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Synthetic Santa

'Twas the night before Christmas when all through the house,

Not a creature was frightened by the click of a mouse;

The firewall was hung ‘round the network with 'tude,

In the hopes that hackers would never intrude;

The users were nestled, all snug in their beds,

While the idea of security danced in their heads;

While out in the mailbox there arrived such a letter,

of collection of credit with me as the debtor!

I flew to the phone to dial up the line,

To tell the lender  the loan was not mine,

"We have a document", he said, "with your S-S-N",

"But a different name, a Mr. Rudolph Rednosekin"; 

"The date of birth matches yours, but I must confess",

"It looks like the North Pole is shown as his address";

And then what to my wondering eyes should appear,

But a toll-free number that would allay all my fear;

For [your institution] has for my family and me,

a professional advocate to help protect my identity!

The holidays are upon us, and so is the increase in risk for identity theft. Fictional characters are a big part of the season, but sadly they've also become a big part of identity thieves' tool kits as well. According to a Federal Trade Commission Report, over the last five years, Synthetic Identity Fraud has become the fastest growing type of financial crime in the United States and accounts for 20% of the credit-related losses.  In this article, we will take a close look at what Synthetic Identity Fraud is, how it works, and what this means to you. 

What is Synthetic Identity Fraud?

It is much like it sounds.  Synthetic identity fraud is a type of fraud in which a criminal combines real and fake information to create a new identity. The real information used in synthetic identity fraud is typically a Social Security number (SSN).  Once a fake name, address, and date of birth are cobbled together with a real SSN the fraudster begins to "groom" the synthetic identity.  

Part of the criminal strategy is to create a credit history by first applying for credit unsuccessfully.  A file will be created at the credit bureaus to record the inquiry.  Then the synthetic identity "person" may be added as a co-borrower on another existing line of credit to start building a credit history.  In time credit will be granted to the synthetic identity.  The fraudsters will use the identity for purchases and make payments on time to build the credit rating, sometimes for years, until  the limit on the line of credit has increased.   When the credit limit is at a target level the  fraudsters will use the entire credit limit for purchases and cash advances, and then stop making payments.  This is called "busting out". A criminal may have many different synthetic identities being groomed at once so they can cycle through them periodically.  

A Perfect Storm

 Synthetic Identity Fraud is very difficult to detect.  Credit monitoring will not alert a consumer that their SSN is being used fraudulently since credit monitoring links to the consumer's real credit file, not the fake identity.  To a creditor, a synthetic identity will appear at first to be a legitimate consumer with no credit history.  Over time as the account is groomed the synthetic identity will gain traction as a legitimate person with a growing credit rating.  When the fraudster decides that the time is ripe for busting out, the payments on the account will stop, which will look to the creditor like a consumer who has suddenly fallen on hard times. The account  will then proceed through the collections process, which could add several months to the timeline.  It is only when the collection process begins and the debt is traced through the SSN to the real owner that the synthetic identity fraud will be discovered.  

According to a recent Experian report, Synthetic  Identity Fraud and Covid-19,  this type of fraud has only become worse during 2020.  Criminals are counting on the courtesies extended by financial institutions and other creditors to people who are struggling with Covid-related layoffs and hardships.  A combination of  more generous overdraft policies, expanded allowances to exceed credit limits, and relaxed or delayed collections processes provides a tempting incentive for fraudsters to dump their existing synthetic identities during this time.  

In addition, the Social Security Administration has recently introduced their electronic Consent Based Social Security Number Verification (CBSV) process, which allows creditors to verify that the SSN being used by an applicant or customer matches the name.  Up until now there has been no easy way for a creditor to make sure that the SSN  that is listed on the credit application matches the rightful owner's name.  Fraudsters are now looking to quickly convert their collection of synthetic identities into cash before this technology is widely adopted.

Add to both of these conditions the fact that it is the holiday season with its traditional spending increases, and this could be the most lucrative time for criminals to cash in on those synthetic identities that they have been grooming for years.  The Perfect Storm.  In fact, this may already be happening and it has not been recognized by creditors because this fraud is blended in with other legitimate new debt due to the pandemic.  

What Does This Mean to You?

Some people think that synthetic identity theft is a victimless crime.  After all, at the heart of the fraud is a fictitious person.  However, as financial institutions and other creditors lose billions of dollars to fraud it affects other services that these institutions can provide to consumers.   More to the point, if someone is using your SSN for a synthetic identity it might eventually affect your ability to obtain credit if the crime goes unresolved.  Plus, if a criminal is using a synthetic identity to obtain employment or apply for government benefits it could affect your ability to obtain such benefits in the future.  At the very least, at a time when you might need Social Security Benefits, or other government benefits the most, it could present a challenge to unravel the activity attributed to your SSN before your benefits are approved.  Finally, if a criminal has access to your SSN they may also have access to your other personal information to commit a theft of your real identity.  

How We Can Help!

This Holiday Season, and throughout the entire year, <FINANCIAL_INSTITUTION>  has professional Identity Theft Recovery Advocates standing by to help you and your family members understand  and address complex problems like synthetic identity fraud.   A personal Advocate will be assigned to help you fight any type of identity fraud if it happens.  If you have a <EMBEDDED ACCOUNT> you automatically qualify.  So remember, treat your personal information like cash to keep your identity safe, and sleep well at night knowing we are there for you.