Julie Conroy, a research director at Aite Group, a financial services research firm, specializes in fraud and money-laundering issues.
What is synthetic ID theft? Criminals fabricate new identities to open fraudulent lines of credit, typically by combining a stolen Social Security number with fictional information. Thieves often gain access to people’s SSNs and other personal information through data breaches, such as the recent breaches at Equifax and Anthem. They’ll then use those fake identities to apply for loans, credit cards and bank accounts, building their credibility (and by extension their creditworthiness) with financial institutions.
Why is it becoming more prevalent? A perfect storm has been forming over the past few years. We’ve been in a very steady credit recovery, and some of the old barriers to getting credit have eased as creditors try to find more people to give credit to. We’ve also seen almost 10 billion records breached since 2013. That gives the bad guys a lot of fodder to use when creating these fake identities. It also didn’t help that in 2011, the Social Security Administration started randomizing the issuance of SSNs, which eliminated some of the safeguards regulators relied on to ensure that people exist.
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Is it more difficult to spot synthetic ID theft than other types? Yes, because synthetic ID fraud involves an amalgam of people’s identities and fictional information. Fortunately, the credit bureaus have developed analytical scores that help them determine whether an SSN and identity belong to the right person. A new federal law should also make it easier for creditors to verify ownership of a Social Security number with the Social Security Administration, which should help them verify that credit applicants actually exist.
How can consumers protect themselves and their children from this type of ID theft? Check your credit reports from the three credit bureaus regularly. Don’t give out your SSN unless it’s absolutely necessary, especially online. Children’s SSNs are attractive for criminals because children are not going to be using their SSNs actively. Parents should periodically check the credit bureaus to see if there is activity associated with their child’s SSN, although this can be time-consuming. Start by contacting the bureaus and asking them to run a manual search of your child’s file.
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