Many things have changed rapidly with the growth of technology. Many of these changes have been positive, making life more convenient and connecting people more than ever before. Unfortunately, these same developments have also increased the number and types of threats that can put our personal and sensitive information in jeopardy. The financial world is no stranger to these threats, but due to technology’s fast nature, new threats evolve just as current ones are mitigated. The latest is synthetic identity fraud.
While identity fraud has been public knowledge for several years now, and there are safeguards and measures to prevent and resolve it, synthetic identity fraud puts a new twist on an old crime. Traditional identity theft is when a legitimate identity is stolen; synthetic identity theft is when an illegitimate identity is created and used.
How do you create an identity that can be used? Synthetic identities use a combination of real and fake information, and leverage CPNs, or credit privacy (or profile) numbers. Many times these numbers are created with stolen information from: the elderly, the homeless, the incarcerated, and from children. However most of these numbers are generated from data breaches. The data breaches at Anthem, the IRS, and USOPM combined for over 106 million compromised records.
Synthetic identity fraud, also known as “ghosting”, poses several challenges for banks and law enforcement alike. Who is the real victim? It’s technically a fake ID. The real victims in many cases are children that have their information used as part of a synthetic identity, resulting in compromised credit. Financial institutions also fall victim in this scenario as there is no recourse against an illegitimate person.
How can synthetic identity fraud be stopped? Awareness is first and foremost. As this is becoming a more pressing risk, bank employees as well as law enforcement can be trained to understand and recognize synthetic identity fraud. More major businesses are taking advanced steps to safeguard their data after recent breaches, many of the resources used should be harder to acquire. Also, putting a freeze on children’s credit files until they turn 18 is a smart way to protect minors.
As technology continues to change, the number of threats on information, and to financial institutions will continue to grow. Being aware and diligent when it comes to these new dangers can protect both your clients and your bank.