Synthetic Identity Fraud – The Next Generation of Cybercrime

What is Synthetic Identity Fraud?

Unlike traditional identity theft, where a criminal steals an existing person’s full identity, synthetic identity fraud involves combining real personal data (such as a Social Security Number) with fabricated information (like a fake name or address) to create a brand-new, seemingly legitimate identity. These “synthetic identities” can pass credit checks, open accounts, and interact with businesses as if they were real individuals.

Why It Matters Across Industries

• Financial Services: Fraudsters use synthetic identities to obtain loans, credit cards, or mortgages, often defaulting with no way to trace the “borrower.”
• Healthcare: False identities can be used to obtain medical services, leading to billing fraud and inaccurate patient records.
• Employment and HR: Criminals may apply for jobs with synthetic identities, gaining insider access to sensitive data or systems.
• Retail and E-Commerce: Synthetic accounts enable fraudulent purchases and account takeovers.

Why Synthetic Identity Fraud is Growing

1. Data Breaches Provide Raw Material: Massive breaches over the past decade have exposed millions of Social Security Numbers and other identifiers.
2. Gaps in Verification: Many organizations still rely heavily on static identifiers (SSN, date of birth) that can be pieced together into a synthetic profile.
3. Long Game Strategy: Fraudsters often nurture synthetic identities over months or years, building credit history before committing large-scale fraud.

How to Protect Your Organization

1. Enhance Identity Verification
   Go beyond SSN and date of birth. Use multi-factor checks, knowledge-based questions, and device/behavioral analytics.
2. Monitor for Anomalies
   Watch for suspicious activity, such as multiple accounts tied to the same SSN, mismatched personal details, or “thin file” credit profiles that grow unusually fast.
3. Collaborate with Industry Partners
   Share fraud intelligence with banks, healthcare providers, and government agencies. Early detection often relies on patterns across organizations.
4. Educate Employees and Customers
   Train staff to recognize red flags in new account creation. Encourage customers to monitor credit reports and use fraud alerts when needed.

Final Thoughts

Synthetic identity fraud is one of the fastest-growing financial crimes in 2025, affecting sectors well beyond banking. Organizations must adapt their identity verification processes and fraud detection strategies to stay ahead of criminals who exploit the gaps between real and fake. By combining strong controls, monitoring, and collaboration, businesses can reduce exposure to this costly and evolving threat.