The “Fastest-Growing” Financial Crime: Synthetic Identity Theft
Con artists are putting a new twist on an old fraud by cooking up make believe identities based on data they steal from their victims.
The scam is known as “synthetic” identity theft. A crook takes a piece of real information, such as your Social Security number, and then links it to a phony name to create a new identity. Once the synthetic identity is established, the criminal can apply for lines of credit, government benefits, income-tax refunds and more.
The fraud is “creating far-reaching impacts” on the U.S. financial system, health care industry, government and consumers, according to the Federal Reserve. Losses are believed to now exceed $6 billion.
Victims can run into many kinds of problems, including loss of credit, denial of benefit applications and disputes with the Internal Revenue Service.
Little detected, little understood
“But unfortunately, many consumers don’t realize how it can hurt their access to credit or how to protect themselves,” said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston. Synthetic ID fraud often goes undetected by routine credit-checking systems. Schemers may wait a long time–sometimes years–before taking advantage of their fictional identities to make illicit purchases.
Synthetic ID fraud often goes undetected by routine credit-checking systems. Schemers may wait a long time–sometimes years–before taking advantage of their fictional identities to make illicit purchases.
It is “the fastest-growing type of financial crime in the United States,” according to a report earlier this year by McKinsey & Company, the management consulting firm.
In June, the U.S. Department of Justice said it had accused 11 defendants of such a scheme, in which they used fraudulently obtained credit cards to buy property and set up shell companies.
To learn more about this popular scam, go to: https://fedpaymentsimprovement.org/news/press-releases/federal-reserve-system-white-paper-examines-the-effects-of-synthetic-identity-payments-fraud/ and https://www.mckinsey.com/business-functions/risk/our-insights/fighting-back-against-synthetic-identity-fraud.