Cyber-criminals are causing more credit card losses for financial institutions with scams that involve creating fake customer identities, though the rate of growth of so-called synthetic identity fraud slowed at the end of last year, according to a new report.

By some reports, synthetic ID fraud now accounts for around 85% of all identity fraud in the U.S., costing an estimated $2 billion a year.

In a new analysis of credit card transactions, TransUnion said outstanding suspected synthetic fraud balances rose 5.2% in the fourth quarter of 2017 to $290 million, compared to the year-ago period. During the previous year, such balances rose 68.5%.

The incidence of synthetic fraud on credit applications remained similar, moving from 0.59% at the end of 2016 to 0.60% in 2017.

TransUnion attributed the slowdown in the growth of synthetic fraud to proactive measures by issuers, but warned that it remains hard to detect.

“The threat of online fraud is significant as faceless digital application channels can make it more difficult to assess the veracity of the identity being used to acquire credit,” Geoff Miller, head of global fraud and identity solutions for TransUnion, said in a news release.

“High tech fraudsters armed with real personal information on good consumers apply with multiple identities for multiple products with multiple lenders within hours or days,” he added.

Synthetic ID fraud involves using either a combination of real and fake information — such as a child’s social security number, along with a false name, address and date of birth — or entirely false information to create a new “person.” The synthetic ID is then used to apply for credit.

“A lot of synthetic identities are created with an age of 25 or older, a time when a person should already have some credit history,” Lee Cookman, a director in TransUnion’s identity-solutions unit, told American Banker.

According to TransUnion, synthetic IDs are also being used for quicker and higher-dollar transactions, with the outstanding balances of suspected fake identities increasing 6.6% to $885.42 million in the fourth quarter for auto loans, credit cards, personal loans and retail cards combined.

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One response to “Banks Losing More to Synthetic ID Fraudsters”

  1. Identity fraud, card fraud and cybercrime are growing so fast ONLY because we rely on unreliable signature, PIN and password systems to conclude our transactions. These crimes will be STAMPED OUT forever only if we make all these three systems RELIABLE and FOOL PROOF as described below. It is as simple as that.

    Smart electronic and digital systems are failing to deter fraud and cybercrime because none of them make signature, PIN and password systems reliable and fool proof. In reality these systems make bad problems worse by 1) diverting crimes to other sectors and 2) provide criminals new loopholes to take advantage of.

    Signature system is unreliable because in the event of crime signature does not even expose fraudster’s gender. We should have realised this serious mistake years ago. To make signature reliable all we have to do is to apply our ID sticker (supplied by financial institutions with our photo, name and their logo printed on it to the document and countersign. This system will make signature system reliable because in the event of crime it will expose fraudster’s identity (photo and traces of thumbprint). Oh Current signature system is like passports without photos and that is why it is so difficult to deter and prosecute fraudsters.

    PIN system is unreliable because fraudsters have options to pick them. We should have realised this serious mistake years ago. To make PIN reliable all we have to do is to store PIN on key size thumbprint activated memory stick. This will act like contactless card but reliable because of activation only by thumbprint. Call this electronic pin EPIN. We also have option to change EPIN to different value after each transaction. Fraudsters will not get tempted to do card fraud at retail outlets, ATMs and even online card payment because they will not be able to pick our EPIN the way they pick our PIN. Unlike other bulky devices like mobile phones, these ID key will be safe in our pocket with other keys and so it will not get stolen or damaged. In realty these ID smart key could replace plastic cards and even passports in future.

    Password system is unreliable because hackers have options to pick our passwords from our computers, mobile phones etc. We should have realised this serious mistake years ago. If we use our EPIN from memory stick as password then cybercriminals will not be able to pick them the way they do pick our current passwords. Use of EPIN to validate online card payment will combat online card payment fraud too.

    Protecting the public from becoming victims of these criminals is the responsibility of any government.

    If you agree that banks should implement these systems then please forward this information to your banks.

    Thank you.

    YKR (Inventor of these patented granted and copyrights protected Ideas (851132))i

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