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Can You Spot a Synthetic ID? The $6 Billion Mistake in Banking

What Banks Need to Know About Synthetic Identity Theft

New research from the Auriemma Consulting Group (ACG) paints a bleak picture of the state of synthetic identity theft and its hit to the banking industry. 

Synthetic identity theft cost banks $6 billion in 2016. Five percent of charged-off accounts and up to 20 percent of credit losses are thought to be a result of synthetic identity theft. 

With synthetic identity theft on the rise, banks and credit unions must search for more comprehensive solutions to this growing problem. 

What is Synthetic Identity Theft?

Synthetic identity theft is when criminals mix and match real and fabricated personally identifiable information to create a new identity.

Stolen Social Security numbers are often used as the primary identifier and are paired with the imposter’s real age or name to legitimize the new persona.

In credit bureau checks, these new identities often produce a valid, yet blank, credit history. This allows criminals to apply for loans, credit cards and other financial accounts under false pretenses.

It currently rivals medical identity theft as the fastest growing form of identity theft.

Data breaches are the primary driver for growth. In 2015, seven million individuals had their Social Security numbers exposed in a data breach. With 2017 data breaches on par with previous years, this trend is projected to continue.

Analyzing Financial Losses

In ACG’s report, they admit the crime can be hard to detect — and consequently — hard to quantify.

Synthetic identity thieves often act as legitimate account holders, establishing a credit history and opening new accounts to rack up as much debt as possible. Once the criminal feels they’ve funneled enough money away, they’ll simply disappear. 

These charged-off balances are then logged as a credit loss, rather than fraud, since no viable avenue for collections exists. What’s more? Those balances are exponentially higher than a typical charge-off, averaging over $15,000 per attack.

The report also suggested that synthetic identity theft could explain why key measures of consumer credit health have worsened, despite a strong employment market and high consumer credit scores.

While the $6 billion price tag is startling, ACG states this loss does not include monetary losses from non-financial institutions. The total is higher when researchers included store credit cards and other products (e.g., car loans).

The Face Behind the Figures

While powerful, these numbers leave out the critical human aspect of this crime.

Remember, synthetic identities are tied to real information. In some recovery efforts, the victim is identified due to this intricate tie and hit up for the debt. It creates a high-stress situation for the victim that can quickly destroy the perception of your brand and relationship if not handled properly.

Emotional Effects of Identity Theft:1

  • 54% feeling of helplessness
  • 51% loss of ability to trust
  • 81% frustration or annoyance

Forty-three percent of victims rated their satisfaction as “poor” or “terrible” when attempting to resolve an identity crime with a financial institution.

At EZShield, no one understands this more than our Resolution Specialists. These identity experts go above-and-beyond each day for our users. Their commitment earns them a lot of praise but has also left them with some unforgettable stories.

One such story was that of Lynn, W. Her surname from a previous marriage was part of a synthetic identity, which a criminal used to apply for credit. The victim was shaken by the unexpected reappearance and misuse of her now 17-year-old name.

Her Resolution Specialist took special protocols to protect both “identities” — the current and former surname. The Resolution Specialist then provided the victim with expert educational tips and proactive fraud tools to ensure she felt in control once again.

It was an increasingly common case, with a pretty powerful outcome. The victim’s distress melted away and it served as an amazing example of the opportunity for financial institutions to partner with an identity theft protection provider that can step-in and help in times of crisis.

Combatting Synthetic ID Theft: A Two-Prong Approach

Synthetic identity theft eats away at financial institution’s profitability and account holder relationships. Combatting these threats takes a dual-approach.

  1. Implement Strong Security Protocols
    The use of biometrics and cross-referenced background checks for identity verification can help thwart synthetic identity thieves. Go above-and-beyond by taking additional precautions when credit applicants have a blank credit history.

    (Remember, criminals are crafty, a quick fix often causes them to divert to different schemes. A comprehensive approach is a must.)

  2. Provide Identity Theft Protection
    Give account holders the right tools and support to keep them safe from synthetic identity theft. In the event their information is ever compromised, they’ll want to know someone is there to help. Otherwise, it could erode your relationship. Ensure these solutions puts customer service first and will act on their behalf with fully-managed identity restoration. 

Interested in learning more about combatting synthetic identity theft at your financial institution? Schedule a demo of EZShield’s award-winning identity protection. Our experts work with you to understand your needs  before developing an action plan to help you effectively reach your goals through a strategic, people-centric approach.

1. Identity Theft Resource Center

About Laura Bruck

Laura, former VP of Marketing at EZShield, now a Sontiq brand, is a marketing professional with over 20 years of experience leading marketing and supporting sales to develop partner solutions, transition to new markets, and achieve significant revenue growth.

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