What is Synthetic Identity Theft
and How to Prevent It?
by Mike Murphy
by Mike Murphy
How serious can the consequences of synthetic identity theft be to you and your loved ones?
Imagine your kid turns 18 years of age and gets a letter from a credit card company. The letter says your child has $50,000 of debt that must be paid back or legal action will be taken.
You’re thinking this must be some kind of mistake. You’re kid just turned 18 and has never even had a credit card to his name.
After some investigating, you realize someone else has been using your child’s social security number for years without you knowing.
And the thief has combined that social security number with information from other unsuspecting victims to create an entirely new identity.
With this new fake identity, the crook is then able to apply for and use credit cards, store cards, and bank loans. They can also file fraudulent tax returns or unemployment benefits with the phony ID.
Synthetic identity theft is one of the fastest growing frauds in America and there’s no sign it’s slowing down anytime soon.
This guide explains what this newer form of ID theft is, as well as how you can go about protecting yourself and your family against it.
This type of ID theft is unlike the identity theft that you may have heard of before. Synthetic identity fraud involves creating a new, false identity based on a combination of real and fake information.
Often, the starting point for synthetic identity theft is the stealing of a child’s social security number.
The criminal will then build a fake identity around that one piece of information.
Because it is a child’s identity that has been stolen, the theft may not become apparent until they become an adult and apply for credit.
This is what makes this kind of theft so dangerous and devastating to a person’s financial future.
But kids are not the only targets for the perpetrators of synthetic identity fraud. An adult’s social security may be used for this type of crime, too. So everyone needs to take precautions to protect themselves from this type of fraud.
Fake identities are a valuable commodity in the criminal world, and they can be put to many uses.
Although the identity that the criminals create is fake, the social security number they use is real in many cases.
The victims of synthetic identity fraud do not usually suffer direct financial loss. However, the use of people’s genuine social security numbers may damage the victim’s credit rating or falsely link the innocent party to criminal activity.
Banks and financial institutions suffer most of the losses.
Here are the primary reasons why criminals create false identities:
Obtaining Funds Fraudulently
A synthetic identity can take time to assemble. But once all the pieces are in place, a fraudster can use the fake name to apply for loans and credit cards.
Sometimes, the criminal will use the fraudulently obtained accounts to build a good credit history. And then, the fraudster will take out larger loans, take the cash, and disappear. Fake identities can also be used to make fraudulent benefit claims.
False identities are often sold to people entering the U.S. illegally. The synthetic identities created by criminals are sold to people applying under false identities to obtain residency or work permits.
Credit Repair Fraud
Synthetic identities can also be used to repair people’s credit scores.
The criminals combine a real person’s identity records with a fake identity with a perfect credit history.
The result of this type of credit repair fraud is that the person who has paid the criminals a fee for this fraudulent service inherits the fake good credit rating.
Other Criminal Activity
There are many other potential uses for false identities. If a criminal has a convincing fake identity, they can rent motor vehicles or phones that cannot be linked to them. Synthetic identities can also be used to open bank accounts for money laundering purposes.
Creating a synthetic identity no longer takes as much time as it used to. In the past, criminals would spend years developing and nurturing fake identities.
But now, because there is so much information available to criminals, creating a bogus identity no longer takes years.
Here’s how the crooks do it…
The process begins with the thief obtaining the social security number of a person with no credit history, which is why children’s social security numbers are often used.
The thief will also have a false name and date of birth for the new fictitious person. And they also use a real physical address where they will claim the fake person lives.
The identity thief will then begin the process of building the fake individual’s credit history. The first stage of this process is to apply for a credit card with the new false identity.
That first credit application will be denied because of the lack of credit history. However, the rejection creates the first record of the fake identity in the credit bureaus’ databases.
The criminal will then work further on creating a false history of the individual. They may make the person an authorized party on an existing genuine account.
They might sign up for low-value credit agreements like phone contracts. Then, the fraudster will gradually apply for more and more credit, all the time keeping the accounts in good standing.
Once the synthetic identity has a good enough credit rating, the criminal will take out large loans and max out all the credit cards.
After that, the crook disappears, taking their fraudulently obtained money with them.
Or the identity thief might sell the false identity on to other criminals who will use the identity for their own nefarious purposes.
Recently, a man from Georgia, Kevin Lyles, was sentenced to three years and 10 months in prison for committing identity theft that involved using synthetic identities.
For three years, he created fake identities and used them to get credit cards. He then used the cards to buy items online.
In total, he got away with over $300,000.
When he was busted after authorities searched his home, they found information for over 300 fake identities.
Some of the bogus documents included phony social security numbers, phony driver’s licenses, and a good amount of credit cards in other people’s names.
In another case, a man was sentenced to 34 months in federal prison for the same offense. He was ordered to pay back over $400,000.
In Miami Florida, the U.S. Attorney’s office charged several men with bank fraud in which they were alleged to be using over 700 fake identities.
Those are just a few cases. There are many others like them around the country. As we said earlier, it’s the fastest growing fraud America.
Anyone can fall victim to this type of fraud.
That’s why it’s so important to stay alert. Especially if you have kids. A child’s social security number is the number one target for criminals looking to commit this kind of fraud.
The most important thing you can do to defend against identity fraud of any kind is to be alert and be vigilant.
That’s always first and foremost.
And be aware that, in the case of synthetic identity fraud, your children’s identity is likely to be more at risk than your own.
So it’s extremely important to protect your child’s identity – both online and offline. And that’s where an identity protection company such as Lifelock can help.
They add another layer of protection by monitoring your personal information for you. If they see something suspicious, they alert you and you’re then able to take action.
To learn more about their services, see our full review of Lifelock and what they have to offer.
Even the plans offered by IdentityIQ are better than not having any alert system in place to warn you.
Here are some of the other steps you can take to protect yourself against synthetic identity fraud:
Be Wary of Divulging Social Security Numbers
Be extremely cautious about who you give your social security number to or any other confidential information.
If you have any doubts about the legitimacy of a request for information, withhold your personal info until you can verify that the request is legitimate.
So contact the organization yourself and confirm that the communication you received is genuine. If you think it’s not on the up-and-up, don’t give out your details.
Dispose of Confidential Documents Carefully
Be aware that it is not only your bank and credit card details that have value for criminals.
A person building a synthetic identity may use all kinds of confidential information, especially your social security number.
So, don’t share private information with other people. And shred all personal documents before you dispose of them.
Monitor Or Put a Credit Lock in Place
Monitoring your credit report will alert you to any suspicious activity.
Freezing a credit report, also known as a credit lock, helps you prevent synthetic identity theft from being used for credit fraud.
Putting a credit lock in place is without a doubt, one of the most effective tools you have to protect your kids against this fraud.
So using it can save you and your kids a lot of headaches down the road.
Review Your Social Security Statement
Review your annual social security statement for any income that you do not recognize. A criminal could use your social security number to gain employment. If they do, you might see unexpected income appearing on your social security statement.
Check Your Mail
Check your mail for anything that looks suspicious.
A final demand addressed to another person, for example, could mean that someone is using your identity to obtain credit.
Be alert for any mail or emails that do not make sense.
Any information about benefits or medical insurance for you and your loved ones that you haven’t applied for may be a sign that your identity has been stolen.
Unfortunately, the growth in synthetic identity theft has implications for everyone of all ages. And the children of today may be impacted by this crime in years to come.
Indeed, surveys have shown their identities are more than 50 times more likely to be used to create false identities than the identities of adults.
The crucial thing to take away from the above is to be alert to this crime. Monitor suspicious activity on your credit reports and be careful about with whom you share any confidential information.