TransUnion Report Highlights Increasing Risk from Synthetic Identity Fraud

A new and unsettling threat has emerged on the financial horizon: synthetic identity fraud. TransUnion released its “Omnichannel Fraud in H1 2023” report today, which reveals that this modern method of deceit is growing at an unprecedented rate.

Synthetic Identity Fraud

At the heart of synthetic identity fraud lies the concoction of a deceptive persona, blending real and fabricated personal information. This blend often combines genuine Social Security numbers, frequently harvested from children, the elderly, or those less active in the credit world, with false names, addresses, or dates of birth. This particular blend, being part-real, poses challenges for financial establishments and credit bureaus in detection.

Key Findings

• Increase in digital transactions resulted in 80% growth in suspected digital fraud attempts globally from 2019 to 2022
• The number of publicly reported data breaches in the United States increased 83% from 2020 to 2022
• Outstanding balances attributed to suspected synthetic identities reached $4.6 billion for lenders in the United States in 2022—a 27% increase from 2020.

Digging Deeper

The TransUnion report flags the growth of synthetic identity fraud, indicating that 2023 has witnessed levels never seen before. This surge is a testament to the effectiveness of this technique, suggesting fraudsters might be reaping greater benefits from this method compared to traditional avenues of deceit.

The ominously titled “Omnichannel Fraud” report alludes to the pervasiveness of this fraudulent activity. Irrespective of the mode—be it online, offline, or via mobile apps—fraudsters are finding ample opportunities. The modern-day convenience of omnichannel shopping inadvertently presents multiple gateways for exploitation.

An even deeper dive into TransUnion’s data reveals that certain geographic regions are more susceptible, hinting at potential loopholes in regional financial systems or credit monitoring practices.

Navigating the Shadows

But why should we be especially alarmed about this trend?

For starters, synthetic identity fraud, given its part-genuine nature, is notoriously difficult to detect and subsequently resolve. In many cases, these deceptive identities don’t even correspond to real living individuals, rendering traditional fraud detection methods inadequate.

Additionally, these identities aren’t just created on a whim. Fraudsters cultivate them over time. It’s a long con, starting perhaps with a small loan or a credit card, gradually building creditworthiness, only to eventually exploit it to its maximum potential.

The most unsettling part is the shadow victims of this fraud: the unknowing individuals whose SSNs are commandeered. Because synthetic identity fraud often targets elderly individuals or children, it may be years or even decades before victims realize the financial mire they’ve been dragged into. By the time they discover it, the damage is extensive, leading to severe financial consequences and the daunting task of credit dispute resolution.

Fighting Synthetic Identity Fraud

To combat this growing menace, TransUnion’s report accentuates the need for both individuals and institutions to amplify their defenses. Financial institutions should consider employing more nuanced and comprehensive verification processes. This could involve anything from referencing multiple databases, incorporating biometric data, or leveraging machine learning algorithms to spot anomalies.

On a broader scale, public awareness campaigns can equip people with knowledge about the risks and signs of synthetic identity fraud. Encouraging routine credit checks and being vigilant about unfamiliar financial activities can be powerful deterrents.

Lastly, it’s crucial for regulatory bodies and governments to sit up and take notice. Legislation needs to evolve, mandating stricter verification protocols and ensuring culprits face stringent penalties.

TransUnion’s Omnichannel Fraud in H1 2023 report is a clarion call. As the digital age advances, so does the sophistication of those with malevolent intentions. The rise of synthetic identity fraud underscores the vital need for preemptive action, to safeguard financial well-being in this interconnected era.

There is a lot more data in the full report. You can download the report from TransUnion here: Omnichannel Fraud in H1 2023.