Enformion Logo (light version).
Fraud & Risk Management

Synthetic Fraud — Everything You Need to Know


You automatically associate the word ‘synthetic’ with something made to imitate a natural product. Therefore, synthetic fraud is a unique and intricate form of identity fraud where what is being imitated is a human being. The fraudster steals a valid Social Security Number (SSN) and fakes all other related information — including the name, address, phone number, and date of birth.

It is among the hardest forms of fraud to track because the fraudsters take years establishing themselves and building good credit. The fake profile is live for an extended period before they make fraudulent charges. Finally, the criminals abandon the fake identity and move on to the next — commonly referred to as ‘busting out’.

Why Criminals Engage in Synthetic Fraud

Although synthetic fraud is mainly for stealing identities and making purchases, it can be used for so much more. Here are a few reasons why someone might need to conduct synthetic fraud:

  • Steal funds and escape government detection.
  • Facilitate human or drug trafficking.
  • Access real SSNs to live and work in the U.S while receiving benefits such as healthcare.
  • Escape persecution after getting into trouble
  • Fund luxuries lifestyles with thousands of fake credit cards.

Synthetic Fraud in the U.S

The Federal Reserve Reports that synthetic fraud in the U.S. is among the most rapidly growing types of financial crime. In most instances, you will come across the sale of personal information on the black market. Hundreds of sellers specialize in the sale of information like social security numbers on the dark web.

These digital thieves often upload the information and sell it to the highest bidders. All personal information is collected from company data breaches. Then the criminals use them to create a new but fake identity. Equally, the payments are massive once they cash in after years of building good credit.

Usually, these fraudsters understand that the first credit application will warrant a rejection. By doing so, the banking institutions create a relevant credit file for their identities. The fraudsters will, therefore, have a higher probability of success by applying to different financial institutions.

How do Fraudsters Create Good Credit with Synthetic Fraud?

Fraudsters make small purchases using their fake identities to establish good credit. Because they quickly pay them off, financial institutions gradually increase their credit. Equally, some fraudsters piggyback on persons with good standing to further grow their limits. The entire process will take months or years, thus making it almost impossible to detect.

Financial institutions view fake identities as real people with a salary, job, and house. Some fraudsters go a step further by creating social media pages and using valid P.O box addresses. It is a slow and gradual process that takes a lot of patience to actualize.

Finally, these criminals max out all the credit lines and completely abandon the fake identities. Then they start the entire process over again using a new fabricated identity. However, some can manage numerous fake identities simultaneously with real SSNs.

Who is Most Vulnerable to Synthetic Fraud?

The elderly, homeless, and children are the most susceptible groups to synthetic fraud in the U.S. They are a demographic that doesn’t use lines of credit often, thus making it easier for the criminals. However, children are the most vulnerable due to the randomization of the nine-digit SSN codes in 2011 by the Social Security Administration.

Fraudsters will either get lucky by using randomization software or purchasing unissued SSNs on the dark web. When the unlucky children come of age and need cars or student loans, they realize they have delinquent credit histories. Dealing with these issues before they can start building credit becomes a daunting task.

How to Protect Yourself from Synthetic Fraud

Although online banking has made synthetic fraud easy, specific measures can help you mitigate the risk. Among the top solutions include leveraging fraud mitigation software — such as Enformion. You get access to advanced analytic tools and a vast database of public information, which help you detect fraud easily.

Start Your Free Trial Today

Having robust fraud detection tools will help you establish client trust and protect profits. With Enformion’s suite of fraud prevention solutions, you can discreetly and quickly detect and stop fraud risk. Start your free trial today to safeguard your bottom line.

A view of a city skyline in the evening where Enformion empowers informed decisions

Ready To Get Started?

Contact us today to request a demo or to get in touch with one of our Data Solution Experts

Talk With Us