Understanding Synthetic Identity Fraud and Avoiding Becoming a Victim

Synthetic identity fraud is similar to identity theft, but it requires less of the victim's personal information and less effort on the criminal's part. A cyber criminal creates a new identity by combining some real personal data with made-up details, then uses the new fake ID to build credit profiles, apply for loans, get government benefits, or perpetrate some other form of fraud.

The fact that less personally identifiable information (PII) and effort are required to build a synthetic identity makes this one of the fastest-growing financial crimes. It can also be more difficult to detect than full-blown identity theft. The same recommendations for avoiding becoming an identity theft victim will, however, help to keep your information out of the hands of those who would use it to build and use fake IDs, possibly at your expense.

How synthetic identities are created and used

A cyber criminal may either steal some of your personal information or purchase it on the dark web if it has been previously compromised in a data breach. Social Security numbers (SSN) are extremely valuable. A synthetic identity fraudster can use a single valid SSN to create multiple fake identities by combining it with made-up names, fictitious dates of birth, and other fake details.

If the criminal doesn't have your SSN but does have your real name, date of birth, and a few other valid personal details, that information can sometimes be successfully combined with a SSN that has either been assigned to someone else or that is fictitious.

Readily-available technology even allows fraudsters to generate fake facial images they can then use with synthetic identities to create accounts with organizations that utilize biometric identification systems for added security. Using a fake face eliminates the need for the criminal to use his or her own image.

A scammer might use a synthetic ID to apply for loans, then immediately default and pocket the money. Alternatively, the fraudster might use the fake ID over a period of years to build an extensive credit profile and a high credit rating, then suddenly "bust out." The criminal will leverage the good credit score to borrow large sums of money, then disappear.

Who is most vulnerable

Criminals love to use children's SSNs when creating fake identities. This is because kids have clean credit slates and because their information can sometimes be used for years by fraudsters before the crime is discovered. In some instances, those whose SSNs were stolen when they were children do not find out that they are victims until they become adults and apply for credit or employment. It's at that point that they discover multiple defaulted loans on their credit reports.

Homeless individuals, the elderly, and those serving time in prison are also favored targets because they generally aren't actively applying for or using credit.

Sometimes SSNs and other PII data are stolen when consumers get scammed by individuals posing as credit repair specialists. Often, the goal of these criminals is to steal their customers' data under the guise of improving their credit ratings.

Even if you do not fall into one of these targeted groups, you could become a victim of synthetic identity fraud if you aren't careful about how and with whom you share your information or if your PII is compromised in a data breach.

Why Social Security numbers are so valuable to criminals

A scammer can often provide a fake name, date of birth, and other made up details along with a stolen valid SSN and get away with it because many organizations lack the ability to verify the information. They don't have access to records that would allow them to match SSNs with names of the individuals to whom they were issued.

The fact that, since 2011, SSNs have been randomly assigned also makes it easier for criminals to get away with using stolen numbers. Prior to 2011, the numbers in a SSN revealed information about a person's place of birth and when they were born. If a fraudster wasn't careful, the fake personal details provided along with one of these pre-2011 numbers could get him caught in the act.

?A new program called eCBSV offered by the Social Security Administration now allows "permitted entities" to pay a fee and sign up for a service that enables them to verify that a SSN was issued to a particular individual. The person claiming to be the owner of the SSN must agree in writing to allow this verification and, of course, a criminal attempting to commit identity fraud isn't going to do that. He or she would more likely cut off communications and move on to a company that didn't subscribe to this verification service. This is, however, a step in the right direction.

How to minimize your risk of falling victim to identity theft or synthetic identity fraud

Taking the following steps will greatly reduce the likelihood that you or someone in your family will become a victim:

????Place a freeze on your credit - This is the most effective action you can take to protect yourself from credit fraud. You can place freezes on your credit with all three credit reporting agencies. You can freeze your kids' credit, too. This will prevent fraudulent accounts from being opened in your name or in the names of your children. Should you need to apply for credit, you'll have to temporarily lift the freezes. It's worth the effort, especially if you've been notified that your sensitive data was exposed in a breach. You'll find an extremely helpful article on applying and lifting credit freezes at Nerdwallet.com/article/finance/how-to-freeze-credit.

????Continuously monitor your credit - If you are offered free credit monitoring services and/or identity theft protection as a result of your information being compromised in a data breach, take advantage of the offer. You can also periodically obtain copies of your credit reports through AnnualCreditReport.com and sign up for free credit monitoring at Experian.com/consumer-products/credit-monitoring.html. Watch for any suspicious activity or unfamiliar accounts being opened in your name.

????Be careful what you share - Sharing too much on social media can give criminals just what they need to perpetrate crimes like synthetic identity fraud. If they only need a few of your personal details like your name and where and when you were born in order to create a synthetic identity, they may be able to get them from your social media posts.

????Avoid sharing your SSN - Never provide your SSN unless it is absolutely necessary. Avoid entering it into online forms. If an organization is asking for your SSN, ask them why they need it and if it is required. Don't assume that, just because a company asks for it, that they will not do business with you if you refuse to provide it. Ask if there is an alternate form of ID that is acceptable. Once you turn over sensitive information like your SSN, you have no control over how it will be used or whether it will be securely stored.

????Check for data breaches involving your information - HaveIBeenPwned.com (yes, that's supposed to be a "P") allows you to check your email addresses, phone numbers, and passwords for free to find out whether they have been compromised in any one of thousands of known data breaches. If you find that one of your passwords has been compromised, change it immediately. You can also sign up for alerts there.

????Watch for suspicious mail - If receive things like Social Security benefits statements when you haven't applied for those benefits, credit offers for your young child, or billing statements for accounts that aren't yours, follow-up is needed.

What to do if you believe you're a victim

If you find indications that cause you to believe you're a victim of synthetic identity fraud or full-blown identity theft, the federal government maintains an excellent site at IdentityTheft.gov/#/. This site provides all the resources you'll need to report and recover from the attack. File your report there and follow the steps to create your own personalized recovery plan. You'll even be provided with form letters you can use to notify creditors.

It's also a good idea to contact your local law enforcement agency to report crimes like these. Depending on the circumstances, they may not have jurisdiction to pursue the matter. They might, however, know of local groups that could provide valuable assistance.

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