More businesses are establishing ecommerce stores as the demand for online shops has increased since the pandemic. As a result, new challenges have emerged, leading to felony cases like identity theft and identity fraud becoming more prevalent. This equated to an estimated damage cost of $16.4 billion daily in 2021.
With the growing number of cybercrime cases, your business should learn how to detect any form of cyberattack. As scams evolve, cybercriminals use smarter ways to steal your identity. They find ways to escape detection, leading to the creation of synthetic identities and then using them to commit fraud.
The best way to avoid this is to fully understand what these criminals do with the synthetic identities and how they are made. To strengthen your authentication security, you must broaden your knowledge about it.
Why are synthetic identities so difficult to detect?
A synthetic identity is made from fabricated credentials which do not necessarily connect to a real person. A cybercriminal has meticulously learned how to create a synthetic identity step by step. They do this by stealing legitimate information and adding other details such as a fake address, email, phone number, social media account, and many other authentication factors. This is all combined to make this new identity seem like an existing person.
Synthetic identity theft is typically harder to detect because the identity is backed by legitimate documents and information for verification from one or more real people.
According to the Federal US Reserve, synthetic identity fraud is one of the fastest-growing scams in the country, where 85 to 95% of cases were left undetected in 2019. Compared to cases of regular identity theft, this method can pass through security checkpoints like the Know Your Customer (KYC) verification processes using a real ID.
3 Ways Synthetic Identities Are Created
Synthetic identity fraud relies on unused personal data such as tax identity information, children’s records, and medical data to make an identity appear more legitimate when creating online accounts. But using this information by itself will often not be enough to bypass basic cybersecurity practices and other verification processes.
To make an account more believable, the fabrication of synthetic identities goes through these steps:
1. Through the creation of a credit file
Synthetic identity fraud allows cybercriminals to manipulate a company’s system by using a combination of real and fake information. This is typically done to create a credit file and gain easy access to funds using the fake identity.
Some methods of exploiting the credit process include applying for credit directly to a lender or using data-furnished strategies.
Other cybercriminals may also use an authorized user’s provision to a credit card account. Institutions will typically identify this as a fraudulent account after updating consumer credit information and realizing that dues have not been paid.
2. When applying for credit
As part of creating a synthetic identity, fraudsters will apply for credit from a lender expecting it to be declined. This will help establish a new credit file that the cybercriminal can then use to apply for a credit card without any record of credit history or scores.
Once they gain access to the account, they will continue to leverage a positive credit history through legitimate uses for a specific period. This gives them more opportunities to acquire more credit cards and favorable benefits, which they can exploit later.
3. Through authorized users
Using authorized users is one of the most common ways to create a synthetic identity because adding another user to an existing account is legal for most credit card providers. Fraudsters take advantage of this system by convincing good credit users to add another identity to their cards.
Once they gain access, bad actors can inherit their good credit score and use it to apply for more credit cards from other issuers. These cards will be maxed out to buy valuable items that can be resold later.
Equip Yourself With the Right Strategy
The growing reliance on technology has paved the way for new opportunities for your business. But with the rise of cybercrimes such as identity theft and identity fraud, it is crucial to remain vigilant and know how to properly spot these threats before they happen. This is especially the case for synthetic identities, which can be more challenging to detect.
One way of ensuring that your business and clients stay protected is by building a robust identity proofing process. This will help lower the chances of your company falling victim to identity theft and other acts of fraud.
For more information on how to achieve this, get in touch with Q5id’s team of experts and find the right product that can up your security game.
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