Synthetic Identity Theft: All You Need to Know

by Keith Morris

Topic: Synthetic Identity Theft

Most Americans are familiar with the concept of identity theft, especially those who have been a victim of this crime. However, there is another way criminals steal your identity, known as synthetic identity theft. This enterprise is more difficult to prevent than standard identity theft, and it may be years before the victim or the authorities become aware of the crime.

As criminals look for ways to get around legal regulations, synthetic identity theft is likely to be a focus for law enforcement and financial institutions. Because of the rapid rise of synthetic identity theft in the US, it’s essential to be aware of what it is and how you can reduce the risk of becoming a victim.


What is Synthetic Identity Theft?

Synthetic identity theft occurs when criminals manufacture part, or all, of a new artificial identity. The process can be complicated and happens in three different ways:

  • Identity fabrication - when the new identity contains completely false information
  • Identity manipulation - criminals take real personally identifiable information (PII) and make slight modifications to the details
  • Identity compilation - Uses a combination of real PII in conjunction with manufactured PII

Because synthetic identity theft can use a combination of real and fake information, it makes it harder for companies to realize there is something suspicious about an account holder.

Businesses frequently see small mistakes on credit applications and transactions, usually because of a typo. Rather than preventing people from using their accounts for what appears to be an innocent error, companies may let the mistake pass. Criminals engaged in synthetic identity theft aim to take advantage of this goodwill from legitimate businesses.

How Synthetic Identity Theft Works

The simplest way for criminals to gain credit for their fake identity is to keep applying for loans until a company finally approves their request.

Creating a new identity using real and fake information is only the first step in this sophisticated crime. Criminals can show incredible patience, manufacturing counterfeit documents that are strikingly similar to the authentic paperwork. They even create social media accounts to make the fake person appear real.

When applying for credit using a synthetic identity, criminals know the lender is likely to refuse the application because the fake person does not have a credit history. However, when a financial institution initiates a hard credit inquiry with the credit bureaus, this creates a new credit file. Now there is a legitimate record for the fake persona.

The simplest way for criminals to gain credit for their fake identity is to keep applying for loans until a company finally approves their request. The credit limits are likely to be low, but as the credit company sees that the person pays off their account in full each month, the criminal can gain access to higher credit limits. 

However, this can be time-consuming. To scale their profitability quickly, criminals can use a technique known as piggybacking. This method involves adding the fake persona as an authorized user to someone else’s real and legitimate account.

Often the person is unaware of what is happening and is not a party to the scam. Sometimes a criminal may find someone willing to be an accomplice, and they authorize the fake persona on their account in exchange for a fee.


How Criminals Benefit From Synthetic Identity Theft

Stealing and laundering money is big business for criminal organizations, and using synthetic identities makes it easier to avoid detection.

Synthetic identity theft has many motivating factors. The most obvious benefit is that criminals can take out credit in another person’s name. Because this type of crime is so hard to identify, it can be months or years before the victim or financial institutions identify the crime.

Stealing and laundering money is big business for criminal organizations, and using synthetic identities makes it easier to avoid detection. They can then use the funds for crimes such as drug trafficking or terrorism. 

There are also untrustworthy credit boosting agencies that can benefit from synthetic identity theft. These companies offer to help people repair their credit files, but they create fake identities for their clients instead of using legitimate means. 

Another possible use of creating a fake identity to gain a social security number (SSN) that allows illegal immigrants to live and work in the US.  This can be a lucrative business opportunity for large criminal gangs who can offer to provide illegal immigrants with the documentation they need to participate in the American financial and healthcare systems.


Who is Most at Risk?

The most vulnerable candidates for this crime are those least likely to notice or least likely to take action if their PII is compromised, like children, senior citizens, and the deceased.

Almost anyone with a valid SSN is a potential victim of traditional identity theft. However, criminals engaged in synthetic identity theft are more specific in who they target. The most vulnerable candidates for this crime are those least likely to notice or least likely to take action if their PII is compromised. People most at risk are:

  • Children, because they are ineligible to apply for credit until they are 18 years old
  • Anyone with a social security number after the randomization process began in 2011
  • Senior citizens because they are less likely to apply for further credit
  • The homeless because they may not be a participant in the financial system
  • The deceased because their PII is no longer in use

Because many children are victims of identity theft, parents need to know how to protect their information. Criminals can spend many years running up debts in a child’s name, aware they are unlikely to notice until they become adults and apply for credit. 

However, there are some steps you can take to help protect your child from becoming a victim of synthetic identity theft. If it’s legal in your state, you can freeze your child’s credit. This step can help protect them from credit identity theft, but it won’t protect criminals from using their PII to file fraudulent tax returns or claim benefits.

You should also be wary of giving out your child’s SSN. Although it may be a question on some forms, you should contact the company requesting it before writing it down. You may find it is not necessary to complete that part of the document. If you must include the information, ask why the company needs it and how they protect the information. 

It’s also important to watch out for any unexplained communications. If you receive emails or letters about benefits, healthcare, or anything else that doesn’t make sense, call and ask for an explanation. It could be a fraudster is using your child’s details to make false claims.

Conclusion

Synthetic identity theft can be hard to identify, but by remaining vigilant and inspecting your credit reports regularly, you may spot that something is wrong. If you have any concerns about being a victim of synthetic identity theft, contact the authorities as soon as possible to reduce the potential damage to your credit file.


About the Author

Keith Morris is a 20+ year veteran of the security game, with the knowledge and experience to set you on the right track toward personal safety and security. His firm is committed to giving you the tools and know-how to combat any threat to your safety.