New account fraud attacks increased 109 percent in the US according to Javelin Strategy’s most recent identity fraud study. Meanwhile, Fraugster reported synthetic identity fraud losses have more than doubled to €19.4 billion for eCommerce merchants and financial institutions.
Sophisticated synthetic identity fraud is of particular concern. Credit bureau Experian found a median loss amount of €6,000 for synthetic identity fraud in general, but a study from FiVerity found that sophisticated synthetic identities are able to steal over $80,000 across multiple accounts. In these cases, fraudsters will take up to 18 months to establish a credit file and trust for their synthetic identity, often achieving a higher than average credit score. Fraudsters have also been able to increase their synthetic identity’s credit score by taking eover legitimate consumer accounts to add their synthetic identities as authorized users, something known as credit piggybacking.
Fraudsters don’t just trick the credit rating agencies, but also the organizations screening their synthetic identities at account opening. They go to great lengths to build social media profiles, underscoring the importance of identity scoring based on age and legitimacy of email or social profiles, not just their existence.
The fraudsters behind these attacks are calculated and patient, often operating a bust out attack strategy where they build rapport and increase credit limits with small, regular purchases they pay on time. The US Federal Reserve found that 70 percent of suspected credit accounts associated with synthetic identities displayed good behavior before defaulting. Another study found that these sophisticated synthetic identities with fabricated rapport open five lines of credit on average, typically defaulting on all around the same time.
Many challenges, techniques and considerations for targeting synthetic identities and other forms of fraud at account opening are discussed in the latest white paper from The Fraud Practice: Is This Really a New User? Detecting Fraud and Abuse at Account Opening.
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