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Expert opinion

How to avoid synthetic identity fraud - industry analysis in brief

Tuesday 24 April 2018 | 09:47 AM CET

Synthetic identity fraud from basics to fine-tuning. In order to overpower this type of fraud, organizations need a tailored approach

In the cyberspace, fraudsters are also striving for innovation. Cybercriminals are a wellspring of ideas, with no longer underestimated capacities of stealing money and data. Consequently, synthetic identity fraud has been turned into a better tool with a bigger potential on the dark web. The industry is constantly keeping a sharp lookout for any suspicious event, so anyone who wants to know more about the status of synthetic identity fraud (SIF) is invited to read the article Synthetic identity fraud: an introduction by Amador Testa, Emailage CEO.

Why did SIF revive?

Given the latest events related to data breaches, a revival of FIS is not a surprise, as fraudsters have enough ‘raw material’ to work with. Synthetic identity fraud may be perceived as a consequence of data breaches, since adept fraudsters need as much data as possible in order to generate a genuine-like digital identity.

Establishing a shell company is an alternative to SIF, which involves creating and storing credit files associated with synthetic identities. Criminals can also use services that allow individuals to self-report their payment activity. By submitting information regarding rent and insurance payments over time, the criminal builds an alternative credit rating for a synthetic identity that they can also use to secure access to credit.

While banks encouraged merchants to install the chip readers needed to adopt EMV, they also smoothed the path for synthetic fraud losses. Companies are still struggling to identify and classify SIF, and for this reason it is difficult to assess the problem in an accurate manner. Consequently, companies include the resulting fraud in their general losses.

Who can help you to bring it down

The big challenge posed by SIF lies in the fact that by the time one discovers the scam, the damage has already been done. For this reason, companies must bring their fraud prevention services to the highest possible level in order to cope with the smart tactics currently used by fraudsters. There is a wide range of companies on the market equipped with good strategies and techniques for combating this type of fraud. To name a few:

Biocatch proposes the use of behavioural biometrics as a tool for fighting synthetic identity fraud. By mapping the criminal behaviour throughout the initiation process, they are able to make the distinction between a real user and a fraudster by identifying both normal and suspicious behaviour. In this particular context, Biocatch can prevent a potentially fraudulent application from going through.

Chargebacks911 noticed that SIF is highly affecting merchants, not only financial institutions and banks. The fake cardholders purchase products and then file a chargeback to the bank. Although the issuer should also make sure the refund claim is a valid one, sometimes they don’t identify any issues during the review, and therefore the merchants shall bear the cost resulting from the chargeback process. This company fights against chargebacks fraud by helping merchants to win disputes. Identifying the true reason for chargeback and detecting affiliated fraud involves while disguising cybercriminals with fake identities as well.

From Emailage’s perspective, an email address is a key to committing SIF. In order to identity potential synthetic IDs, the company uses crowdsource network intelligence to look for changes of the behavioural pattern around the use of email address in transactions and for every transaction they do a digital identity verification. The equation involves the email with several demographics of that particular customer plus the transaction data, generating a risk score. By leveraging this score, one can have an accurate assessment of the transaction, and implicitly determine that an applicant is a real person.

ThreatMetrix is also a relevant company in this context with its focus on digital identity proofing. Their approach is based on the fact that digital identity can distinguish each individual element of an identity and they can assess whether it is consistent with other facets of that identity. Even when a fraudulent account is successfully created, digital identity continuously analyzes the user’s actions to determine if they make sense within the context of each new transaction in order to expose the malicious activity.

IdentityMind uses digital identities powered by their own technology to assess the transaction risks and to enable better customer selection and fewer rejections of good customers. They leverage machine learning to build identities, but also to analyze them. Their algorithms provide reputations for each entity tailored to any particular industry, adding additional checks where appropriate.

We have also put together a comprehensive infographic and a detailed industry mapping to help you tailor your business goals when it comes to protection. Download our Global mapping and infographic of key players in the fraud management industry to gain access to valuable information regarding the current fraud management landscape.

About Anda Kania

With a high interest in the latest news of the payment and fraud industry, Anda has used her position of senior editor at The Paypers to discover and analyze the hottest topics and to discuss with the top thought leaders in the domain, in order to get the pulse of the fraud and digital identity industry. With a Master’s Degree in International Relations and National Security Studies, Anda is in a constant search for the upcoming trends and the best way to comprise it in words for our readership.

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