Written By ESR News Blog Editor Thomas Ahearn
“Synthetic identity theft” – where fraudsters create new identities by combining real and fabricated personal data – is the fastest growing type of financial crime in the United States that is difficult to detect and often unreported, according to a white paper from the U.S. Federal Reserve.
“Synthetic Identity Fraud in the U.S. Payment System: A Review of Causes and Contributing Factors” found synthetic identity thief was more prevalent in the U.S. than other countries since identification in the U.S. relies heavily on static personally identifiable information (PII) such as Social Security numbers (SSNs).
The growing trend of well publicized data breaches in the U.S. has accelerated the spread of synthetic identity theft as the volume of PII data exposed in these breaches increased by 126 percent with more than 446 million records exposed between 2017 and 2018. The white paper also revealed:
- 20 percent of credit losses were attributed to synthetic identity theft in 2016.
- Synthetic identity theft cost U.S. lenders $6 billion in 2016.
- 85 percent to 95 percent of applicants identified as potential synthetic identities are not flagged by traditional fraud models.
- An average $15,000 charge-off balance per instance of synthetic identity theft in 2016.
Synthetic identity theft “is often unreported, since victims are typically individuals – such as children, the elderly or homeless – who are less likely to access their credit information and uncover the fraud,” the white paper states, adding that one million children were victims of identity fraud in 2017.
Synthetic identity theft occurs when a fraudster creates an identity using stolen or fabricated PII, applies for credit using the synthetic identity, repeatedly applies for credit until approved, accelerates a positive history to secure extensions of credit, then “busts out” by maxing out the credit line and vanishing.
The fact that data breach concerns have led to an increased focus on information security with background screening firms was chosen by global background check provider Employment Screening Resources® (ESR) as the first trend on the firm’s list of “ESR Top Ten Background Check Trends” for 2019.
Employment Screening Resources® (ESR) – which is headquartered in Northern California – undergoes a SOC 2 Type II audit annually to protect the privacy, security, and confidentiality of personal data used for background checks against identity theft. To learn more, visit www.esrcheck.com/Why-ESR/SOC-2/.
NOTE: Employment Screening Resources® (ESR) does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.
© 2019 Employment Screening Resources® (ESR) – Making copies or using of any part of the ESR News Blog or ESR website for any purpose other than your own personal use is prohibited unless written authorization is first obtained from ESR.