Synthetic Identity Fraud Legislative Update

by Ken Meiser

Ken Meiser

In my new role as Chief Compliance Officer for ID Analytics, I have been spending a great deal of time in Washington D.C. with our government relations team staying abreast of new laws that impact our industry. I will periodically share relevant news and updates from Capitol Hill. My first report is regarding an important legislative development that might partially address some of the issues surrounding synthetic identity creation. Synthetic fraud is one of the fastest-growing and hardest-to-detect forms of identity fraud enterprises face today,¹ which makes this Act important to follow.

The Economic Growth, Regulatory Relief, and Consumer Protection Act was signed by the President on May 24, 2018. While this Act has a number of provisions, ID Analytics has been actively involved with one particular section that should have a real and positive impact in the fight against synthetic fraud. Section 215 of the Act aligns with one of our core missions – reducing identity fraud. In short, this provision directs the Social Security Administration (SSA) to make a mechanism available to facilitate the verification of consumer information upon request by a certified financial institution.

Highlights of Section 215 – Reducing Identity Fraud:

  • The proposed service will validate a consumer’s name, social security number and date of birth in real-time or via batch.
  • The service requires gathering event-based consent from a consumer, but no longer requires consumers to submit a hard-copy wet signature on an SSA consent form.
  • Final interpretation for eligibility will be made by the Social Security Administration, but it appears this service will be available to chartered financial institutions ONLY in connection with a credit transaction. This may mean the non-credit (e.g., brokerage or deposit account) arms of banks likely cannot use this service. It may also exclude a significant segment of organizations that initiate consumer transactions (e.g., fintechs, telecommunication providers, non-bank lenders, etc.).

Timeline and potential business impacts:

The SSA will need time to develop guidelines for user certification and to implement the service. The cost of this endeavor is still unknown. The provision may help overcome the loophole that was created by SSN randomization and provide institutions with a more practical method of identity verification, especially for online and mobile transactions. While this regulation has the long-term potential to significantly reduce synthetic identity fraud, uncertainty on the SSA’s timeline for implementation and the limitations on both the industries and use cases which can benefit from it make the level of impact unclear.

What comes next?

ID Analytics will continue to work with our legislators to shape the future direction of the Act and coordinate our efforts with other government affairs teams to advocate for the availability of the service to industries that conduct consumer transactions, outside of chartered financial institutions. Stay tuned for new developments. If you have questions or are interested in joining a consortium to work collaboratively to further the legislation, please contact me.

 

Ken Meiser is Chief Compliance Officer at ID Analytics

 

 

 

1. CNBC News, https://www.cnbc.com/2018/06/07/scammers-create-a-new-form-of-theft-synthetic-identity-fraud.html (accessed June 8, 2018).