What is Synthetic Identity Fraud, and How Can You Avoid It?

A relatively new type of identity theft is emerging in the United States and is expected to create significant financial losses in the years ahead: synthetic identity fraud.

According to Deloitte Insights, synthetic identity fraud could surpass $23 billion in losses by 2030. In this blog, we’ll explain what synthetic identity fraud is, what can be done to avoid it, and how FIBT is combatting the issue.

What is synthetic identity fraud?

According to the Federal Reserve, “synthetic identifies are essentially fictional ‘people’ linked to valid Social Security numbers.” These Social Security numbers may be obtained in data breaches – and are often tied to children, the elderly, or the homeless.

Using this combination of real and fake personal details – and with the help of generative artificial intelligence (AI), the scammer begins a long process that ultimately leads to fraud. Here’s how the Better Business Bureau describes it:

“Over time, the scammer builds up a credit history. They may even make charges and payments over several years. until they can qualify for large lines of credit. Once they are approved for a high line of credit, they do what is called a “bust-out.” The con artist charges their credit cards to the limit, pays nothing, discards the identity, and disappears.”

The Federal Trade Commission notes that synthetic identity fraud is particularly difficult to catch: “Since it is not your name, address, phone number or credit file… credit monitoring, fraud alerts, or credit freezes will not inform you or stop synthetic ID theft.” But the Better Business Bureau notes that, if your Social Security number is used, “unpaid debts left by the scammer can affect your ability to take out loans or credit.”

How can it be prevented?

Synthetic identity fraud has grown to represent 80 to 85 percent of all identity fraud, according to the FTC. So what’s the key to keeping yourself out of identity thieves’ line of sight? The answer: protect your Social Security number at all costs. Only share it when absolutely necessary – and with those you know you can trust.

The FTC recommends enrolling in a credit monitoring service and regularly checking your credit report. If you use online and mobile banking with FIBT, you have access to Credit Sense, which allows you to see your credit score any time with no impact to your score. With Credit Sense, you can also receive alerts to any new credit inquiries and new accounts opened.

First International Bank & Trust is also highly aware of synthetic identity fraud and is working to safeguard our customers from it. Our Fraud Prevention team has systems in place that aid in identity verification and can help to detect possible synthetic identities.

Finally, if you know your Social Security number was obtained due to a data breach, you can place an alert or credit freeze at the credit bureau level. To learn more about the steps you can take to secure your SSN and identity, visit https://www.identitytheft.gov/Databreach.

Visit the FIBT Education Center for even more tips on keeping yourself and your finances safe from fraud.