Synthetic identity theft is one of the fastest-growing forms of fraud, costing financial institutions and businesses billions of dollars annually. Preventing synthetic identity theft requires a multi-layered approach. In this article, we will explore synthetic identity theft definition, ways to prevent synthetic identity theft, synthetic identity theft warning signs, and how it happens.
What is Synthetic Identity Theft?
Synthetic identity theft is a type of fraud where fraudsters create a new identity using real and fake information. Instead of stealing someone's full identity, they mix real data with made-up details. Synthetic identity fraud uses a stolen real national identification number (NIN or social security number (SSN) with a fake name, birth date, or address. This mix creates a synthetic id. This explains how synthetic identity theft works.
Synthetic identity theft can be used interchangeably with synthetic identity fraud.
What are the Warning Signs of Synthetic Identity Fraud?
Having the knowledge of what is synthetic id theft and how to detect it can better prevent fraud. Below are synthetic identity theft warning signs that businesses should look out for.
1. Mismatch between identities
2. Recently issued contact information
3. Mismatches of national identification numbers
4. Lack of personal information in credit profiles.
How Does Synthetic Identity Theft Happen?
One of the most asked questions by compliance officers and businesses is how synthetic identity fraud happens. Fraudsters create fake identities using a combination of real and fabricated personal information to commit financial fraud. Unlike traditional identity theft, where a criminal steals and uses a real person’s identity, synthetic identity theft blends real and fake details to form a new identity that doesn’t belong to any one person.
Synthetic id theft examples include: fake addresses, fake social security numbers, name mismatches etc.
How to Prevent Synthetic Identity Theft: 6 Ways
Preventing synthetic identity fraud can be challenging for businesses because fraudsters create new identities that appear legitimate over time. Moreover, criminals harness AI to automate and scale their attacks, making fraud more widespread and challenging to combat. However, by leveraging AI and machine learning models, businesses can better detect patterns and anomalies across vast data sets, uncovering fraudulent activity that might otherwise go unnoticed by machines or humans.
Below are 6 ways businesses and financial institutions can prevent synthetic identity theft
1 Advanced Identity Verification:
By implementing the Use of multi-factor authentication (MFA) which requires users to provide multiple verifications, such as IDs and biometrics, for example Real-Time ID matching tools for ID verification, and advanced liveness detection for facial recognition.
2 AI-Powered Fraud Detection:
The use of Machine Learning Algorithms to analyze behaviour patterns. They detect anomalies and flag suspicious activity and transaction monitoring which identifies suspicious transaction patterns .
3 Cross-Referencing Data across Databases
Check Credit History and Verify Personal Information against trusted sources, like government databases and financial institutions, to find any differences.
4 Use Digital Footprint Analysis:
Analyze Behavior and Check Online Presence for red flags, such as a limited digital footprint, and use tools to examine online activities, including social media and public records.
5 Customer Education:
Raise Fraud Awareness to Inform customers about the risks of synthetic identity theft and ways to protect themselves from synthetic identity theft, using strong passwords, MFA, and reporting suspicious activities quickly. This is how businesses can prevent synthetic identity theft effectively
6 Regulatory Compliance
By minimizing data collection and adhering to KYC and AML regulations, businesses can effectively verify customer identities, thereby enhancing fraud prevention and ensuring regulatory compliance.
Detect and Prevent Synthetic identity theft the Youverify way
Stay ahead of fraudsters and stop synthetic identity theft before it happens with Youverify fraud prevention solutions that help businesses detect synthetic fraud by verifying the ID of anyone, anywhere across the globe irrespective of the location of your customer.
Crawl individual and business digital footprint for direct and affiliated negative news before onboarding. Our transaction monitoring can also Identify suspicious transaction patterns ensuring that fraud is prevented at the earliest stages.
Ready to secure your business, Book a demo today.