Synthetic fraudsters can’t fake it anymore

No one embraces the aphorism “fake it till you make it” more than a synthetic fraudster.

This burgeoning variety of bad actor combines stolen info, such as a phone number and address, with fake info to create an entirely new (and bogus) identity.

A recent study from Aite-Novarica Group predicted that synthetic identity fraud will jump from $1.8B in 2021 to $2.42B by 2023. It also surveyed a group of top fraud executives who pegged “synthetic identities resulting from application fraud” as one of their most worrisome threats. And, as if the alarm bells weren’t already loud enough, the Federal Reserve put out a video in February to raise awareness about synthetic identity fraud.

Let’s take a closer look at the synthetic fraud landscape thus far in 2022. Then, we’ll show you how Deduce is outflanking the fakers.

Chasing ghosts

Our initial primer on synthetic identity fraud in February cited experts who foresaw an uptick in synthetic attacks in 2022. Three months in, it seems these experts lived up to their reputation as synthetic identities continue to negatively impact myriad industries and the consumer victims it leaves in shambles.

In 2020, financial institutions suffered $20 billion in losses due to synthetic identity fraud. The use cases keep piling up: suspicious auto loan applications (260% increase); Buy Now, Pay Later fraud (66% increase from 2020 to 2021); and synthetic refund fraud, to name a few.

Financial harm to businesses isn’t the only concern. Profits from synthetic identity fraud are also linked to terrorism and human trafficking. Parents even have to protect the financial futures of their young children who may not realize their identity was stolen until after applying for a credit card as an adult. Hacked school databases and social media accounts led to 1.25 million stolen child identities in 2020.

The most frustrating element of synthetic identity fraud for consumers, businesses, and law enforcement is the elusiveness of the perpetrator. Pinpointing the real human behind a “Frankenstein identity” is like chasing a ghost. A mishmash of, say, a random person’s address, another individual’s stolen social security number, and a made-up name, is more than enough to throw investigator’s off the scent. Complicating matters is the patience of synthetic fraudsters who often prefer playing the long game by taking out smaller loans, paying bills on time, and otherwise keeping a low profile

Fraud prevention solutions are tasked with a different set of challenges, namely: how do you stop a synthetic fraudster early, before an attack can take place, and is that even possible?

You can’t fake it

Preemptively stopping synthetic fraudsters in their tracks is indeed possible—if the largest real-time identity graph in the US is at your disposal.

Deduce’s Identity Network is just that. We’re a relatively young company, but our data is clever beyond its years, powered by more than 450 million anonymized US user profiles (many US residents have more than one email) and 1.4 billion daily activities. 

Think of Deduce as the wise old owl who’s seen every fraudster scheme in the book. Our vast database of user profiles and activity successfully prevents synthetic identity fraud for one key reason: it’s too expensive for synthetic fraudsters to fake us out. The amount of websites, diversity of activity, and length of time needed to circumvent our defenses—all using the same device and identity—would be too costly. (Fraudsters are a thrifty bunch.)

Given the patience of synthetic fraudsters and their efforts to legitimize fake identities by opening bank accounts, paying utility bills, etc., the static data traditionally used to prevent breaches isn’t sufficient. Real-time user activity, on the contrary, gives the Deduce intelligence layer the upper hand no matter how many real and fake details they’ve cobbled together.

And, because the Deduce Identity Network offers both risk and trust signals, you’ll combat synthetic bad actors while making sure legitimate users aren’t mistaken as false positives.
If you’re looking for a synthetic antiseptic, contact us today.

Static data alone can’t ward off synthetic fraudsters

The synthetic ascension

In 2021, identity fraud targeting US-based e-tailers made up 30% of all fraud losses. Within that troubling percentage lies an uptick in synthetic identity fraud, in which bad actors fuse stolen data (phone numbers, emails) with fake data to create a bogus identity.

Post-pandemic, fraudsters have feasted on users’ anxiety and increased online activity, phishing login information with very little effort. Given this trend, experts foresee another rise in synthetic identity fraud in 2022, especially in the financial services arena and on platforms that utilize seamless signup and other quick decisions.

With factors like social security number randomization making synthetic “Frankenstein identities” more prevalent, stopping this mish-mashed form of identity fraud is imperative before it festers into a costly and potentially years-long disaster.

Not your average identity fraud

The challenge of preventing synthetic identity fraud lies in its patchwork composition. A synthetic identity pulls together fake and legit info from multiple sources instead of targeting a single consumer victim, making it much more difficult to detect. With no defrauded person to tip off companies, accounts created via synthetic identity can remain active indefinitely like clandestine, money-sucking leeches only to vanish once the on-file credit card maxes out.

Again, there’s no real-life person to trace the account back to, which complicates the identification of synthetic identity fraud, much less the calculation of losses (assuming fraud is circled as the culprit). Unfortunately, differing interpretations of synthetic identity fraud among enterprises can often chalk cases up to credit-related issues, leaving credit lenders and related providers to carry the financial burden.

If need be, synthetic fraudsters can bypass defenses with more than a fake SSN and stolen email. Forget Frankenstein identities — the craftiest of synthetic fraudsters are combining facial features from multiple people with AI to create realistic “Frankenstein faces.” Yet another wire-crossing maneuver that throws traditional fraud prevention solutions off the scent.

The synthetic antiseptic

Old school fraud prevention tools rely on static data such as physical address and device fingerprinting to detect bad actors. This won’t cut it for synthetic identity fraud.

The only way to effectively root out stealthy synthetic fraudsters is to combine static data with live and historical real-time user activity data. By adding this extra layer of real-time intelligence —behavioral biometrics, time of day, location, etc. — there are too many holes for fraudsters to cover up or build an authentic digital “legend” and more than enough information to help companies spot a fraudulent identity.

This is precisely the extra punch Deduce provides. We pack more than 450 million anonymized US profiles and 1.4 billion daily user activities (logins, account creations, checkouts, etc.) from over 150,000 websites and apps into our real-time Identity Network, protecting organizations from financial losses and the other nightmarish side effects of synthetic identity fraud. For example, a solution that’s solely reliant on static data will fall victim to false positives and ultimately turn good customers away, while the Deduce approach is able to contextualize scenarios where a new device or other factor may not be consistent with identity fraud.

Fraudsters can fake a number of different attributes, but nothing they spoof can outsmart the collective intelligence and profile history of the Deduce Network. The breadth and diversity of our data (transactions, social media activity, etc.) is too gargantuan — and too expensive for the average fraudster to circumvent.

Tap into the Deduce Identity Network today and bolster your defense against synthetic identity fraud. Contact us here to get started.