Introducing "Synthetic Identity Fraud" - Banks' Biggest Fraud Risks Are People Who Don't Exist

An increasingly popular type of identity fraud is exceptionally difficult for banks to prosecute: Why? Because the people stiffing the banks don't actually exist.

That's right: It's called "synthetic identity fraud" and it's become a tool for scammers to siphon off hundreds of thousands of dollars without living with the guilt of ruining the credit scores of all those little old ladies.


The Wall Street Journal explained how it works in a recent story: Scammers apply for loans at dozens of banks using made-up information (names, social security numbers etc.) Because these people have no credit history, the loans are typically rejected - at first. But just by applying for a loan, the credit bureaus - Equifax, TransUnion and Experian - save an individual's information, and after a person applies again and again, eventually, these attempts become enough to seemingly will a credit history into existence.

Essentially, the scam exploits one vulnerability of the credit-check system: It's difficult for banks to tell the difference between a person with no credit history and a person whose identity has been made up.


Synthetic identity fraud was first discovered by law enforcement in 2012, when lenders and law enforcement started reporting unusual instances where confirming an individuals identity proved to be impossible. They quickly realized that many of them weren't real people.

TransUnion says it began hearing from lenders and law enforcement about unusual fraud cases between 2012 and 2014. It began investigating, searching for driver’s licenses, voter registrations and other records to confirm identities. When nothing turned up, TransUnion investigators realized the cases could be tied to fabricated identities.

The company blocked thousands of credit reports from future use, figuring any real people would get in touch, says Lee Cookman, a director in its identity-solutions department. None did.

TransUnion and Experian say it is tough to distinguish between a fake person and a real person applying for credit for the first time with legitimate identifying information that isn’t on file. Equifax didn’t respond to requests for comment.

Since then, it has blossomed into one of the biggest threats to credit-card lenders. Synthetic frauds are already costing banks countless hours - and billions of dollars.

One man in South Carolina was arrested after creating 750 "synthetic identities" and applying for loans through them.


Already, credit bureaus estimate that at least $350 million in outstanding credit-card debt are owed by people who don't exist.


TransUnion says a record $355 million in outstanding credit-card balances was owed by people who it suspects didn’t exist in 2017, up more than eightfold from 2012. It estimates lenders have issued credit cards or loans to millions of synthetic identities in the US.

In January, Accenture PLC listed synthetic-identity fraud as one of the biggest threats facing banks in 2018, saying it would be “costing banks billions of dollars and countless hours as they chase down people who don’t even exist.”

In Rock Hill, S.C., a 50-year-old man was arrested last year after applying under synthetic identities for more than 750 credit cards; he pleaded guilty. Earlier, a Southern California man pleaded guilty to conspiracy to commit bank fraud using synthetic identities, agreeing to forfeit properties in Los Angeles, West Hollywood and Santa Monica bought with the proceeds.

Scammers turned to synthetic identities as fraud detection software used by banks became increasingly skilled at foiling conventional cybercrime.

One scammer who created 300 synthetic cards and was eventually sentenced to several years in a federal prison


Criminals have taken up this new ruse in part because lenders and borrowers have gotten better at protecting against more traditional fraud, which often involves using stolen data about real consumers, says Chris Pinion, who specializes in fraud strategy at LexisNexis Risk Solutions, a unit of RELX Group.

Bypassing actual consumers, scammers such as Mr. Lyles trip fewer alarms. An Alabama native, he had worked at a debt-collection firm and as a U.S. Navy service member trained in electronic warfare, according to court records. He was once chief financial officer at Chosen Destiny Foundation Inc., a nonprofit serving Atlanta’s homeless.

Over two decades, he was convicted of crimes such as motor-vehicle theft and marijuana possession, court records show.

“He’s a good son, a loving father, and he took care of his family to the best of his ability,” says Betty Hollinger, his mother. “Whatever else happened, I just don’t know.”

Mr. Lyles, in federal prison for the fraudulent credit-card scheme, didn’t respond to interview requests. His lawyer, Careton Matthews, declined to arrange an interview with his client. “Mr. Lyles accepted responsibility early on,” he says. “He is remorseful for having committed the acts that caused him to be sentenced.”

Ironically, an innovation by the Social Security Administration meant to prevent fraud helped give rise to the "synthetic identity fraud" phenomenon.

Using CPNs on loan applications is illegal, says Stephen Stigall, partner at law firm Ballard Spahr LLP, and can subject their users to charges of making false statements to banks, bank fraud or conspiracy to commit bank fraud.

Lenders lack methods of instantly distinguishing credit-profile numbers from Social Security numbers—in part an unintended consequence of a Social Security Administration move meant to reduce identity fraud.

The agency used to generate numbers in predictable patterns. The first few digits corresponded to a person’s ZIP Code when the number was issued, letting lenders cross-check the number with other application entries. In 2011, the agency began generating numbers randomly. That made it tougher for lenders to spot fakes.

An agency spokesman, Darren Lutz, says “randomization represents an important step forward in preventing the compromise of SSNs and preventing identity theft” including by making it harder for scammers to reconstruct numbers using public information.

But whether this mistake will be fixed - ie, whether the SSA will go back to using patterns when assigning SSNs - remains to be seen. To be sure, that method also had its vulnerabilities.

But given the ease with which one scammer can marshall dozens of "fake" (but usable) identities - well, at least people who've had their sensitive information stolen in a major corporate hack can at least sleep a little easier: You're no longer the target criminals covet.


TeethVillage88s Thu, 03/08/2018 - 19:07 Permalink

What in the holy horse shit is this?
- " Introducing "Synthetic Identity Fraud" - Banks' Biggest Fraud Risks Are People Who Don't Exist

An increasingly popular type of identity fraud is exceptionally difficult for banks to prosecute: Why? Because the people stiffing the banks don't actually exist."

uhland62 Yukon Cornholius Thu, 03/08/2018 - 21:08 Permalink

Not to forget the changing IDs of spooks and operatives. Remember 'pocket litter', as recommended by Edward Snowden to discard before you travel with your official new ID. He also spoke of FB pages and webpages which were created to support an operative's ID. It's going to get worse because the 'normal' crims methods are slowly attacked as in the article. In Germany they already cut off the lines of phone scammers.

In reply to by Yukon Cornholius

OverTheHedge Yukon Cornholius Thu, 03/08/2018 - 23:23 Permalink

I've only just found out about this, and unfortunately it turns out that the straw man logic is badly flawed, and likely to get you into all sorts of trouble. It's a shame, because if it was true, life could be so much more fun.

The strawman theory is recognised in law, but only as a scam: the FBIconsiders anyone promoting it a likely fraudster,[2] and the IRS considers it a frivolous argument that will get you a $5000 fine if you use it on your tax return.[3

Did you really think the legal system would allow you to walk away from your mortgage, just by following a few specific rules? Even if it is "true", which it isn't, they would just pass a new law to cover their asses and keep you in perpetual slavery. It's what law makers do.

In reply to by Yukon Cornholius

Yukon Cornholius OverTheHedge Fri, 03/09/2018 - 02:01 Permalink

It’s not about walking away from mortgages, but rather knowing who (or what) you are and what your status, standing, and agency are in court. It’s about understanding the difference between legal and lawful, admiralty law and common law. It’s about understanding what the ‘legal’ (i.e. commercial) terms actually mean and how they apply to you as a natural being vs. YOU the legal fiction that was created at your birth in order so YOU could conduct commerce with the private corporation that is THE UNITED STATES OF AMERICA, or THE INTERNAL REVENUE AGENCY, or whichever corporation you (the natural being) may have to deal with. Same in Canada, Australia, GB etc. A man has unalienable rights. A citizen only has the privileges granted to him by his governor. 

Everything is a contract. It’s not easy, but there are procedures you can follow to help you not fall into THEIR trap. Do you know who you are? 

In reply to by OverTheHedge

NumbersUsa Buckaroo Banzai Thu, 03/08/2018 - 19:47 Permalink

"On November 21, 1962, the Department of Justice ordered the AZC (AIPAC) to begin registering as an Israeli foreign agent. This touched off an intense battle between the Justice Department and the AZC which outlasted (killed) both JFK and RFK. The bloodied and bruised Justice Department hid away its files on the affair until they were finally declassified and released in 2008.

The effort to register Israel’s foreign agents clearly failed. Just 42 days after the Justice Department order, the American Israel Public Affairs Committee incorporated itself in Washington and took over the AZC’s functions. Since the year it was ordered to register—as part of the AZC—AIPAC has extracted an inflation-adjusted $250 billion from US taxpayers for its foreign principals. Influencing the conduct of US policy "by techniques outside normal diplomatic channels" has never stopped."

In reply to by Buckaroo Banzai

uhland62 PT Thu, 03/08/2018 - 21:15 Permalink

One application rejected is being cautious there may be something fishy.

10 applications rolling in is proof you exist!!! 

(The loan would then have to go through an account. They must miss due diligence when establishing the account that the person exists etc. Ah -I forgot, it's all online. Digital is safe.) 

In reply to by PT

zoo TeethVillage88s Thu, 03/08/2018 - 22:51 Permalink

Makes sense. In an effort to give loans to as many people as possible to rip off the government for their next bailout scheme, they got scammed by smarter people. Or perhaps the same people that took life insurance on bank employees without letting them know found a better way to steal without having to kill their own employees. Something to think about!

In reply to by TeethVillage88s

OverTheHedge zoo Thu, 03/08/2018 - 23:48 Permalink

I don't know about the US, but in the UK it has been illegal to insure someone's life without their knowledge or consent since 1883. Before then, people used to take out insurance policies on famous people as a kind of betting - the Duke of Wellington was always a popular choice. They stopped the practice when they noticed homeless /poor people who had life assurance policies taken out by other people without their knowledge, had a suspiciously short life expectancy.

So how did the banks manage to prove an insurable interest? Nail gun ownership?

In reply to by zoo

PT OverTheHedge Fri, 03/09/2018 - 00:06 Permalink

It was revealed to occur in the US a few years (decades?) ago, if I remember rightly I saw it mentioned in one of Michael Moore's documentaries.  Big companies were worried about losses due to their star employees dying unexpectedly so took out life insurance policies on them - without their knowledge.  Yes, it leaves the gate wide open for all sorts of abuses.  I haven't heard anything more about it since MM's doco.

In reply to by OverTheHedge

BitchesBetterR… Thu, 03/08/2018 - 19:13 Permalink

the Banks greed gone wrong blamed again on the illegals....


flashback to the house market bust: who the fuck made possible to illegals, to get access to loans with NO ID/SSN verification at all, ZERO down payment, no income, no employment verification?  THE BANKS DID




GeezerGeek NumberNone Thu, 03/08/2018 - 21:40 Permalink

There are certainly apps available to create synthetic videos of real people, and there are apps available that create synthetic yet realistic faces. Nothing you see digitally can be trusted. Bad actors can synthesize videos showing public figures saying the most outrageous things and most of use would be fooled into believing it. Do a search on DeepFake app if you are unaware of this technology.

Long ago I dreamt of a consumer electronics device that could use our likeness and voice to produce videos in real time showing us as the main characters in famous movies. Imagine a husband and wife, for instance, starring in their own version of Gone With The Wind. (Or Debbie Does Dallas.) It's taken two decades, but the software and hardware have gotten close to making that dream come true. 

In reply to by NumberNone

refill6times Thu, 03/08/2018 - 19:21 Permalink

Remember that guy years ago who robbed banks, when asked why he said "thats where the money's at"

As long as the banks have all our money, they are the target, that's where the money's at.

Give us back our money, and we wont rob you. Simple.

slyhill Thu, 03/08/2018 - 19:23 Permalink

The problem has never been about protecting <identification> numbers.

It is that the (((institutions))) are far too eager to lend.