Auriemma Consulting Group (ACG) convened a special working session in October 2016 to promote industry collaboration on the issue, which despite being a lesser-known form of identity theft, has been rapidly growing and is difficult to track.
The identity-based scheme exploits vulnerabilities in credit reporting and applicant verification: criminals combine real, often stolen, and fabricated information to create a new identity, open accounts, and gradually establish credit. Fraudsters may spend long periods of time, sometimes years, making fraudulent purchases before defaulting, wrecking their victims credit and leaving lenders with little recourse for collection and recovery.
To avoid attention, fraudsters target populations that are less likely to use and monitor credit, including children and the elderly, although everyday cardholders may be equally unlikely to spot unauthorized charges.
Estimates put the toll of synthetic fraud to businesses at billions of dollars annually, but total financial losses remain unknown. Solving for synthetic fraud will require close coordination between industry, law enforcement, and government officials.
In the meantime, synthetic fraud seems likely to get worse. As EMV chip cards and other protections shore up the physical point of sale, fraudsters are pivoting to new account fraud in growing numbers. A string of data breaches has exposed reams of personally identifiable information they can use to create synthetic identities.
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