SYNTHETIC IDENTIFY THEFT: a new way for fraudsters to steal your money!

SYNTHETIC IDENTIFY THEFT: a new way for fraudsters to steal your money!

As a private investigator in my hometown of Portland, Oregon I have always investigated a lot of frauds but lately I’ve seen an increase in synthetic identity fraud cases. Because of severe budget cutbacks and emotional cries from radical groups to “defund police” many police departments just don’t have the time, resources or inclination to aggressively investigate many types of financial frauds. In many jurisdictions police will take a report and that’s about it. There will be no follow-up. No detective is going to take the time to gather all the pertinent documents, analyze them, interview people and do all the many other things it takes to properly investigate a single financial fraud case. That’s when some victims call me.

What exactly is synthetic identify fraud? And, what can you do to protect yourself?

Financial fraudster are always evolving and continually try to stay one step ahead of the law. Synthetic identify fraud is a new “twist” to traditional identify fraud. According to a recent White Paper from the Federal Reserve, “synthetic identity fraud is a crime in which perpetrators combine fictitious and sometimes real information, such as social security numbers and names, to create new identities to defraud financial institutions, government agencies or individuals.”  Victims of synthetic identity fraud are typically persons with limited credit histories like children, the elderly or the homeless but anyone can become a victim.

In the traditional identify fraud case a fraudster uses the name and social security number of someone else. The fraudster then pretends to be that person in order to set up accounts and obtain credit. A synthetic identify fraudster takes it a step further. The fraudster combines fake and real personal information to establish a credit record under the new synthetic identity. In addition to using the social security number the fraudster may combine the social security number with a person’s address, phone number, work history and other associated personal information. This makes the fraudster seem more legitimate and makes it more difficult to differentiate synthetic identity fraud from legitimate financial activities.

Your Social Security Number is NOT as Secure as You Might Think

Contrary to popular belief, it is quite easy for fraudsters – and really anyone, to obtain someone’s social security number. Once a fraudster has your social security number some easy internet research can often reveal all the other personal information a fraudster needs to start opening accounts under a completely fictitious name, but still using your social security number.

In the United States since it is very difficult to get a new social security number and most financial records keep track of people primarily by their social security number. A person’s name can change for any number of legitimate reasons (marriage, divorce, religious conversion, legal name change, etc.) but the social security number remains constant. In the United States, state laws regulate name changes and usually a person can adopt any name desired for any reason. And, many states allow a person legally to change names by usage alone, with no paperwork. This makes it easy for a synthetic fraudster to do their work.

Here’s How it’s Done:

Synthetic fraud cases can get rather complicated and there are numerous variations to the scheme but the fraudster starts by creating an identity using fabricated or stolen identification.

Then the fraudster applies for credit using the fabricated or stolen identification. The fraudster might get turned down many times but the fraudster is not deterred. Sooner or later some business will “approve” the credit application. Once approved for a line of credit (even a small amount of credit) the fraudster accelerates the fraud and starts to build a credit record under the fictitious name. The fictitious name now gets associated with the real social security number of the real person.

As a fraudulent synthetic credit score rises, the fraudster can secure more credit accounts and larger amounts of credit until the fraudster has “maxed-out” a person’s credit. The fraudsters can then create new synthetic identities and repeat the process.

Synthetic identity fraud is one of the  fastest-growing type of financial crime in the United States. Each year synthetic identity fraud cost U.S. lenders over $6 BILLION and more than 20% of credit losses were attributed to synthetic identity fraud.

What to do to protect yourself:

Lock your Credit:

The ultimate preventative measure is to “lock” or “freeze” your credit file at all three national credit bureaus. Doing this will block all access to your credit reports and will prevent unauthorized credit checks. With a locked or frozen credit file no creditor is likely to grant anyone credit. But, locking or freezing your credit file also prevent processing of your own legitimate credit applications.

Monitor Your Credit:

A less drastic measure is regularly checking your credit report to make sure everything looks right. If something looks suspicious you can notify the credit bureau and report it as fraud.

A free way to do this is to use https://www.annualcreditreport.com/index.action. This is the only absolutely free source to access your credit report as authorized by Federal Law. You are allowed one free credit report each year.

Another way to monitor your credit is to use a service like Credit Karma. By signing up for a free account you can check your credit scores anytime and view all accounts associated with your credit file. While this service is free, you will receive periodic email solicitations for credit cards, loans and other financial services. My experience is that you will not be bombarded by offers and you can route them directly to your SPAM file if you don’t even want to bother reading or deleting them.

There are also a number of credit fraud monitoring services you can subscribe to for a yearly or monthly fee. Are these monitoring services worth the cost? If you are super lazy and just don’t want to spend the time to monitor your own credit, then paying someone to do it for you might be worthwhile.

Regularly Change passwords on any online financial account:

This can be a vexing chore and if you have multiple accounts it can become difficult to keep track of all passwords. One solution is to use a Password Manager. For a fee there are a number of password manager software programs that will store your passwords so that only you can access them. Of course, you will still have to remember the password to your password storage system!

Traditional identity theft is widespread and bad enough. But, synthetic identity fraud is more devastating as it allows criminals to steal your money and wreck your credit history even quicker and to a greater degree. Knowing what synthetic identity fraud is and how it works and then taking some easy and inexpensive steps can prevent you from becoming a victim.

George Babnick
George W. Babnick, is a 34 year law enforcement veteran with an extensive background in physical security, criminal and administrative investigations, training, school policing, supervision and management, and criminal forensics. He recently retired as a Captain in the Portland Oregon Police Bureau where he managed the Training, School Police, and Forensic Evidence Divisions. He holds criminal justice degrees from Portland Community College and Portland State University and a law degree from Northwestern California University School of Law, Sacramento California.

Mr. Babnick is a longtime member of the Western Society of Criminology and is the author of articles on security and law enforcement, investigations, supervision and management, and risk management related to these subjects.

As a physical security expert, George Babnick provides private physical security consultations across the United States and consults with clients outside the United States. He specializes in assessing security problems for small and medium businesses as well as select individuals. He offers independent, honest advice and expertise, with the goal of providing all clients with practical and cost-effective security solutions to enhance security and effectively manage business and personal security risks.

Mr. Babnick is also a licensed Private Investigator and conducts investigations for attorneys, businesses, and individuals throughout the State of Oregon.

To learn more about security consultation and investigative services offered, please visit http://babnickandassociates.com

Disclaimer: Nothing in any article on this blog should be construed as legal advice. Persons seeking legal advice should seek the counsel of an attorney licensed in their state.