TL;DR
Synthetic identity fraud — where criminals stitch together real data fragments from multiple people to create a fictitious digital person — is now the dominant form of identity-based crime, accounting for roughly 85% of all such fraud. While individual consumers may not be directly liable, they still bear indirect costs through higher bank fees and misused public funds. Protecting yourself means guarding your financial data closely, monitoring accounts vigilantly, and choosing financial partners with strong identity verification practices.
What is synthetic identity fraud?
Synthetic identity theft involves pulling together a brand-new digital person made up of pieces from real consumers. Your Social Security Number could be combined with someone else's name, a third person's address, and a fourth person's purchasing history.
In 2021, 11 people were charged in a vast fake identities scheme that cost banks more than $1 million. This is just the tip of the iceberg, experts say. As stealing real identities grows harder and harder, combining data from many becomes a more feasible way to commit crime.
Criminals use identity fraud to convince banks, credit unions, merchants, and other vendors to sell or give them money or merchandise. Synthetic identity fraud involves making up the identity used in those thefts.
In an old-school identity theft, someone steals many parts of your online persona, such as your:
- Name
- Social Security Number
- Physical address
- Part of your account number
- Employer's name
- Driver's license number
The criminal applies for loans or makes purchases in your name, but the contact information for those transactions goes back to the criminal and not you.
In synthetic identity fraud, a criminal pieces together a brand-new digital person from many parts stolen from real people. The criminal works slowly, building up a credit rating for this new person. And eventually, they max out the benefits they can get and start again.
Should you be worried about synthetic identity theft?
Why synthetic identity theft affects everyone
You may struggle to understand why the average consumer should care about fake identities. You aren't held responsible for thefts that need only part of your identity. But the banks and credit unions you use are victims, and they can pass along their losses in higher fees and penalties you must pay.
Synthetic identity theft is also on the rise, as it accounts for about 85 percent of all identity-based fraud. Anyone who wants to fight crime should be concerned.
Some criminals are also abusing programs paid for with your taxes. In 2020, for example researchers discovered fake identities in the Paycheck Protection Program made to help people recover from the coronavirus.
Unfortunately, spotting synthetic identity theft isn't easy. Few victims know that their identities have been stolen, so they don't help companies spot the issue and fight back. And the crimes are slow to build, which makes them harder to monitor and prevent.
How can you fight synthetic identity theft?
You can help keep criminals from stealing your information.
Steps you can take to protect your information
- Guard your financial data: Treat card numbers, purchase history, and banking partnerships as strictly personal — only share with trusted parties.
- Monitor your accounts: Review account activity regularly and report anything suspicious immediately.
- Vet your financial partners: Ask prospective financial institutions about their enhanced due diligence techniques and data safeguarding practices.
If you're searching for a new financial partner, ask about their ability to keep your data safe. Do they use enhanced due diligence techniques to vet their customers? How do they safeguard your information?
Find out more about how to defend against identity attacks on our blog.
Frequently asked questions
What makes synthetic identity fraud different from traditional identity theft?
Traditional identity theft involves stealing a complete set of personal details from one real person. Synthetic identity fraud, by contrast, assembles a fictional digital identity by combining data fragments — such as a Social Security Number, name, and address — taken from multiple different real individuals.
Why is synthetic identity fraud so difficult to detect?
Because the fabricated identity doesn't belong to any single real person, few or no victims realize their partial data has been misused. This lack of victim awareness, combined with the slow, deliberate way criminals build up the fake identity's credit history, makes the fraud hard to monitor and prevent.
How does synthetic identity fraud affect consumers who aren't directly targeted?
Even if your full identity isn't stolen, the financial losses absorbed by banks and credit unions from synthetic fraud can be passed on to customers in the form of higher fees and penalties.
How do criminals build a synthetic identity over time?
Criminals piece together data from multiple real people to create a new digital persona, then patiently establish a credit history for that fictional person. Once the fake identity has sufficient credit standing, they maximize the financial benefits they can extract before abandoning it and starting the process over.
What steps can individuals take to reduce their risk of contributing to synthetic identity fraud?
Individuals can protect themselves by treating all financial information as strictly private, monitoring their accounts for unusual activity, and reporting anything suspicious. When choosing a financial institution, it's worth asking how they vet customers and safeguard personal data.
Has synthetic identity fraud been used to exploit government programs?
Yes. Researchers discovered in 2020 that fabricated identities were used to fraudulently access the Paycheck Protection Program, a government initiative designed to help people recover financially during the coronavirus pandemic.
References
Frankenstein Fraud: How Synthetic Identities Became the Fastest-Growing Fraud Trend. (May 2021). Security Management.
The Changing Face of Identity Theft. Identity Theft America.
Synthetic Identity Fraud Worrying U.S. Regulators. (November 2020). Thomson Reuters.
What Is Synthetic Fraud? (March 2021). Forbes.
