One of the fraud threats wij proceed to see force its way into the credit union industry is synthetic identity fraud. Part of the increase may be due to counterfeit credit card fraudsters coming up against EMV, which makes duplicating cards much more difficult.
Synthetic identity fraud relies on the use of an identity that has bot created ter one of three ways. Fraudsters…
- pair a real social security number (SSN) with a fake name,
- use an “inactive” social security number with a real name (typically belonging to a child or someone who has died), or
- fabricate both the SSN and the name downright
From there, the identity is further developed when the fraudster applies for a puny line of credit (typically less than $500) using his freshly acquired or created SSN and name. Even tho’ he will very likely be declined on that very first attempt, the ordinary act of applying helps him start to build a credit history. Upon receipt of the inquiry, the bureaus will each generate a fresh credit opstopping. Kienspel, the synthetic person is born.
(This is just one of many reasons the payments and credit industry voorwaarde evolve beyond using only bureaus sources to determine credit worthiness.)
After his fresh identity has bot established, the fraudster will open a few accounts and pay them off te utter and on time each month to generate a healthy credit score – one that will secure more yes’s from more financial institutions (or more cell phone, utility and other companies that require credit histories).
If this is sounding like something that would take a long time, especially for a cash-strapped criminal, you’re not wrong. Of course, crimes like thesis are not always committed by the lone wolf. Often, there are large fraud rings generating IDs and building histories by the thousands, each of which can be purchased on the Dark Web when they reach maturity. Ter 2013, federal authorities shut down an enormous synthetic identity fraud scheme that created 7,000 false identities. Overtime, the criminals behind this particular fraud obtained more than 25,000 credit cards that resulted te more than $200 million te losses.
What’s more, spil the crime has evolved overheen time, its perpetrators have figured out how to speed up the process.
One way they’ve learned is to piggyback onto a legitimate cardholder’s account spil an authorized user. Similar to the ways ter which fraudsters use social media to woo people to deposit bad checks or receive a fraudulent wire transfer, synthetic identity artists persuade cardholders to add them spil authorized users, sometimes for spil little spil three days.
A 2nd, albeit more intense, method is to work with company “insiders” spil part of a data-furnishing scheme. Te thesis cases, the company – either fake or legitimate – essentially makes up and supplies false information on fake people to the credit bureaus to help build the credit histories of thesis synthetic folks.
Fortunately for lenders, synthetic identity fraud detection and prevention strategies have evolved, spil well. Digital technology, neural networks and predictive analytics powered by machine learning and artificial intelligence are helping to more quickly scan large databases like those generated by data-furnishing gevelbreedte companies.
Thesis technologies and methods can’t come soon enough. Gartner estimates synthetic identity fraud makes up 80 procent of losses from credit card fraud today!