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What is Synthetic Identity Theft?
A fraud in which a person assumes another person's identity is known as synthetic identity theft. The thief creates a new identity by combining basic and fraudulent information. In most cases, the accurate information utilised in this fraud is stolen. This information is used to create phoney accounts and make fake purchases.
Cybercriminals can use synthetic identity theft to steal money from creditors such as credit card companies.
How Does Synthetic Identity Theft Work?
Synthetic identity thieves steal information from unsuspecting persons to construct a false identity. They take people's Social Security Numbers (SSNs) and combine them with bogus information such as names, residences, and even birth dates. In this type of fraud, there is no readily identified victim.
Synthetic identity fraudsters can utilise numerous identities simultaneously, and they can keep accounts open and operational for months, if not years, before the fraud is discovered.
They may open accounts and appropriately use them for a set amount of times to improve their credit score and history. The fraudster will benefit from a more significant windfall in the future because of the higher credit score.
In certain circumstances, thieves pile up fraudulent charges, then use factual information to create a phoney identity and get their credit line restored by posing as a fraud victim. Then they utilise the extra credit to commit more fraud.
Some types of synthetic identity fraud aren't motivated by a desire to defraud others of their money. Undocumented immigrants have been caught using fake or stolen Social Security Numbers to gain financial services in the past. While this is still fraud, these synthetic identity thieves aren't aiming to steal money from financial institutions; instead, they want access to bank accounts and credit cards to make payments and purchases.
Synthetic Identity Theft Detection
Synthetic identity theft can be the most challenging type of fraud to detect and safeguard against. Financial institutions' filters may not be sophisticated enough to catch it.
When a synthetic identity thief applies for a credit card, he or she may appear to be a legitimate consumer with a poor credit history.
Financial institutions are unable to detect synthetic identity theft, as the criminal establishes a history of responsibly using the fraudulent account before it becomes delinquent in making it appear as if the account is of a real person who is having financial difficulties rather than a criminal who piles up debt and defaults on the account at the earliest opportunity. Bust-out fraud is the term for this form of deception.
Identity Theft − Synthetic vs. Traditional
Traditional identity theft is not the same as synthetic identity theft.
The person behind a synthetic identity theft creates a new identity using both actual and made-up information, making it more difficult to track.
In an ordinary identity theft, cybercriminals get the personal data of a customer from the dark web and exploit the data without their knowledge. Names, residences, dates of birth, Social Security Numbers, and employer information are all included.
Fraudsters make use of other people's genuine identities to open accounts and make purchases. These individuals are frequently unaware of the fraud until it appears on their credit report or until they are alerted by their bank, financial institution, or collection agency.
Synthetic Identity Theft Costs
Synthetic identity theft is becoming one of the most widespread types of identity fraud, costing individuals and financial institutions a lot of money. Synthetic identity theft is the most rapidly growing financial crime in the United States, according to a Federal Reserve analysis. In 2016, it cost lenders $6 billion, with an average charge off of $15,000.
Who is to Blame for Synthetic Identity Theft?
Banks are vulnerable to synthetic identity theft because most of the data provided by the thieves are authentic. A criminal might be able to get away with applying for a credit card under a false identity but with an original, stolen Social Security Number (SSN). The criminal racks up charges without any intention of paying them back, and the credit card company loses money, as it is unable to collect payment from the fictitious identity that opened the account.
Synthetic identity theft's exponential growth and, in particular, its impact on children's identities, will have unfavourable consequences for young people in the future. According to Carnegie Mellon's CyLab, Childrens' SSNs are 50% more likely to be used in a synthetic identity theft.
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