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Synthetic Identity Fraud is Rising. GIACT’s Fighting Back.
Of all the fraud vectors plaguing the payments industry,
synthetic identity fraud is one of the most concerning. Unlike card-present
fraud, which is on the decline due to the widespread adoption of EMV
technology, synthetic fraud is on the rise. Worse yet, traditional fraud models
are ill-equipped to even identify it.
Also concerning is that children are often the victims of
this type of fraud. In fact, an estimated 40% of identified synthetic identities
were constructed using information stolen from children born after 2011,
according to a recent white paper from GIACT, a leading fraud prevention
company.
The paper went on to note that this fraud vector is being
driven by the prevalence of data breaches: In 2018, 446 million consumer
records were exposed in data breaches, a 126% increase from 2017. The rise of
synthetic identity fraud is costing the payments industry considerably.
For instance, the credit card industry alone lost $6 billion
due to this type of fraud in 2016, according to GIACT’s white paper, The
Hidden Costs of Synthetic Identity Fraud.
In light of such alarming statistics, and to learn more
about what synthetic data fraud is and how to stop it, PaymentsJournal sat down
with David Barnhardt, Chief Experience Officer at GIACT, and Tim Sloane, VP of
Payments Innovation at Mercator Advisory Group.
During the discussion, Barnhardt and Sloane defined what
synthetic identity fraud is, sketched out the contours of the issue, and
discussed how GIACT’s fraud products can enable companies to fight back.
Understanding
synthetic identity fraud
Synthetic identity fraud occurs when criminals combine real
and fake identity information to make a new, fake identity. By combining some
real elements with fake ones, the ensuing profile is harder to detect as being
fraudulent.
Sloane explained that criminals are turning towards this
type of fraud for two main reasons. First, with all the personal information
that has been compromised in data breaches, stealing someone’s personal
information has never been easier. Social security numbers, addresses, account
usernames, and passwords can be readily purchased on the dark web.
Second, EMV chip technology has made card-present fraud
increasingly harder to get away with. In response, fraudsters have turned to
cyber fraud as an easier and more lucrative alternative.
Synthetic identity fraud schemes usually come in two
flavors. The first one is when the criminal cashes out immediately. For
example, the fraudster may open a fake account and immediately purchase
something before abandoning the profile.
The second approach is more sophisticated, harder to
identify, and significantly more costly. The criminal will open a synthetic
account and then behave like a normal consumer. They’ll make purchases, make
payments, and work to build up their credit. Sloane noted that a common version
of this approach is called piggybacking, “which is taking other criminals and
adding them to the account to help others establish a solid credit line.”
Once the fraudster has the desired level of credit, they’ll
bust out, meaning they commit the fraud and abandon the account. About 50% of
synthetic identities utilize piggybacking, explained Sloane.
“Fraud operators are becoming increasingly more sophisticated in how they carry out synthetic identity frauds.”
David BarnhardtStatistics like that indicate how “fraud operators are
becoming increasingly more sophisticated in how they carry out synthetic
identity frauds,” said Barnhardt. He cited a Federal Reserve report, which
estimated that as many as 85% to 95% of synthetic identities were not flagged
as high risk by the existing fraud models.
This clearly indicates that traditional identity
verification solutions are simply not working, said Barnhardt.
“Anywhere you turn
regarding synthetic identity fraud, it wracks up costs.”
At its core, synthetic identity fraud is a vehicle through
which criminals can effectively steal goods, services, or money. As discussed
above, one common area where criminals use synthetic identities is to open
credit card accounts.
This approach is nothing new, as criminals have been using
false identities for years to get credit cards. What is new, however, is how
criminals are building credit.
“They’re making purchases and making payments, and they’re
building enough credibility and aging the account long enough to obtain higher
credit line increases,” Barnhardt explained. The higher the credit limit, the
bigger the payout when the criminals eventually orchestrate the bust out.
According to the Federal Reserve, the average charge-off
balance was more than $15,000 for each instance of synthetic identity fraud in
2016.
Banks and businesses aren’t the only parties getting hurt by
synthetic identity fraud. This type of fraud is also hurting consumers.
Consumers are often the ones having to clean up the mess because there “could
be some type of collection or some type of demand payment reported to their
credit,” explained Barnhardt.
In many instances, their social security number, or that of
their kid’s, has been compromised. This can make it hard for them to unlink
themselves from the fraudulent behavior.
“Anywhere you turn regarding synthetic identity fraud, it
wracks up costs,” said Barnhardt.
GIACT’s approach to
fighting back
Unlike traditional identification solutions that only assess
a handful of data points to verify an identity, GIACT’s approach is more
comprehensive.
“To detect today’s more sophisticated identity crimes, the employment of detailed traditional and nontraditional data elements is a must.”
David Barnhardt“We like to say that the devil is in the details,” said
Barnhardt. “To detect today’s more sophisticated identity crimes, the
employment of detailed traditional and nontraditional data elements is a must.”
GIACT’s gIDENTIFY solution triangulates across numerous
diverse data sources to ensure that each data point is both accurate and
timely. For example, gIDENTIFY can determine if the social security number
being used for a specific account belongs to somebody else. Similarly, the
product can verify other important aspects of an account’s identity, such as
address, date of birth, email, and phone number.
Another important feature that GIACT offers is the ability
to verify if a person is alive or dead. It’s very common for criminals to make
an account using the information of a deceased individual.
By combing and verifying all these data points, GIACT can create
the digital DNA of a consumer, so to speak. This makes it hard for hackers to
fake a similar profile because they will struggle to fake the profile down to
the nontraditional elements that GIACT checks.
Sloane noted that an approach such as GIACT’s is essential
to stopping fraud. “It really comes down to having the ability to analyze
verifiable and accurate data that’s available pretty much in real time,” he
said. “And the broader and more accurate that data is to analyze, the better
off the analytics can be in detecting the fraud.”
With its robust analytic capabilities, the gIDENTIFY product
from GIACT makes it possible to keep up with the ever-changing face of cyber
fraud.
The post Synthetic Identity Fraud is Rising. GIACT’s Fighting Back. appeared first on PaymentsJournal.
View all episodes
By The PaymentsJournal PodcastOf all the fraud vectors plaguing the payments industry,
synthetic identity fraud is one of the most concerning. Unlike card-present
fraud, which is on the decline due to the widespread adoption of EMV
technology, synthetic fraud is on the rise. Worse yet, traditional fraud models
are ill-equipped to even identify it.
Also concerning is that children are often the victims of
this type of fraud. In fact, an estimated 40% of identified synthetic identities
were constructed using information stolen from children born after 2011,
according to a recent white paper from GIACT, a leading fraud prevention
company.
The paper went on to note that this fraud vector is being
driven by the prevalence of data breaches: In 2018, 446 million consumer
records were exposed in data breaches, a 126% increase from 2017. The rise of
synthetic identity fraud is costing the payments industry considerably.
For instance, the credit card industry alone lost $6 billion
due to this type of fraud in 2016, according to GIACT’s white paper, The
Hidden Costs of Synthetic Identity Fraud.
In light of such alarming statistics, and to learn more
about what synthetic data fraud is and how to stop it, PaymentsJournal sat down
with David Barnhardt, Chief Experience Officer at GIACT, and Tim Sloane, VP of
Payments Innovation at Mercator Advisory Group.
During the discussion, Barnhardt and Sloane defined what
synthetic identity fraud is, sketched out the contours of the issue, and
discussed how GIACT’s fraud products can enable companies to fight back.
Understanding
synthetic identity fraud
Synthetic identity fraud occurs when criminals combine real
and fake identity information to make a new, fake identity. By combining some
real elements with fake ones, the ensuing profile is harder to detect as being
fraudulent.
Sloane explained that criminals are turning towards this
type of fraud for two main reasons. First, with all the personal information
that has been compromised in data breaches, stealing someone’s personal
information has never been easier. Social security numbers, addresses, account
usernames, and passwords can be readily purchased on the dark web.
Second, EMV chip technology has made card-present fraud
increasingly harder to get away with. In response, fraudsters have turned to
cyber fraud as an easier and more lucrative alternative.
Synthetic identity fraud schemes usually come in two
flavors. The first one is when the criminal cashes out immediately. For
example, the fraudster may open a fake account and immediately purchase
something before abandoning the profile.
The second approach is more sophisticated, harder to
identify, and significantly more costly. The criminal will open a synthetic
account and then behave like a normal consumer. They’ll make purchases, make
payments, and work to build up their credit. Sloane noted that a common version
of this approach is called piggybacking, “which is taking other criminals and
adding them to the account to help others establish a solid credit line.”
Once the fraudster has the desired level of credit, they’ll
bust out, meaning they commit the fraud and abandon the account. About 50% of
synthetic identities utilize piggybacking, explained Sloane.
“Fraud operators are becoming increasingly more sophisticated in how they carry out synthetic identity frauds.”
David BarnhardtStatistics like that indicate how “fraud operators are
becoming increasingly more sophisticated in how they carry out synthetic
identity frauds,” said Barnhardt. He cited a Federal Reserve report, which
estimated that as many as 85% to 95% of synthetic identities were not flagged
as high risk by the existing fraud models.
This clearly indicates that traditional identity
verification solutions are simply not working, said Barnhardt.
“Anywhere you turn
regarding synthetic identity fraud, it wracks up costs.”
At its core, synthetic identity fraud is a vehicle through
which criminals can effectively steal goods, services, or money. As discussed
above, one common area where criminals use synthetic identities is to open
credit card accounts.
This approach is nothing new, as criminals have been using
false identities for years to get credit cards. What is new, however, is how
criminals are building credit.
“They’re making purchases and making payments, and they’re
building enough credibility and aging the account long enough to obtain higher
credit line increases,” Barnhardt explained. The higher the credit limit, the
bigger the payout when the criminals eventually orchestrate the bust out.
According to the Federal Reserve, the average charge-off
balance was more than $15,000 for each instance of synthetic identity fraud in
2016.
Banks and businesses aren’t the only parties getting hurt by
synthetic identity fraud. This type of fraud is also hurting consumers.
Consumers are often the ones having to clean up the mess because there “could
be some type of collection or some type of demand payment reported to their
credit,” explained Barnhardt.
In many instances, their social security number, or that of
their kid’s, has been compromised. This can make it hard for them to unlink
themselves from the fraudulent behavior.
“Anywhere you turn regarding synthetic identity fraud, it
wracks up costs,” said Barnhardt.
GIACT’s approach to
fighting back
Unlike traditional identification solutions that only assess
a handful of data points to verify an identity, GIACT’s approach is more
comprehensive.
“To detect today’s more sophisticated identity crimes, the employment of detailed traditional and nontraditional data elements is a must.”
David Barnhardt“We like to say that the devil is in the details,” said
Barnhardt. “To detect today’s more sophisticated identity crimes, the
employment of detailed traditional and nontraditional data elements is a must.”
GIACT’s gIDENTIFY solution triangulates across numerous
diverse data sources to ensure that each data point is both accurate and
timely. For example, gIDENTIFY can determine if the social security number
being used for a specific account belongs to somebody else. Similarly, the
product can verify other important aspects of an account’s identity, such as
address, date of birth, email, and phone number.
Another important feature that GIACT offers is the ability
to verify if a person is alive or dead. It’s very common for criminals to make
an account using the information of a deceased individual.
By combing and verifying all these data points, GIACT can create
the digital DNA of a consumer, so to speak. This makes it hard for hackers to
fake a similar profile because they will struggle to fake the profile down to
the nontraditional elements that GIACT checks.
Sloane noted that an approach such as GIACT’s is essential
to stopping fraud. “It really comes down to having the ability to analyze
verifiable and accurate data that’s available pretty much in real time,” he
said. “And the broader and more accurate that data is to analyze, the better
off the analytics can be in detecting the fraud.”
With its robust analytic capabilities, the gIDENTIFY product
from GIACT makes it possible to keep up with the ever-changing face of cyber
fraud.
The post Synthetic Identity Fraud is Rising. GIACT’s Fighting Back. appeared first on PaymentsJournal.