Over the last few years, synthetic identity fraud has taken off. Once considered a complex and expensive crime to commit, synthetic ID fraud cost U.S. banks $1.8 billion in 2020 and is on track to cost banks $2.4 billion by 2023. Meanwhile, the U.S. Federal Reserve Bank of Boston attributed 20% of financial institution (FI) credit losses to synthetic identity fraud as recently as 2016.
Mitigation has largely fallen on the financial institutions where the crime occurs. But there are very good reasons why consumers should play offense — and financial institutions should be their top supporters.
Simply put, “synthetic identities” are identities that do not correspond in their entirety to any real person. However, they may well contain pieces and parts of personal information that belong to real people. This is a large part of why consumers haven’t been actively engaged on the issue – if it is not a real identity, how can there be any real victims? Unfortunately, as we’ll cover later, the consequences of these “fake” identities are very real.
Ten years ago, synthetic identity fraud was time-consuming, risky, and rarely committed in person. Committing this type of crime in the real world meant a fraudster would need forged identity documentation. If that documentation didn’t pass muster, they could be arrested on the spot, or at the very least, need to restart the major effort of obtaining another forgery and building a new false identity.
It’s very different now that applying for financial products online has become the norm. Criminals can take personally identifiable information (PII) stolen in any number of data breaches and combine it with a fictitious name, a random address or date of birth, and other elements that they like. This can be replicated hundreds of times in a day for little time or money. It’s a far cry from just a few years past.
Synthetic identity fraud is rising at an alarming speed, and it’s causing actual damage to individuals and families:
At the end of the day, vigilance is one of the most important ways to keep synthetic identity fraud at bay. Financial institutions support this by offering access to credit reports and account activity alerts – but these measures raise red flags after fraud has already happened. It’s possible today to take a more proactive approach.
Financial institutions can be an important partner in proactively monitoring consumers’ sensitive PII, alerting them when it’s been compromised, and clearly identifying what mitigation steps should be taken. When a fraudster uses a synthetic identity, it creates victims of financial institutions and consumers – and it is in the real interest of both to work together and stop it.
As a leader in the identity protection market, Sontiq provides relevant fraud and identity theft protection tools at every touchpoint. This approach empowers accountholders while helping our partners reach their goals.
For more information on Sontiq Identity Theft Protection, schedule a demo today.