Key Takeaways
1. Identity fraud continues to rise globally, affecting millions of individuals and organizations each year.
2. Identity theft involves stealing personal information, and identity fraud occurs when that information is used to commit crimes.
3. Fraudsters exploit different methods to steal data. Even a small oversight can expose sensitive information and lead to long-term consequences.
4. Identity fraud protection is the most effective defense against identity fraud. Implementing strong controls can significantly reduce risks.
Introduction.
Identity fraud is a growing threat in today’s digital world, affecting millions of people and organizations each year, resulting in losses running into hundreds or millions of dollars worldwide annually.
In the U.S., nearly 60% of businesses report higher fraud losses in 2025 due to more advanced attacks by fraudsters, which in turn is having an impact on financial institutions and businesses, and the public sector.
In this article, we will carefully examine identity theft and provide you with all the information you need to know about identity fraud protection.
What is Identity Fraud?
Identity fraud occurs when a criminal obtains and uses an individual's identity information, such as identification numbers, financial details, or other sensitive data, without authorization for fraudulent purposes.
Identity theft also includes criminals stealing someone's credit or debit card details or their medical records. This stolen information is then used to commit crimes, including fraud, impersonation, and other offenses.
Types of Identity Fraud
Identity fraud comes in many forms, each targeting different aspects of an individual's identity information. Here are the most common types:
1. Financial Identity Fraud
This type of identity fraud is aimed at exploiting the victim's financial lifeline, and they only get to find out that they have been defrauded when they notice unfamiliar transactions in their credit report. The individual has become a victim of financial identity fraud.
2. Social Security Identity Fraud
Social security identity fraud happens when criminals use a victim's social security number to apply for jobs. It can also be when criminals exploit an unsuspecting victim's identity to file for tax returns, get benefits from the government, or enjoy other perks.
3. Medical Identity Fraud
Imagine going to the hospital to enjoy health insurance coverage and finding out that it has been used by you. You have joined the list of people defrauded of their identity medically. These coverages that are stolen can be medical treatment, prescription drugs, consultations, or the submission of and benefiting from fake insurance claims.
4. Synthetic Identity Fraud
Like the name implies, this is basically the creation of a fake identity made to closely resemble or have attributes of a real one. The UK finance states that synthetic identity fraud is costing UK financial institutions over 300 million euros a year. Here, criminals combine real and fake information like a real person's Social Security Number with a fake name, all in the bid to create a new identity that will go through the system undetected.
5. Tax Identity Fraud
In this type of identity fraud, scammers steal a person's Social Security Number, using it to file for fraudulent tax returns. The unfortunate victims only get to know that they have been targeted when they legitimately file for tax returns and get rejected by their country's internal revenue service.
6. Criminal Identity Fraud
This type of identity fraud brings trouble out of the blue to your doorstep. This happens when an arrested criminal provides a person's identity information to law enforcement. Such an individual then gets to receive warrants or criminal records under their name, which they did not know of.
How Can Identity fraud happen?
Identity thieves are always on the prowl, looking for unsuspecting victims to devour. To accomplish this, they employ various methods to steal people's personal information. These methods are as follows;
1. Discarded Devices and Hard Drives
One of the most common ways identity fraud criminals use to target their victims is by searching through discarded hard drives or stolen, abandoned computers.
They obtain sensitive information, including bank records, the victim's login details, and other personal data. If personal data is not properly secured on devices, it exposes the individual's information to identity theft.
2. Hacking Corporate Networks
Another way identity fraudsters can gain access to a person's identity information is by hacking into the corporate networks of organizations.
They get to obtain a large amount of consumer data, which includes their contact details, Social Security numbers, and credit or debit card information.
3. Exploiting Public Records
Public records are also a means by which identity fraudsters have access to unauthorized data.
The information they got can be used to outmaneuver the security measures put in place to keep them out. Sometimes these fraudsters pose as the victims themselves, covering their tracks with other stolen data.
4. Using Malware and Spyware Tools
Malware has become one of the most effective tools in the arsenal of identity theft in the last decade. Tools like spyware and keyloggers have become the go-to applications to covertly infiltrate a victim's device, stealing files, taking screenshots, or recording the user's keystrokes.
5. Social Media Oversharing
Social networking platforms also facilitate identity theft. Scammers utilize the sensitive information that many users overshare, including birthdates, family names, or vacation plans, to assume their identities or guess security questions. An innocuous message can provide a scammer enough details to create a plausible false identity.
What are the best ways to prevent Identity fraud?
Identity fraud prevention includes:
1. Use strong, unique passwords
One way to implement identity theft prevention is by using a strong, unique password with numbers and symbols embedded in it, and also by avoiding using the same password for multiple accounts.
2. Two-factor authentication (2FA)
Enabling two-factor authentication creates an extra layer of security for online accounts, which makes it harder for fraudsters to have access to your finances
3. Protect social media accounts
Keep your social media accounts private and exercise caution when clicking on links that appear, regardless of how attractive they are. Additionally, refrain from sharing your personal information on social media or anywhere else online.
4. Freeze Credits
If you suspect your information has been compromised, a Credit freeze is one effective way of preventing a new account from being opened in your name.
5. Monitor accounts regularly
Monitor and review your bank, credit card, medical accounts, and other financial accounts regularly for suspicious activity. Also, set up alerts for account activity
How do you recover from identity fraud?
If you have already been a first-hand victim of identity fraudsters, these are steps to avoid further damage and get justice:
1. Contact your financial institutions to report the incidents of fraudulent transactions on your accounts. Request that they freeze the affected accounts.
2. File a report with the institution in your country in charge of investigating and handling identity theft fraud in your country. Also, have them create a recovery plan for you.
3. Place a fraud alert on your credit reports, which helps lenders know to verify your identity before issuing you or anyone credit.
4. You would also need to report the crime to your local law enforcement, like the police. File a report with them for documentation.
5. Notify credit bureaus of the attack on your finances. Also, dispute fraudulent accounts with them to confirm that you never created or requested credit through the accounts.
Identity fraud FAQ.
Q1. What is Identity Fraud?
Identity fraud is a type of fraud where an individual's identity information is stolen and used illegally for personal gain
Q2. What is synthetic identity fraud?
Synthetic identity fraud is a more sophisticated form of identity theft in which criminals create an entirely new fictitious persona by fabricating personal information.
Q3. What is Identity theft in Banking?
Identity theft in banking refers to unauthorized access to bank accounts, resulting in suspicious withdrawals or loans made in the victim's name.
Final Thoughts
Identity fraud is rapidly increasing its threat in the digital world, disrupting lives, damaging reputations, and draining years of hard-earned financial stability. Identity theft prevention measures are crucial for individuals and organizations, such as banks and fintech companies, to stay ahead of identity theft.
Youverify offers business and financial institutions fraud prevention technology, ensuring businesses stay ahead of identity fraud by providing end-to-end fraud and AML compliance solutions for your organization. Request a demo today. Contact us for more information.