An analysis of synthetic identities from a fraud and credit risk perspective

by Carmel Maher

Carmel Maher

One of the most sophisticated synthetic identity fraud rings in U.S. history created 7,000 new identities, received 25,000 credit cards and amassed a $200 million bounty from banks between 2003 and 2013.¹ Credit card issuers aren’t the only ones caught in the line of fire; synthetic identities are increasingly targeting auto loans and leases, the wireless industry, online lenders and even healthcare plan providers. The problem of synthetics isn’t new, but these fraudsters are finding creative ways to circumvent enterprises’ risk defenses and they aren’t slowing down.

To better understand the success of these masterminds, ID Analytics conducted a study to examine how synthetic identity behaviors find their way past fraud and credit screening at leading U.S. financial institutions today.

The research revealed just how difficult it is to identify synthetic fraudsters. Check out these stats:

  • 85-95% of applicants identified as potential synthetic fraud were NOT flagged as high risk by traditional models built to predict the potential of third-party fraud, including identity theft.
  • More than half of synthetics in this study were identified as having good, very good, or excellent credit.

 

Do these statistics surprise you? Are they alarming? If anything, they help to explain why synthetic identities have seen such dramatic growth over the past five years; traditional fraud and credit assessments generally are not geared to detect them. The research also analyzed indicators of synthetic identities from both a fraud and credit risk perspective and identified patterns of behavior that are highly indicative for isolating likely synthetics. To read the full study download, Slipping through the cracks: How synthetic identities are beating your defenses.

This is part one of our research series that examines synthetic identities, the challenge of combatting synthetic identities with traditional risk management solutions, and how deeper insight into identity and consumer intention can be used to help reduce the growth of this elusive threat. In part two, ID Analytics analyzes the variability in behavior among synthetic identities and how those differences make synthetics very difficult to solve with solutions that target only one signature trait associated with the crime.

The second phase of our research will be released during the KNOW 2019 conference March 24-27 in Las Vegas. If you are attending the show, stop by kiosk number 5 to pick up a copy and say hi to our team! If you are not attending, check back on our blog to see the results. You can also sign up for monthly updates below, so you don’t miss out on future studies.

 

Carmel Maher is the Product Marketing Manager for ID Analytics

 

 

1. frankonfraud.com, https://frankonfraud.com/fraud-scams/how-a-fraud-ring-created-7000-new-synthetic-identities-and-stole-200-million/ (accessed March 1, 2019).