CUNA News
  • LOG IN
  • Create Account
  • Sign Out
  • My Account
  • LOG IN
  • Create Account
  • Sign Out
  • My Account
  • Topics
    • Community Service
    • Compliance
    • Credit Union Hero
    • Credit Union Rock Star
    • Credit Union System
    • Directors
    • Human Resources
    • Leadership
    • Lending
    • Marketing
    • Operations
    • Policy & Issues
    • Sales & Service
    • Technology
  • Credit Union Magazine
    • Buyers' Guide
    • COVID-19
    • Digital Edition
    • Credit Union Hero
    • Credit Union Rock Star
    • Subscribe
    • Advertise
    • Contact
  • Advertise
  • Awards
    • Nominate Credit Union Hero
    • Nominate Credit Union Rock Star
  • Podcasts
  • Videos
  • Jobs
  • Contact

News

Home » Synthetic identity fraud: The chameleon of fraud trends
Sponsored Content
Description+goes+here

Synthetic identity fraud: The chameleon of fraud trends

SIF no longer flying under credit unions’ radar.

August 15, 2022
Eric Tran-Le
No Comments
NICE Actimize

Of the many fraud trends that shook the financial services industry during the pandemic, synthetic identity fraud (SIF) was arguably the biggest headliner. Synthetic fraud may have flown under the radar of many credit unions prior to the pandemic, but has rapidly garnered more scrutiny alongside escalating monetary losses and media coverage.

SIF involves fabricating a new identity procured from a mixture of fake information and authentic personally identifiable information (PII) stolen from multiple victims. The synthetic identity might use a legitimate Social Security number (SSN) and birth date from a real person, as well as random false data, to fill in any gaps.

Content Sponsored By:

NICE Actimize

What synthetic identity fraud looks like today 

The diversity, velocity, and scale of synthetic fraud attacks has intensified as fraudsters continue to leverage new approaches and technologies to achieve their ends. SIF is well-suited for innovation because of the seeming legitimacy of the manipulated or manufactured identity, and has spawned a host of fresh fraud trends.

Synthetic identity BNPL fraud

The popularity of Buy Now Pay Later (BNPL) in recent years is due in part to the accessibility of its services for consumers with little, poor, or no credit history. BNPL service providers typically perform a soft pull on the user’s credit, which provides an opportunity for fraudsters to leverage a synthetic identity to invade the platform with minimal friction. The distributed payment installments also enable fraudsters to cast a broader net for attacks.

Child synthetic identity fraud

Fraudsters are increasingly turning their attention toward the most vulnerable victims: children. Bad actors leverage various social engineering techniques to illegally procure children’s data from sources such as school district systems, social media accounts, and even the dark web. The data is used to compile a convincing synthetic identity that can be used to fuel different types of fraud. Because the crime is often only discovered once the child applies for credit or a federal student loan as an adult, the synthetic identity can be successfully used for years without being noticed by the victim or their family.

Synthetic auto loan fraud

The mainstream adoption of automation and digitization in the auto finance industry—an attempt to appeal to younger generations—is presenting numerous challenges for lenders, as is the ongoing shortage of automotive inventory. This further streamlines identification checks and onboarding to enable easy access to financing. Fraud losses from falsified auto loan applications are expected to grow this year as lenders push their digital transformation agendas forward.

Deepfake synthetic identity fraud

Deepfakes have become infamous for their realistic portrayal of victims, including celebrities and government officials. Now deepfake synthetic identities are increasingly being used to help fraudsters secure remote job roles. The FBI recently reported that they’ve received an influx in complaints of stolen personally identifiable information (PII) and deepfakes used for job applications, primarily in technology jobs. Deepfakes and synthetic content, including identities, bring verisimilitude to various social engineering scams. In this latest manifestation, the approach is deployed in online job interviews with the goal of accessing financial data, corporate databases, sensitive customer data, and other valuable information frequently associated with technology job roles.

New synthetic identity trends demand new solutions

The quality and quantity of new and emerging synthetic identity fraud trends demonstrate how challenging SIF detection is for traditional fraud prevention tools and approaches.

The inclusion of both authentic and falsified information, in addition to the patience fraudsters often exhibit in nurturing accounts and mimicking legitimate account holder behaviors, helps synthetic identities bypass existing fraud detection models so criminals can establish credibility. Financial institutions also struggle with the lack of a single source of truth for identity verification, siloed identity verification data sources, and inaccurate identity data across data sources.

Fraud prevention is a balancing act; solutions and approaches must be robust enough to stop criminals before they can infiltrate the system and commit fraud, yet optimized in such a way that the digital experience isn’t hindered for real customers. Real-time intervention and detection via artificial intelligence (AI) and machine learning (ML) enables institutions to efficiently combat synthetic identities while addressing this need for balance.

The pillars in this equation include an abundance of high-quality data to authenticate identities and address any information voids, and advanced analytics to recognize and manage risks. This creates a solid foundation for FIs to:

  • Link proof of a user’s existence to their indicated information and address.
  • Establish trust and move legitimate applications through the system via data corroboration, including verifying phone numbers and other information and determining real-time possession or accessibility. 
  • Ensuring that provided user information is a probable fit based on the user’s occupation, age, and nationality.
  • Facilitate early and continuous account monitoring through identity-related intelligence, identity risk scores, and behavioral analytics. 
  • Orchestrate identity verification flows to improve any account opening journeys across different products and business lines. 
  • Accelerate risk decisions according to a single identity score.

Stopping synthetic identity fraud doesn’t end there; a modern control framework should also incorporate customer education, application velocity monitoring, and identity verification and entity resolution convergence for a more complete perspective of applications and their relationships.

It’s time to apply smarter, better, faster FRAML to your fraud activities, and stop fraudsters before the damage is done.

ERIC TRAN-LE is vice president, head of Actimize Premier at NICE Actimize.

KEYWORDS fraud operations security
  • Related Directories

    NICE Actimize

Post a comment to this article

Report Abusive Comment

Credit Union Magazine: Winter 2022

Winter 2022

Credit Union Magazine’s Winter 2022 issue highlights data-driven marketing, the board’s role in cybersecurity, elder abuse scams, credit unions’ auto lending advantage, and more.
Digital Edition •  Subscribe

Trending

  • House passes CUNA, League-led board modernization bill

  • CFPB issues CUNA-opposed proposal on credit card late fees

  • Key committee leaders supportive of credit union priorities

Tweets by CUNA_News

Polls

Vote for the 2023 CU Hero of the Year

View Results
More

Champion for the Credit Union Movement

Credit Union National Association is the most influential financial services trade association and the only national association that advocates on behalf of all of America's credit unions. We work tirelessly to protect your best interests in Washington and all 50 states. We fuel your professional growth at every level and champion the credit union story at every turn.

More CUNA

  • Membership
  • Contact Us
  • Careers

Resources for

  • Credit Union Advocates
  • Leagues
  • Press
  • Providers

Our Affiliates

  • American Association of Credit Union Leagues (AACUL)
  • Credit Union Awareness
  • Credit Union House
  • CUNA Strategic Services
  • National Credit Union Foundation
GET CUNA UPDATES
© 2023 Credit Union National Association | ADA Compliance Notice & Legal
Email Us