An Analysis of Synthetic Identity

October 22, 2014
By Dr. Stephen Coggeshall

A new study from ID:A Labs shows that the average fraud rate for synthetic identities has increased more than 100 percent since 2010.  Synthetic identity fraud has become a significant and growing problem for multiple reasons. A major contributing factor is that social security number (SSN) randomization, introduced in 2011, and intended to provide higher safeguards for the public, has been exploited by fraudsters to help create and use false identities. Additionally, the availability of identity information for use by fraudsters in generating synthetic identities has grown with each new, massive data breach.

Fraudsters have used synthetic identities for decades. In the past, people with minimal or poor credit history created synthetic identities to receive approval for new credit cards. In some cases, to consolidate financial responsibility, family members shared identity information in an amalgamation of elements that could no longer be traced to a particular person. Despite the fake identities, these cases often lacked malicious intent, and applicants would plan to use the card legitimately to purchase goods. However, today, synthetic identities are often created for malicious intent: to purposefully commit fraud, to launder money, or to support terrorist or other criminal activities.

The risk of synthetic identity fraud has grown as the demand for immediate access to goods and services threatens to strain security processes. Enterprise systems are increasingly automated, and online enrollment technologies are gaining in popularity.  Due to the absence of official identification, like driver’s licenses or passports, synthetic fraudsters can appear as a “thin file/no hit” applicant to an enterprise’s adjudication system. Without a true paper trail leading to a real person, the subsequent drop in credit score is of no consequence, and the victim of the crime is the financial institution at risk of fraud or violation of Know Your Customer (KYC) regulations.

How pervasive is Synthetic Identity fraud?  What’s the potential impact to your organization? For more information download our white paper: The Long Con; An Analysis of Synthetic Identity.


Dr. Stephen Coggeshall is Chief Analytics and Science Officer at ID Analytics, Inc.