Synthetic Identity Fraud
Learn about synthetic identity fraud, its impact on businesses, and how Straddle can help
Understanding Synthetic Identity Fraud
In today’s digital economy, businesses face an increasing threat from sophisticated fraudsters. One of the fastest-growing forms of identity theft is synthetic identity fraud. This guide will help you understand what synthetic identity fraud is, how it differs from traditional identity theft, and strategies to protect your platform.
What is Synthetic Identity Fraud?
Synthetic identity fraud occurs when genuine information is combined with fabricated information to create a new, false identity.
Synthetic identities may appear credible, allowing fraudsters to:
- Open new accounts
- Make fraudulent purchases
- Exploit financial systems
According to Security Magazine, 46% of organizations faced synthetic identity fraud in 2022, making it a significant concern for businesses across industries.
Types of Synthetic Identities
Fraudsters typically create synthetic identities in two ways:
Manipulated
A genuine identity with one or more personal details altered. For example, a consumer with low credit might manipulate their identity to hide their previous history.
Manufactured
A combination of real and false information to create an entirely new identity. This identity does not belong to any known or real person.
Synthetic vs. Traditional Identity Theft
| Aspect | Synthetic Identity Fraud | Traditional Identity Theft |
|---|---|---|
| Identity Creation | Creates a new, false identity | Steals an existing, real identity |
| Detection Time | May go undetected for longer periods | Often reported quickly by the victim |
| Victim Reporting | No direct individual victim to report fraud | Individual victim can alert authorities |
| Impact | Affects financial systems and businesses | Directly impacts the individual whose identity was stolen |
| Detection Difficulty | More challenging due to lack of victim reports | Easier due to victim complaints and unusual activity |
How Fraudsters Use Synthetic Identities
Synthetic identities are often used in:
-
Financial Services:
- Opening new accounts
- Building credit history over time
- Obtaining larger credit lines
-
Ecommerce and Online Marketplaces:
- Creating accounts with lower verification requirements
- Making high-value purchases
- Obtaining chargebacks, increasing merchant losses
Fraudsters may cultivate synthetic identities for months or even years before using them for fraudulent activities, making detection challenging.
Protecting Your Platform
To combat synthetic identity fraud effectively:
- Implement robust identity verification processes
- Use advanced fraud detection technologies
- Monitor account behavior over time
- Educate your team about the latest fraud trends
- Collaborate with other businesses and law enforcement
Straddle’s identity verification and fraud detection capabilities can help protect your platform from synthetic identity fraud. Our API integrates seamlessly into your onboarding and transaction processes to identify potential risks.
By understanding synthetic identity fraud and implementing strong protective measures, you can safeguard your business and customers from this growing threat.