the coming years. By 2023, synthetic ID fraud could reach over $6 billion in losses annually, according to consulting firm Auriemma Group.
Several factors are driving the rapid growth of this crime:
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Difficult to detect – Since the identities use real and plausible information, they go unnoticed more easily by banks, lenders, and retailers. Victims often don‘t discover the fraud for months or years.
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Increased data availability – Vast troves of detailed personal data available online aids criminals in crafting thorough synthetic identities. Data breaches also provide identity thieves access to people‘s private information.
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High payoff – Synthetic identities allow criminals to obtain much higher credit limits and loans compared to traditional identity theft. They can make big purchases undetected over long periods.
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Sophisticated methods – Identity thieves utilize advanced technologies like botnets, phishing websites, and underground dark web marketplaces to obtain data and conduct this fraud seamlessly.
IDC predicts synthetic identity theft losses will reach $6 billion by 2023
As criminals continue to refine their techniques, synthetic identity theft cases are certain to rise. Preventing this complex fraud requires heightened awareness and vigilance.
Spotting the Warning Signs
Detecting synthetic identity theft early on can be challenging since the fraudulent accounts are designed to resemble your real ones. Here are a few red flags to watch out for:
Unfamiliar accounts or charges – Look for accounts you don‘t recall opening or charges from vendors you don‘t recognize. Criminals often add victims as authorized users to help improve the credit for synthetic identities.
Credit report discrepancies – Information like your address or employer may not match your real details. This likely means someone is using your information.
Denied credit – If you are unexpectedly turned down for new loans or credit cards, it could indicate fraudsters opened accounts in your name lowering your score.
Increased credit limits – Criminals seek to increase the limit on your existing cards to make major purchases before "busting out" and disappearing.
SSN concerns – Someone may be misusing your SSN if you get IRS notices about unreported income or employers say your SSN was used by another worker.
Closely monitoring statements and reviewing your credit reports at least annually is crucial to uncovering this insidious fraud in its early stages.
Protecting Yourself from Synthetic Identity Theft
While no prevention methods are foolproof, implementing safeguards can greatly reduce your risk of falling victim to synthetic identity criminals:
Freeze Credit Reports
Placing freezes on your credit reports makes it much harder for thieves to open new fraudulent accounts in your name. You can lift the freeze temporarily when applying for legitimate credit. This can now be done online within minutes.
Monitor Credit Reports and Scores
Check your credit reports frequently for any suspicious activity and review your credit scores for signs of unexpected dips. Take advantage of your free annual credit reports from AnnualCreditReport.com. Use credit monitoring services for alerts of any new accounts or inquiries.
Limit Personal Information Sharing
Closely guard your SSN, account numbers, and other sensitive details. Only provide this information when absolutely required and ensure sites you submit it to are legitimate. Also be cautious about posting personal info publicly online or oversharing on social media.
Shred Financial Documents
Shred any statements, bills, or other paperwork containing identifying information before disposal to prevent criminals from accessing your details through dumpsters.
Practice Online Safety
Be wary of emails asking you to click suspicious links or provide sensitive data. These phishing scams can lead to malware infections and stolen personal data. Also use strong unique passwords and enable multi-factor authentication wherever possible.
Educate Children on ID Theft Risks
Discuss identity theft risks with children and teens and urge them to limit sharing private information publicly online. With little prior credit history, children present prime targets for synthetic ID creation.
Recovering from Synthetic Identity Theft
If you suspect you may be the victim of synthetic identity fraud, act immediately to contain the damage. Follow these steps:
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File a police report – Report the identity theft to your local police department. Provide as many details as possible to aid investigation.
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Contact banks and creditors – Place holds on accounts potentially accessed fraudulently. Monitor accounts closely for any suspicious charges or withdrawals.
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Place fraud alerts – Contact Equifax, Experian, and TransUnion to have 90-day fraud alerts placed on your credit files. Order your free credit reports to review.
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Reset account security – Change passwords, security questions, and PINs on all your financial accounts to prevent further access by thieves. Enable two-factor authentication anywhere possible.
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Report to the SSA – If you suspect your SSN was compromised or misused, report this to the Social Security Administration.
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Seek legal guidance – Consult an attorney specializing in cases of identity theft victims for help recovering losses and holding criminals accountable. You may need to testify against perpetrators.
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Sign up for identity theft protection – Services like LifeLock provide identity monitoring and assistance with critical steps for resolving fraud.
Synthetic Identity Theft: The Bottom Line
Synthetic identity theft presents an alarming new fraud threat impacting consumers and institutions. As criminals refine tactics for manufacturing and using synthetic IDs, losses are poised to grow significantly if increased vigilance is not taken.
Safeguard your sensitive personal data, monitor for warning signs, and implement preventative measures to keep this insidious fraud at bay. Share your knowledge on fighting synthetic ID theft as well to help protect those around you. With heightened awareness and precautions, we can work together to combat this emerging threat.
