What Is Synthetic Identity Fraud?
By Louis DeNicola
Synthetic identity fraud occurs when someone uses a combination of real and fake personal information to create an identity and commit fraud. A fraudster may combine a stolen Social Security number (SSN) with a fake name, date of birth and address to create a new identity, for example. They can then use the "Frankenstein ID," as it's sometimes called, to commit various times of fraud.
How Does Synthetic Identity Fraud Happen?
Synthetic identity fraud is one of the fastest-growing types of financial crimes, and it can happen in several ways.
A fraudster may steal someone's personal information or buy it on the dark web, then combine it with fake information to create a new identity. In some cases, the fraudster might even use a single SSN to create multiple identities.
Fraudsters may then use this new synthetic ID to build credit. It may take months or years to create good credit profiles for their fake identities, and then they "bust out," or borrow a lot of money and disappear.
Synthetic identities may also be used to fraudulently apply for government benefits, open bank accounts to launder money and commit other nefarious acts. A 2021 Experian report that fraudsters are even using artificial intelligence to create fake faces in an attempt to fool companies' biometric verification systems.
Another way synthetic fraud can happen is when someone uses their real name, date of birth and contact information with an SSN that doesn't belong to them. Sometimes this occurs to unsuspecting consumers who are trying to build or rebuild their credit. They may reach out to a credit repair company that offers to help them "start over" with a credit privacy number (CPN). In reality, the CPN may be an SSN that hasn't been assigned to anyone yet or is stolen.
Stolen SSNs often actually belong to children, incarcerated people, homeless people or the elderly—many of whom don't have or actively use their credit information. The consumer might be trying to do the right thing by following a "professional's" advice to get their credit on track—but all the while may be inadvertently committing fraud by using the stolen SSN to open new credit accounts.
One reason synthetic fraud has been possible is that many organizations couldn't electronically check the name and date of birth associated with the SSN. And, since 2011, SSNs have been assigned at random—which means there isn't a clear link between the number and a person's place or date of birth.
To help solve this problem, the Social Security Administration launched an electronic consent-based verification service (eCBSV) in 2020. It's currently in an initial testing period with a select group of participants, including Experian.
How to Protect Yourself From Identity Theft
- Detecting synthetic ID theft can be more difficult than detecting other types of identity theft. But here are some things you can do to keep your—and your loved ones'—information protected.
- Monitor your credit. To check for any unfamiliar accounts and ensure all your information is correct, get your credit reports from all three credit bureaus (Experian, TransUnion and Equifax) at least once a year, which you can do for free through AnnualCreditReport.com.
- Lock or freeze your credit reports. This keeps others from opening an account in your name.
- Freeze your children's credit reports. The credit bureaus will create and then freeze children's credit reports, which could help keep others from using their SSN to open new credit accounts.
- Be careful about what you share on social media. Fraudsters may be able to gather information, such as birthdays, from social media posts.
- Limit sharing SSNs. This is particularly important if you have children or are a caretaker for an older relative. You can ask organizations if they truly need an SSN, or if a different type of personal information or identification could work instead.
- Keep an eye on your mail. If you see unusual mail regarding government benefits, Social Security statements or preapproved credit offers for a child, that could be an indication of fraud.
Unless you're complicit in the creation or use of the fake identity, you likely won't be responsible for any of the fraudulent activity.
However, synthetic identity fraud is far from a victimless crime—as it's sometimes described. Rising fraud rates could increase the cost of credit for everyone and make it more difficult to open a credit account or apply for government benefits.
See if Your Information Is Already on the Dark Web
In addition to taking protective measures, you could look to see if your personal information has already been compromised. You can get a free, one-time dark web scan from Experian to check for your SSN, email and phone number.
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