With the holiday shopping season at its height, scammers worldwide are targeting whoever they can for a quick buck — and a new scheme called synthetic identity fraud is putting more consumers at risk.
"Synthetic identity is a fake person that is created by a fraudster that is used to commit different types of financial crime," said Naftali Harris, the CEO and Co-Founder of fraud prevention company SentiLink.
Harris says that, unlike other frauds that are usually spotted and reported by an actual victim, synthetic fraud is harder to detect and usually leaves banks with unexplained financial losses.
"They'll trick the credit bureau into thinking this is a real person and then actually build credit in the name of a completely fictitious individual," Harris said. "They trick financial institutions into giving them high limit credit cards, unsecured personal loans, auto loans for luxury vehicles and are able to use these fake people to commit different kinds of financial crimes."
Harris says there are two types of synthetic identity fraud. "First person" happens when a consumer gives out someone else's name, Social Security number or date of birth. "Third party" synthetic fraud happens when a fraudster gives banks a fake date of birth, name or Social Security number that doesn't belong to a real person.
SentiLink says roughly 70% of all synthetic fraud can generally be tied back to a real person. Loan applications are a place where suspicious activity shows up.
The most recent government numbers available show around 22 million people had their Social Security number stolen by hackers who breached the U.S. government's Office of Personnel Management. In 2021, those numbers are even higher, with 85% of those cases now deemed cases of synthetic identity fraud.