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Why Synthetic Identity Fraud Should Concern Your Financial Institution


Michael W. Kahn

Michael W. Kahn


We’ve all heard of identity fraud, but synthetic identity fraud?

It’s real. It’s expensive. And it’s time to raise your awareness.

Rather than flat out stealing someone’s ID, this involves a long, elaborate process in which perpetrators “mix and match” real and phony information to create an ID, said Dave Richardson, Senior Manager, Fraud & ATM Operations, at First National Bank of Omaha. 

Richardson told the recent Nacha webinar, “Synthetic Identity Fraud: $6 Billion in Losses Annually and Counting,” that “once that ID is created, they’ll attempt to build that ID into an actual person.”

That’s accomplished by slowly building a history, often starting by opening an account without a credit check, such as a prepaid cellphone. 

“They let it build. They have that good history for one, two, three years,” said Richardson. “Now we have an established person with an established profile”—even though he or she is utterly fake.

The next step is to apply for a credit card, knowing it’s likely going to be declined. What they really want is the inquiry and record that’s created with a credit bureau, said Richardson, because “now it looks legitimate.”

Over time—often two to five years—a credit score gets built. “Once they get approved,” Richardson said, they can “kick off the plan for how they want to create fraud.”

Who has the time and skills to invest in this?

“This isn’t somebody in a garage creating some identities. This is organized criminals who are highly funded and highly focused,” said Andrew Davies, Vice President, Global Market Strategy, Financial Crimes Risk Management, at Fiserv.

“Industry insiders estimate that the criminal enterprises are investing around 80% more than the financial institutions in protecting themselves,” said Davies. And for good reason.

“Their singular focus,” said Davies, “is on perpetrating their criminal activities and taking advantage of financial institutions and consumers to steal money.”

What warning signs should your financial institution look for? How can you help prevent synthetic identity fraud? The answers, along with much more detailed information, are in the complete 90-minute “Synthetic Identity Fraud: $6 Billion in Losses Annually and Counting” webinar. Click here to visit and purchase the webinar recording. The webinar is worth 1.8 continuing education credits for AAPs and APRPs.