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Best Practices for Mitigating Synthetic Identity Fraud

What Is It?

A recent report by Julie Conroy at AITE details the growing threat of synthetic identity fraud in the US. While definitions differ across the payments landscape and even within the same financial institution, at its core synthetic identity fraud occurs when criminals create false identities to establish new bank accounts and/or lines of credit with the intent to steal money.

Synthetic Identity Fraud



Identity Fabrication

Identity is completely false, not using any genuine identity data elements

Identity Manipulation

Genuine identity data elements are changed slightly to create a new identity

Identity Compilation

Parts of different identities are compiled to form a new identity

Credit Privacy Number (CPN)

CPN is a 9 digit number sold by credit repair agencies to consumers with bad credit. It is also used by illegal immigrants to access credit. Intent is to obfuscate creditor inquiries to credit bureaus and establish new records for the consumer.

Children and the elderly are the most vulnerable segments of the population. Children will not begin to establish a credit history until the age of 18 and the elderly are less likely to open new lines of credit and tend not to report unauthorized use.

According to Issuers interviewed for the AITE report, loss from synthetic identity was conservatively estimated to be $800M in 2017 and is expected to increase to $1.25B by 2020.

How They Do It

Criminals establish new synthetic identities using several different methods and build upon those identities over time.

  • Add an authorized user to an existing credit line
  • Apply for a secure credit card
  • Purchase a mobile phone
  • Establish social media profiles
  • Complicit data supplier
  • Slow and steady credit accumulation

Synthetic identity fraud is not new. However, over the last few years, an increase in data breaches of personally identifiable information, loosening of credit standards, EMV migration and SSN randomization have contributed to a notable increase in occurrence and financial loss.


Recommendations and Best Practices

Although it’s difficult to detect synthetic identifies before criminals use those IDs to bust out credit lines, there are steps financial institutions can take to help mitigate fraud loss.

  • Scrutinize how new identities are established
  • Analyze public data sources
  • Incorporate digital identity data
  • Consider a 3rd party vendor ID solution

More information can be found in Julie Conroy’s report: “Synthetic Identity Fraud: The Elephant in the Room”. Aite Group LLC. May 2018.