In what is known as “synthetic identity fraud,” thieves are now creating false identities from whole cloth, and using them to dupe lenders and credit card companies out of their money. The Justice Department says this fast growing danger is one of the hardest forms of identity crime to fight. That’s probably because no actual identity is being stolen, so there’s no immediate victim to raise a red flag on fraudulent activity.
The victims in this case end up being the lenders who cannot get their money back after sending it to a completely fictitious person. Peter Rudegeair and AnnaMaria Andriotis report for the Wall Street Journal that authorities end up chasing ghosts when synthetic identity fraud is investigated. They write:
Because the person taking out cards or loans isn’t real, there are no consumer victims to alert lenders. When companies and law enforcement discover something amiss, they often wind up chasing ghosts. Mr. Lyles secured credit cards often using fictional names and numbers the Social Security Administration hadn’t yet assigned.
Synthetic-identity fraud exploits a vulnerability in America’s consumer-credit system. Lenders often consider a loan applicant legitimate if the applicant has a credit report at Equifax Inc., TransUnion or Experian PLC. But a new “credit file”—essentially a precursor to a credit report—often gets created when someone simply applies, even if the loan doesn’t come through.
Some lenders approve loans after reviewing credit files, which helps turn those files into full credit reports. That’s how a fictitious person, or 300 fictional people, can end up with a credit card.
“When you see this type of scheme,” said Samir Kaushal, the assistant U.S. attorney who prosecuted Mr. Lyles, at a hearing, “one realizes how precarious our system actually is.”
While a small part of total identity-fraud losses—that number hit about $16.8 billion in 2017, according to consulting firm Javelin Strategy & Research—synthetic-identity losses are soaring.
TransUnion says a record $355 million in outstanding credit-card balances was owed by people who it suspects didn’t exist in 2017, up more than eightfold from 2012. It estimates lenders have issued credit cards or loans to millions of synthetic identities in the U.S.
Read more here.
Despite the new trend in targeting identities that don’t exist, synthetic ID fraud is still a much smaller piece of the fraud industry than traditional ID theft. Protect yourself by reading these two pieces: