The United States’ Federal Reserve has published advice for financial institutions located in the US on how to mitigate risks of synthetic identity payments fraud. Citing an analysis by the Auriemma Group, the Fed noted that synthetic identity fraud cost US lenders around US$6 billion and was responsible for 20% of credit losses in 2016.
Scammers usually create synthetic identities by piecing together bits and pieces of real and fake information, which includes Personally Identifiable Information (PII), such as names, Social Security Numbers (SSN), and addresses. They frequently target individuals, who are less likely to check their credit information often, such as children, the elderly, or even homeless people. The upside of utilizing this method for fraudsters is that synthetic identities act like legitimate accounts, which means they evade conventional means of fraud detection.