Money Frankenstein Fraud: How to Protect Yourself Against Synthetic Identity Fraud
Identity theft isn’t always as simple as stealing one person’s information. A growing form of this crime, known as synthetic identity fraud, or “Frankenstein fraud,” involves criminals piecing together personal data from multiple sources to create entirely new, fake identities.
Synthetic identity theft can feel like a horror movie where criminals stitch together pieces of different people’s information.
As a cybersecurity expert with over 40 years of experience, I’ve witnessed the evolution of these scams firsthand. Here’s what you need to know to protect yourself.
What is Synthetic Identity Theft?
Synthetic identity theft isn’t a new phenomenon, though many might be unfamiliar with the term. It involves creating completely new identities by combining stolen information from multiple individuals. Some elements might be real, taken from various sources, while others could be fabricated.
This type of fraud is particularly concerning because the fake identities often fool the financial system. According to Frank McKenna, a fraud expert and Chief Fraud Strategist at Point Productive, as many as 15 million Americans have been synthetic identity fraud victims, and often, they don’t realize it. These criminals frequently target the most vulnerable — children, the elderly, and the homeless — who are less likely to regularly monitor their credit reports.
Synthetic identity theft caused $20 billion in losses in 2020, according to the cyber fraud defense and software company FiVerity’s 2021 identity fraud report.
How Does Synthetic Identity Theft Work?
Synthetic identity fraud requires patience from the criminal, particularly when using a child’s Social Security number. They construct the identity by using a valid Social Security number combined with an unrelated name, address, date of birth, phone number, or other identifying information.
Criminals might obtain Social Security numbers through dark web purchases, data breaches, or scams like phishing attacks. The synthetic identity theft model exploits a flaw in the U.S. financial and credit system.
When the criminal uses the synthetic identity to apply for credit, the application is usually denied because there’s no record of that identity. However, once the identity is presented to a credit bureau, it can be shared with other credit bureaus. This action helps credit bureaus recognize the synthetic identity as a real person, even with limited activity and evidence.
Once established, the fraudsters start building credit, becoming exemplary borrowers by paying off balances fully each month. The fake identity accumulates a high credit score, giving them access to larger lines of credit. Finally, the identity thieves exploit the available credit by maxing out all credit cards and loans before abandoning the false identity. The lender and, in many cases, the real owner of the Social Security number, are left to deal with the consequences.
How Does Synthetic Identity Fraud Affect Me?
The impact of synthetic identity fraud can be devastating. Victims may find their credit ruined, face difficulties when applying for loans or mortgages, and spend significant time and money disputing fraudulent accounts and restoring their credit. The financial impact can also include the cost of repairing the damage and the emotional stress of dealing with identity theft.
How to Protect Yourself from Synthetic Identity Fraud
While synthetic identity theft is scary, several steps can help reduce your risk.
- Freeze Your Credit Reports: A credit freeze prevents creditors from accessing your credit reports, stopping anyone from opening new credit lines in your name. This applies to you as well, unless you unfreeze your credit with each major credit bureau. Since synthetic identity theft often targets children’s and the elderly’s Social Security numbers, freezing their credit can limit the source of stolen numbers. Freezing your Social Security number can add another layer of protection.
- Check Your Credit Reports Regularly: If you don’t freeze your credit reports, review them frequently for suspicious activity. Watch for other names, addresses, or employers associated with your credit file. Consider signing up for a free credit monitoring service like Capital One’s CreditWise. You can also use AnnualCreditReport.com for a free weekly credit report.
- Watch Out for Phishing and Social Engineering Attacks: If criminals cannot obtain your Social Security number through a data breach or dark web purchase, they may attempt to trick you directly. Criminals pose as banks, the IRS, or the Social Security Administration to get you to reveal your Social Security number. While phishing tactics are becoming more sophisticated due to AI, being careful and taking your time to read emails and texts for typos or a sense of urgency is important. If you get an unsolicited message from your bank, call the bank directly using a number from the bank’s official website.
- Protect Documents Containing Your Social Security Number: While organizations rarely use your full SSN in communications, it is still on documents like tax returns. Protect all printed copies of those documents, shred any unnecessary copies, and delete any forms attached to email communications with your CPA.
- Check Your Social Security Statements: You can check your Social Security statement for free through the Social Security Administration to detect if someone uses your Social Security number or your kids’ to apply for employment or benefits. You can request it here. You can also lock your number for added safety.
By staying vigilant and proactively implementing these strategies, you can protect yourself and your family from the growing threat of synthetic identity fraud.
