The Federal Reserve's "FedPayments Improvement" project highlights the implications of miscategorizing synthetic identity fraud (SIF):
Synthetic identity fraud is a type of identity fraud that has devastating impacts across multiple industries. This type of fraud is estimated to cost the payments industry $20 billion in annual losses.* However, many experts believe this estimate is too low because synthetic identity fraud is often miscategorized as a credit loss and therefore, is underreported. Financial losses due to non-payment by synthetics often can appear to be caused by personal bankruptcy, other financial hardships or poor management of one’s finances by a “real” person. Industry experts predict that synthetic identity fraud will continue to increase in 2022, making accurate reporting even more critical. Accurate categorization of the losses associated with synthetic identity fraud can yield major benefits and avoid the following potential negative impacts:
- Lack of proper identification leads to underreporting
- Improper classification of synthetic identities can lead to poor detection
- Miscategorization of synthetic identity fraud allows further perpetuation of this type of fraud
- Miscategorization leads to industrywide misunderstanding of synthetic identity fraud’s magnitude
Download the Fed's one-pager for the full report or visit their SIF Mitigation Toolkit for additional resources.
*2021 Synthetic Identity Fraud Report, FiVerity