How to Detect Synthetic Identity Fraud

detect synthetic identity fraud

To stop account creation fraud, a business should use comprehensive risk tools that combine automated ID verification with robust data analytics. This way, the system can sift through large volumes of data and identify inconsistencies that are indicative of fraudulent activity. It is also important to have strong Know Your Customer (KYC) and KYB protocols in place, and to regularly review and update those policies to ensure that they remain effective against the most sophisticated threats.

Fraudsters create synthetic identities by using real information and modifying or adding fake details, such as name, address, or date of birth. These stolen credentials are often used to bypass standard KYC protocols or for fraudulent transactions and then discarded, but they can be reused in a process called “pollination” to add legitimacy to other fake identities.

Unmasking Synthetic Identity Fraud: Strategies for Detection and Prevention

This scam can be very challenging to spot, as it takes months or even years for the criminals to build a credit profile. In many cases, they will rely on the same tactics as a legitimate user – submitting applications for credit card accounts and loans, making small purchases and paying their bill on time – until they are ready to cash out.

A combination of technology, cross-industry cooperation, and predictive analytics is key to combating this type of fraud. Robust identity proofing systems that integrate multiple data sources, including government issued ID authentication, public records analysis, and proprietary database verification will help weed out false and fraudulent identity.