Posted by Eva Velasquez, CEO, Identity Theft Resource Center
It feels like criminals are one step ahead of the latest loss preventive strategies, and that may very well be the most accurate assessment of crimes like identity theft. Synthetic identity fraud a newer form of identity theft, is already believed to be responsible for about $6 billion in theft in 2016 alone, and shows no signs of slowing down.
As the name suggests, synthetic identity fraud involves creating a fabricated or pieced together identity, and there a few different ways it happens. The most common method is to utilize an unused Social Security number (SSN) and combine it with a made up name and date of birth, then use an address controlled by the thief. This all became a little easier for thieves when the Social Security Administration (SSA) switched from the old system in which each of the three parts of the individual number were linked to other data points specific to a person, like the state and year they were born for example. In 2011, the SSA switched to a completely randomly generated process to create and assign new SSN numbers. The reasoning behind this move was the SSA believed it would make it more difficult for thieves to “guess” someone’s SSN by looking at other public information available for that person. The problem is that now that a SSN is not tied to additional data points, such as a location or year of birth, it becomes harder for financial institutions, health care providers, etc. to verify that the person using the SSN is in fact the person it was issued to. Therefore, it is easier for identity thieves to leverage SSN’s issued post 2011. An unintended consequence of the SSA’s process change created a new class of victim in synthetic identity fraud, and that is with children. Thieves target these newly generated SSN’s as they know your 6-year-old niece (born in 2012) or your 4-year-old son (born in 2014) will not have an established credit file. While it is possible to use a random combination of numbers, it’s also just as easy for a criminal to use a child’s stolen SSN in combination with a synthetic name, birthdate, and address. How do thieves obtain your child’s SSN? One way is through data breaches. Recent data breaches in the health care industry and with the IRS are just two examples of how thieves were able to obtain the data they desired.
Here’s the interesting thing about this type of fraud: when a thief creates a fake or synthetic identity with a stolen or made-up SSN and applies for a credit card, the issuing bank will typically reject the application. After all, it’s not a real person and there’s no credit history for that synthetic identity. However, the process of checking for the credit report actually generates a new credit file. Once the credit file is created, the thief’s accomplice adds the synthetic identity as an “authorized user” on several legitimate accounts, and within a few months, a credit history is created for the synthetic identity. Now, when the criminal applies for a credit card with the synthetic identity, there is a credit history and therefore a credit card application is more likely to be approved. Keep in mind this is how any credit history is created – whether legitimate or by a criminal – and is completely normal. In fact, it’s the way many consumers begin to develop a valid credit history.
The record-setting numbers of data breaches targeting personally identifiable information is a troubling trend and very difficult to fight back against. With only a few snippets of your information, thieves can cause serious harm for retailers and financial institutions, which will ultimately harm consumers in the long run.
For example, when your 6-year-old niece applies for her first college loan in 2029, or your 4-year-old son applies for his very first credit card in 2032, they may discover their SSNs were used by synthetic identity criminals leaving them to face the stressful and arduous task of reclaiming their SSN. If private industry and our government fail to address this issue, this will be the legacy we leave our children post 2011.
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