Synthetic Identity Fraud

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Synthetic identity fraud is a type of fraud in which criminals create a new, fake identity by combining real and invented personal information, such as a real identification number with a made-up name and date of birth, to open accounts and obtain credit.

Unlike traditional identity theft, which uses a real person’s full identity, synthetic identity fraud creates an identity that does not belong to any single real person. This makes it harder to detect, because there is no victim who notices unfamiliar accounts.

Fraudsters often build up the synthetic identity’s credit history over time. They might apply for credit, be rejected at first, then gradually obtain small credit lines, make payments on time and increase their limits. Once the identity has a strong credit profile, they borrow as much as possible and disappear, a practice called busting out.

For example, a fraudster might use a stolen child’s Social Security number, which is unlikely to be monitored, with a fake name to open credit cards and loans in the United States.

Synthetic identity fraud is considered one of the fastest-growing types of financial crime, especially in the United States. Lenders combat it using data analysis, identity verification services, document checks and checks against government databases. Generative AI may make creating convincing fake identity documents easier.

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