Synthetic identity fraud: The bad guys are now creating identities instead of stealing them

SALT LAKE CITY — Identity theft remains one of the top financial crimes in the world, but now, crooks have figured out a new fraud by combining both real and fake personal information to create a new identity.

You would think that there would be safeguards in place to keep crooks from making up a person. After all, we must prove we are a real person from time to time with things like our Social Security and driver’s license numbers. But bad guys have figured out how to create new identities and they are getting some pretty big paydays for their work.

You are likely familiar with identity theft – a bad guy pretends to be you for various nefarious reasons. The process can be a time-consuming pain for the crooks: They have to stalk you, hack you, or trick you – to say nothing of the fact that we are getting more adept at spotting the frauds when they show up in our inboxes or online.

Now the crooks are adapting by moving past stealing someone’s identity to creating their own.

“You make up a fake person, trick the credit bureaus and financial institutions into believing that this fake person is real,” said Naftali Harris, cofounder and CEO of cybersecurity firm SentiLink. “And then use that fake person to steal money from financial institutions, launder money, or commit other kinds of financial crimes.”

It is called “Synthetic Identity Fraud,” and SentiLink describes it as the fastest-growing type of identity fraud in the U.S., accounting for nearly 85% of all ID fraud cases in the country.

“For anyone watching at home, don’t go and actually do this,” warned Harris. “This is a felony, but it’s surprisingly easy to do.”

We will not get into the nitty-gritty of it here but suffice it to say it is easy and it is lucrative because the crooks generally use these fake personas to target big banks with much deeper pockets than you or me.

Before you shrug your shoulders and say, “sounds like a big bank problem,” Harris said make no mistake about who is actually covering their losses from synthetic identity fraud.

“When banks suffer losses,” said Harris, “they increase rates and fees on their entire customer base to make up for it.”

Synthetic fraud is particularly bad for folks who do not have established credit — young people and immigrants.

Think about it: banks become skeptical about whether a person applying for a line of credit is a real person and so they may deny money to a real person who doesn’t have much credit history.