Synthetic Identities. Are you chasing invisible footprints? 2018 Fair Isaac Corporation. All rights reserved.

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Rosalyn Potter
5 years ago
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2 Synthetic Identities A combination of fictitious and potentially stolen personally identifiable information (PII) leveraged to compose a false and fabricated identity. True Name Manipulated Synthetic Stolen Real Fabricated Name Social Security Number Date of Birth Address Phone Number Address Name Social Security Number Date of Birth Address Phone Number Address

3 Credit write-offs are skyrocketing in financial services, but economic pressures are not the cause. Security and risk management leaders must apply fraud prevention and secure payment technologies and strategies to new account use cases in digital channels. Gartner, Inc. 1 Synthetic identity fraud losses in the U.S. credit card market are estimated to reach over $1.2 billion in Aite Group 2 1 Gartner, Inc. (March 2018) The Growing Problem of Synthetic Identity and First-Party Fraud Masquerades as Credit Losses 2 Aite Group (2018) Synthetic Identity Fraud: The Elephant in the Room 2018 Fair Isaac Corporation. All rights reserved. 3

Growth Drivers Behind Synthetic Identities Social security number (SSN) randomization Although SSNs are now randomly distributed in order to reduce identity fraud, lenders find it more challenging to

4 Growth Drivers Behind Synthetic Identities Social security number (SSN) randomization Although SSNs are now randomly distributed in order to reduce identity fraud, lenders find it more challenging to authenticate SSNs. Migration to EMV cards EMV cards have forced fraudsters away from transactional fraud and have instead moved towards identity-based fraud. Lack of personal identification controls Lenders are unable to automatically validate certain identity systems.

5 No victim to report a crime Most victims of identity-based fraud are unaware that a portion of their personal information has been used for fraudulent activity, making it difficult for victims to report their stolen personal information. Increased use of digital channels, particularly online and mobile Fraudsters create identities that appear to be real identities by establishing social media accounts and activating mobile devices, making it difficult to differentiate a real identity from a fabricated one. Surge of data breaches Identity-based fraud continues to increase as more personally identifiable information becomes available through cyber breaches Fair Isaac Corporation. All rights reserved. 5

How Are Synthetic Identities Used? 1 2 3 Bust-Out Fraud A fraudster opens a credit account and acts as a trusted customer for a period of time.

6 How Are Synthetic Identities Used? Bust-Out Fraud A fraudster opens a credit account and acts as a trusted customer for a period of time. After building credit and maintaining normal customer patterns, the fraudster maxes out the credit line before abruptly vanishing from the account. Data Furnishing A fraudster creates a false company to artificially verify fake data elements. Piggybacking Fraudsters attach themselves as authorized users (AU) on accounts with a good standing. The authorized users can be added willingly or covertly.

7 How they are used Bust-Out Fraud Data Furnishing Piggybacking Anonymously obtain funds and merchandise Sell merchandise on the dark web 1 Make false transactions for a fake or legitimate business Money laundering / funding of terrorist activity 1 The Part of the World Wide Web that is only accessible by means of special software, allowing user and website operators to remain anonymous or untraceable 2018 Fair Isaac Corporation. All rights reserved. 7

8 Bust-Out Fraud The fraudster opens a credit account with a mixture of stolen and fabricated personal data. The fraudster maintains consistent spending patterns and fulfills payments for a period of time, which eventually leads to a higher credit limit. Suddenly, the fraudster makes large purchases in a short period of time before abruptly abandoning the account.

9 Fraudster Bank Bureau No History Frank Johnson 123 Main St. Synthetic Identity Created Frank Johnson Multiple Lenders Fraudster Bureau Frank Johnson History Builds credit line Frank Johnson 2018 Fair Isaac Corporation. All rights reserved. 9

11 Fraudster Data Furnishing The fraudster creates a fabricated company. After the falsified company is established, the fraudster creates fabricated employee identities. The fabricated employee information is fed to the credit bureaus to build lines of credit. Creates a falsified company Fabricated company Furnishes falsified data Bureau Fabricated identity established with a good line of credit Frank Johnson 2018 Fair Isaac Corporation. All rights reserved. 11

12 Fraudster Piggybacking Organized Fraud ring uses its own business account to add fictitious employees. The fabricated employee information is sent to credit bureaus to build lines of credit. Fictitious identities are eventually removed from the initial account in order for the fraudsters to build their own lines of credit. Add fabricated AUs to legitimate account Fake ID #1 Fake ID #2 Fake ID #3 Bureau Fabricated identity established with a good line of credit Fake 1 Fake 2 Fake 3

13 Fraudster Piggybacking Surrogate Fraudster adds a fabricated identity as an authorized user to an account with good credit, called a surrogate account. A surrogate account may be a willing participant (established via credit repair agency). The fabricated identity is sent to the credit bureau to build a good line of credit. The fraudster eventually removes the fictitious identities from the surrogate accounts and uses the lines of credit to build other accounts. Leverage credit repair agencies to authorize fabricated AUs to business and individual accounts with good credit Fake ID #1 Fake ID #2 Fake ID #3 Bureau Fabricated identity established with a good line of credit Fake 1 Fake 2 Fake Fair Isaac Corporation. All rights reserved. 13

Combating Synthetic Identities 1 2 3 4 Combine and analyze the data from multiple sources consisting of bureaus, public records, consortia-based databases and digital identity in order to detect

14 Combating Synthetic Identities Combine and analyze the data from multiple sources consisting of bureaus, public records, consortia-based databases and digital identity in order to detect potential synthetic identities. Examine where and how the new identity was created within the credit file. Find the root of the synthetic identity by leveraging link analysis to discover inconsistencies indicative of compilation and manipulation. Filter out synthetic identities at the point of origination to prevent them from being written off as credit losses or bad debt. Leverage advanced analytics as risk engines to deploy machine learning models at scale. For more information about synthetic identities contact us at info@fico.com or visit

For more information North America Latin America & Caribbean Europe, Middle East & Africa Asia Pacific www.fico.com/fraud +1 888 342 6336 +55 11 5189 8222 +44 (0) 207 940 8718 +65 6422 7700 info@fico.

16 For more information North America Latin America & Caribbean Europe, Middle East & Africa Asia Pacific (0) FICO is a registered trademark of Fair Isaac Corporation in the United States and in other countries. Other product and company names herein may be trademarks of their respective owners Fair Isaac Corporation. All rights reserved. 4596BR 08/18

The Stark Reality of Synthetic ID Fraud How to Battle the Leading Identity Fraud Tactic in The Digital Age

The Stark Reality of Synthetic ID Fraud How to Battle the Leading Identity Fraud Tactic in The Digital Age Scoping Out Synthetic ID Fraud In the 18 years since synthetic identity fraud emerged as a significant