We know criminals steal victims’ identities, but a new wave of ID thieves is creating and exploiting identities that aren’t even connected with real people, according to fraud-fighting firm ID Analytics, a subsidiary of LifeLock.
It’s called synthetic identity fraud, and it’s something that should be on everyone’s radar — especially those in certain industries like finance or telecommunications. A new study from ID Analytics shows that the rate of synthetic identity fraud has increased more than 100 percent since 2010.
This relatively new form of identity fraud involves criminals pairing random Social Security numbers, dates of birth, names and other fabricated credentials to create a full-blown identity to obtain credit cards, cellphones and more.
Individuals can be directly impacted if a fraudster randomly chose their Social Security number and fabricated another identity with it.
Behind the scenes, ID Analytics uses proprietary algorithms to catch these fictitious identities. To their knowledge, roughly 2 percent of the population is synthetic.
Dr. Stephen Coggeshall, ID Analytics’ Chief Analytic and Science Officer, explained in a recent webinar that synthetic identity theft is a fairly easy thing to do. “The problem will continue to grow as more fraudsters continue to catch on,” he said.
There are two types of synthetic identity fraudsters, according to Dr. Coggeshall. The first type of criminal signs up for services with artificial credentials without intending to ever pay. The second type of criminal signs up for services and behaves well for some period of time, nurturing a rich credit history. Eventually, they bust out, going bad in a flurry of activity.
A recent change in the issuing for Social Security numbers is partially responsible for fraudsters being able to carry on such acts so easily. Until 2011, Social Security numbers were issued using a distinct, predictable pattern, making it feasible to conduct validity checks. Now that the numbers are generated randomly, validity checks are increasingly difficult.
Synthetic identity theft poses a variety of threats, from compliance issues leaving institutions unsure of whom they are dealing with, to drug trade crimes and financial loss from unpaid debt.
According to ID Analytics, synthetic identity theft is responsible for up to 20 percent of credit card charge-offs and up to 80 percent of credit card fraud loss.
While there’s not a whole lot a consumer can do to prevent synthetic identity theft, it’s still helpful to monitor your credit reports for any suspicious signs, such as new accounts that you did not open, and further investigate if you see an unwarranted dip in your credit score. It also pays to take a close look at your annual Social Security statement to ensure the reported income figure is accurate, rather than over-inflated.
Another red flag: mail that is sent to your home address with another person's name on it, especially if that person has not resided at your address in the past. If this happens, you can write on the envelope, "NOT KNOWN AT THIS ADDRESS, RETURN TO SENDER," and leave the mail in your mailbox with the flag up for your mail carrier to pick up or drop in a USPS mailbox. This will prompt the sender to look further into the issue when they receive the returned mail.