Like many aspects of our day-to-day lives, the expansion of technology has both enhanced and complicated the ways in which we operate. As more and more of our information lives online, identity theft — once more likely to occur because of a stolen wallet — has also assumed a digital appearance: synthetic identity theft.

What is Synthetic Identity Fraud?

Synthetic identity fraud is defined as the use of a combination of pieces of personally identifiable information (PII) to fabricate a person or entity in order to commit a dishonest act for personal or financial gain.

This form of identity theft has allowed bad actors to combine a stolen Social Security Number (SSN) and other false information — such as a fake name, address, date of birth, or phone number — to create a counterfeit identity to steal funds, escape prosecution, or any other number of criminal and fraudulent activities.

An Alarming Trend

In 2020, the Federal Bureau of Investigation (FBI) named synthetic identity theft as the fastest growing financial crime in the United States. Fraud targets are often those who do not typically use credit or are less likely to monitor their credit activity — including children, homeless individuals, and the elderly. These victims may find themselves blindsided as fraudsters create a new identity, apply for credit, and after years of building good credit by making payments for a time, abandon the account without paying anything back to the financial institution.

While this type of fraud is already difficult to detect due to its elusive or “normal” nature, many bad actors go to incredible lengths to appear as such, states Forbes. In addition to establishing good credit by making payments quickly and on time, some create digital profiles or use P.O. boxes for addresses.

Not only has technology and access to the dark web made PII more accessible to fraudsters, in 2011 the Social Security Administration (SSA) began randomizing the nine-digit social security codes rather than assigning them to individuals based on their geographical location and group number. No longer do social security numbers raise red flags when enrolling or opening accounts “out of state.”

As online banking grows in popularity, so too do concerns for synthetic identity theft. Between prevalent phishing schemes and heightened risks for data breaches — accessing PII and conducting synthetic identity fraud has become much easier than in years prior.

How to be Proactive Against Bad Actors

Inconsistent categorization and reporting make it difficult to identify and mitigate this type of fraud — as far as banks and credit bureaus can tell, these individuals are just like anyone else. . . until they “bust out” or abandon the maxed-out account with no intention of repayment.

After abandoning the false identity’s account, a fragmented file is created. This additional file not only becomes associated with the original SSN but also holds the additional credit report information and other fabricated PII. Unfortunately, this information could negatively impact the credit rating of the real individual.

While victims of identity theft typically are not liable for fraudulent purchases or accounts, as long as they can prove they are the real SSN holder and not the thief, financial institutions are left to absorb the cost and oftentimes it is challenging to dig out all of the impacts to ones credit.  So it’s important to stay vigilant with credit:

• Do frequent credit report checks or freeze unused credit at credit bureaus throughout the U.S. as to deter criminals or catch them early.
• Protect your child’s profile. Parents can protect their children from fraudsters by requesting their child be added to their credit profile. By adding a child to an adult’s credit profile, not only does the child’s own credit profile become established in his or her name and SSN, but the child is also able to begin building their credit.

How to Protect your Existing Accounts

Unfortunately, synthetic identity fraud isn’t the only fraud out there. It’s also important to monitor your existing accounts for fraud and to act quickly if you see something suspicious.

• Check your debit and credit card transactions regularly.
• Set up alerts in your mobile or online banking that would flag unique activity.
• Install the Brella app on your phone so you can freeze and unfreeze your cards at a moment’s notice. You can also set up alerts for suspicious or high-risk transactions.

If you have any questions about possible fraud with your account, please contact us immediately. If it’s after bank hours, remember you can cancel your debit or credit card by contacting:

• Debit: call the Wolf Line at 833-423-0341, option #4
• Credit: call Elan at 1-800-558-3424

(Elan is a national agency that provides credit card services.)

*Article courtesy of Wisconsin Bankers Association.