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You’ve already heard about identity theft, but there’s a new crime in town. This course can help financial institutions know more about synthetic identities, how they’re used for crime, and how to avoid them.

A client has not paid back their remaining balances on time. However, upon checking, you realize that the client does not exist! You may be facing a case of synthetic identity fraud. This lesson will help you know more about synthetic identity fraud and its difference from traditional identity theft.

By the end of this lesson…
We’ll know more about what synthetic identity fraud is.


In a country, one of the government’s primary roles is to provide public services for its citizens.


One of these services includes providing financial assistance and benefits to retired, disabled, or sick individuals.


In order to enforce tracking for these benefits, the government provides each citizen with a unique social security number or SSN.


Because this number is unique, it has become a number required when applying for other services and privileges such as driver's licenses, bank accounts, and loans.


Essentially, this SSN becomes the very identity of a person.


But what happens if this SSN falls into the hands of the wrong people?


What can happen if fraudsters catch a hold of real social security numbers?


Take a guess…


Synthetic Identity Fraud

How do fraudsters commit synthetic identity fraud in the first place? How do they make fake identities? This lesson will help you know more about how synthetic identity fraud takes place.

By the end of this lesson…
We will know more about how synthetic identity fraud is done by fraudsters worldwide.


How does synthetic identity fraud happen?


Social Security Number Theft
The first step fraudsters do when they commit synthetic identity fraud is to steal real and existing SSNs.


How do you think fraudsters gain access to real social security numbers?


Creation of Fake Identities
A real SSN is combined with fake personal information such as name, address, and birthday to build a synthetic identity.


Some fraudsters even go as far as creating fake social media accounts for these identities!


This synthetic identity is used to apply for various financial services.


Possible cognitive problems that come with age and the elderly lifestyle may prevent the elderly from regularly making use of financial services. This makes Mary the most susceptible to synthetic identity fraud.


Who do you think is most susceptible to synthetic identity fraud?


Once the fraudster gains access to credit or loans, they initially use them responsibly to gain a good reputation.


Fraudsters use the account responsibly for months, and some even for years. The higher their account’s credibility, the more money they can use for their personal gains.


After gaining access to the money through credit or loan, they disappear without paying these financial institutions the money they owe.


This type of fraud is called a bust-out fraud


In some cases, several fraudsters move on to commit traditional identity theft. They use real information to file a fraud report, have their accounts restored, and proceed to conduct fraud again.


The Synthetic Identity Fraud Process

What can happen after a case of synthetic identity fraud? This lesson explores the consequences of synthetic identity fraud on regular citizens and financial institutions.

Consequences of Synthetic Identity Fraud


By the end of this lesson…
We will know more about what happens to regular citizens and financial institutions after facing a case of synthetic identity fraud.


Imagine that you are a client of a financial institution.


You realized that your SSN was used for synthetic identity fraud.


You only found out when your credit application was denied because of existing records of fraud.


An acquaintance quickly approaches you and offers to help you by providing you with a credit profile number that you can use to apply for a new credit application.


They claim that they receive these numbers from the government, and their organization helps those with bad credit scores to apply for new accounts.


You only need to pay over $2000 to seal the deal.


Citizens with stolen security numbers
An existing record of irresponsible or even criminal use of their security numbers makes it difficult for citizens with stolen security numbers to gain access to financial services.


For example, an elderly applying for retirement may find out that some of their benefits are revoked because of previous fraudulent activity.


Scam victims
On top of losing their money to the scam, victims who bought new credit profile numbers may be charged with synthetic identity theft that they unknowingly participated in.


Aside from regular citizens, financial institutions may be the biggest victims of synthetic identity fraud. The money lost during a fraud is considered a financial institution’s loss.


In 2017, it was reported by US card issuers that more than $800 million was lost because of synthetic identity fraud.


If the fraud is done perfectly, financial institutions might not even know they were victims of fraud, and instead, file the money as their loss.


More than money, financial institutions may also face compliance risks and pay fees to government institutions for failure to detect fraud.


Clients may also find it hard to trust financial institutions that have experienced fraud, choosing instead to conduct transactions with other, safer institutions.


Every piece of evidence should be submitted to the institution's security department.
It is also important for the financial institutions to be transparent with their clients regarding the information submitted and updates with the investigation.


What kind of evidence can you gather and submit?


Consequences of Synthetic Identity Fraud

How do we avoid dealing with the consequences of a crime that seems so hard to detect? The answer is in prevention. This lesson shows you how you can prevent synthetic identity fraud in financial services.

By the end of this lesson…
We will know more about how we can protect ourselves from synthetic identity fraud.


In the previous lesson,
We’ve established how difficult it is to detect synthetic identity fraud…
…that sometimes financial institutions don’t recognize they faced a case of fraud at all.
What makes synthetic identity fraud difficult to detect?


Let's recall!


What makes synthetic identity fraud difficult to detect?


Despite efforts to detect synthetic identity fraud, the nature of the crime itself makes it difficult to catch.


There is no direct victim to report the fraud.
Clients usually have a reason to track strange activities tied to their name and address, but rarely to their SSN. This makes it more difficult to detect and report synthetic identity fraud.


The client does not exist.
It is more difficult for financial institutions to come after the client because they simply do not exist.


There is no quick and easy avenue to cross-check social security numbers
Because SSNs are sensitive information, financial institutions must file a report to verify the number to the government—a difficult task considering the number of daily clients and transactions.


How can financial institutions help their clients prevent synthetic identity fraud?


Encourage clients to update and monitor their accounts
Clients should understand the importance of regularly updating and monitoring their accounts to increase security.


Make sure that clients are informed regarding protocols for fraud
Knowing what to do decreases the chances of further damage. This also increases trust between the client and the financial institution.


Provide regular updates on how clients can protect themselves
Fraudsters also know the game. Keeping clients updated with security tips and fraudulent actions can keep their accounts protected.


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Dealing with Synthetic Identity Fraud

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