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Many fraud rings are highly sophisticated. In a recent example, one crime ring created more than 7,000 synthetic identities and secured over 25,000 credit cards over the course of a decade. This particular ring operated in 28 U.S. states and 8 other countries, stealing anywhere from $200 million to $1 billion, according to experts.

Modern fraud rings like this are a threat to financial institutions because they- not the consumer- pay the price. The form of fraud described above is rapidly increasing. According to McKinsey, synthetic identity fraud (SIF) is one of the fastest-growing financial crimes in the United States.

What is SIF and how is it wreaking havoc on organizations?

The Federal Reserve defines SIF as “the use of a combination of personally identifiable information (PII)* to fabricate a person or entity in order to commit a dishonest act for personal or financial gain.”

Fraudsters create synthetic identities through:

  • Identity fabrication - a completely fictitious identity without any real PII
  • Identity manipulation - using slightly modified real PII to create a new identity
  • Identity compilation - a combination of real and fake PII, such as a false driver’s license, to form a new identity.

Fraudsters typically purchase PII from the dark web, use it to create a synthetic identity, and then apply for credit until they are approved. Next, they create a positive credit history often through piggybacking as added authorized users to an account with good credit.

These criminals use social media, P.O. boxes, and fake businesses to make the synthetic identity look more authentic. Once they have raised their limit and hit the potential of their curated identity, they max out their credit by making big-ticket purchases, cash withdrawals, etc. Then they disappear, leaving institutions with major financial losses as they move on and repeat the process elsewhere.


To learn more about SIF:

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*PII: personally identifiable information. Examples include passports, credit or debit cards, SSN, medical records, and online payment info.

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