The Achilles' Heel of Synthetic Identity Fraud

Losses from Synthetic Identity Fraud are Increasing

Most of us are familiar with the fable from Greek storyteller, Aesop, about the boy who cries wolf.  To get attention, he pretends a wolf is attacking his sheep. The town’s people come to his aid, only to find it is a ruse. He repeats this act several times. When a real attack happens, no one comes to help because he “cried wolf” one too many times.

Why repeat that fable here? Because synthetic identity fraud is so difficult to detect, it might seem as though people are “crying wolf” about the problem. After all, criminals go to great lengths to look and act like a real identity, so organizations don’t realize they are dealing with a fake person. And, technology that has helped detect other types of fraud, doesn't work for synthetic identity fraud.

Unfortunately, synthetic identity fraud is a real, and vicious, wolf. Top card issuers identified one million accounts as potentially synthetic -- within just a year’s time. Aite Group estimates that losses from synthetic identity fraud will almost double from 2015 to 2020. It calls synthetic identity fraud “the new elephant in the room — a problem that is rising to epic proportions but that many have yet to acknowledge.”

Enter another Greek character – Achilles. He was a great warrior who was invulnerable except for his heel. There are several versions of how he was finally defeated, but most of them end with an arrow in his heel. The legend of Achilles teaches us that even the strongest opponents have a point of weakness.

The Achilles' Heel of Synthetic Identity Fraud: Personal History

In the credit world, the characteristics identifying real people don’t suddenly appear in the public domain a few months before they start applying for credit. Real people leave digital and documentary evidence of their existence throughout their lives, such as:

• Registered vehicles
• Employment histories
• Current and previous addresses
• Utility and cell phones records
• Student loans or secured credit cards
• Email addresses and social media accounts

When few of these identifiers seem to exist, that could be a red flag for synthetic identity fraud. For example, real people leave consistent evidence across multiple databases such as addresses, email and phone numbers. Synthetic identities tend to be inconsistent. That's because the applicant may give some real details, but others are fabricated so they won't reoccur. In other cases, the information may be too consistent, which can also be a sign of fraud.

The arrow in the Achilles' heel of synthetic identity fraud is the use of external data and analytics to detect linkages and suspicious patterns indicative of phony or manipulated identities.

How to Deepen Your Understanding of Customers

By bringing in “signs of life” indicators such as utility accounts, car registrations and court records, you get a 360-degree, full-color view of applicants and customers. And when you deepen your understanding of customers, you can stem losses associated with synthetic identity fraud.

Equifax FraudIQ® Synthetic ID Alerts uses machine-learning algorithms to detect synthetic identity behaviors and patterns. It can also be used as a screening tool with demand deposit accounts. Equifax can also help design a layered fraud defense to employ throughout an account’s lifecycle.

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