A credible threat is in play when it earns an official definition from a well-known organization that plays a crucial role in sustaining the country’s economic lifeblood. The Federal Reserve recently bestowed this distinction upon an issue that continues to grow and negatively impact many different business sectors – synthetic identity fraud (SIF).
According to the Fed, synthetic identity fraud “is the use of a combination of personally identifiable information (PII) to fabricate a person or entity in order to commit a dishonest act for personal or financial gain.”
That definition is easy enough to understand, and if you stay on top of the many potential cyberthreats to your business, this is a term that you are most likely already aware of. LibertyID recognized the prominence of SIF and the continued issues it poses by designating this type of fraud as #29 on our 31 Flavors of Identity Theft.
Why is more widespread awareness of SIF an issue worth further investigation and earning recent headlines for becoming officially defined? The Fed states that “consistent use of this definition within and across organizations can enable us to discuss, identify and classify synthetic identity fraud in a similar matter.” That’s a great goal and purpose, but on another level, it highlights one of the fastest growing financial crimes in the US, affecting both businesses and individuals on a grand scale.
Understanding the Definition
If you are unfamiliar with synthetic identity fraud, a quick dive into a few of the ways that it can occur is worth examining. The definition given above helps to explain it, but it does not identify the fraud in action.
A cybercriminal can establish a synthetic identity by using any combination of PII. Tax identification numbers, Social Security numbers, addresses, and any other stolen legitimate information combined with fake information sets the foundation. This is used to fabricate an application for a line of credit or loan, alongside several other fraudulent purposes. The activity can continue under the radar and unnoticed while thieves make off with large sums of money, negatively impacting the credit and wellbeing of the individuals and businesses affected.
What makes SIF even more of a threat is that criminals may not use the information they collect right away. Threat actors often build up a history that makes the synthetic identities appear more legitimate before they attempt to profit. This helps increase the likelihood that their fraud attempts will succeed. It also helps to limit detection because the synthetic identities often seem real to any person or service that may be trying to spot them.
SIF is difficult to spot, making it challenging to stop. That’s why fraudsters continue to develop new angles for exploitation that can be steps ahead of any attempt at defense. There’s money to be made, and the long lifespan for profit from a synthetic identity increases the allure of the crime.
How SIF Can Affect Your Business
The FBI says that synthetic identity theft is the fastest growing financial crime in the country. There is an obvious risk to individuals, with young people and the elderly being particularly susceptible. But the threats to businesses are just as serious, and the quickly increasing prevalence of SIF exists in many sectors.
The problem affects over 60 percent of all businesses, with those numbers poised to keep increasing. If your company or organization has not already dealt with the issue, it will likely come into the picture soon.
Financial institutions see the brunt of the problem, with synthetic fraud costing this sector over $6 billion a year. While most instances of SIF occur away from banks and credit unions, these financial businesses are left to deal with the damage and often have to dish out cash to consumers with other losses looming. The financial impact from this is evident but other problems can pile up, including decreased customer satisfaction and reduced membership which has a long-term negative impact.
Recent assessments show that the total number of SIF occurrences has fallen during the pandemic, but this may be the result of unique circumstances that have come into play during the ups and downs of 2020. Loan forbearance programs that came about during the course of the pandemic have resulted in fewer sales of credit profile numbers (CPNs) over that time. These CPNs are a commonly used form of PII to commit synthetic fraud. Less availability translates into fewer frauds occurring – but this is expected to change soon when these lenient loan payment programs come to an end. There were also other forms of fraud that threat actors focused on, such as the PPP and a drastic rise in unemployment fraud.
If you have a business in the financial sector, you are both directly and indirectly at risk to the problems posed by SIF. Educating your employees, members, and customers about this risk is suggested. Having a clear understanding of the threat and a data breach defense in place is also critical. Experts suggest a multi-layered approach to deal with the issue. This includes following methods and using technologies to ensure that a customer is legitimate when being onboarded – with manual and digital efforts alike being needed. The more effort and energy that is put into identifying fraudulent identities, the easier it is to prevent the damage they can potentially inflict.
LibertyID has a number of steps we provide when our members are subject to synthetic identity fraud. From contacting the businesses involved to identifying and closing fraudulent accounts to filing reports with the FTC, we work to achieve a full restoration of any type of identity theft – synthetic varieties included.
SIF may have just earned an official definition, but success in the modern digital business world is truly defined by having a good defensive plan in place before any cyberthreats appear.
LibertyID is the leader in identity theft restoration, having restored the identities of tens of thousands of individuals without fail. If you retain personal information on your customers, now is the time to get data breach planning and a response program in place with our LibertyID for Small Business data breach preparation program. With LibertyID Enterprise you can now add value to existing products, services, or relationships by covering your customers, employees, or members with LibertyID’s fully managed identity theft restoration service – at a fraction of our retail price – with no enrollment and no file sharing. We have no direct communication with your group members – until they need us.
Call us now for a now obligation proposal at 844-44-LIBERTY (844) 445-4237