Synthetic Fraudsters Not Only Use Fake Identities But Fake Employers as Well

By Justin Hochmuth, Senior Fraud Analyst at Point Predictive

In January 2022, we announced that over 5,000 employers, totaling $1 billion in fraudulent application value, were discovered within our proprietary auto lending fraud data repository. These fake employers were tied to fake websites and forged paystubs and were often used to lure lenders into calling fake phone numbers for employment “verification.” Unfortunately, those that called were given a completely bogus verification of employment by the person that answered the call.

Since then, the problem has only worsened. Fast forward to today and the value of those applications using fake employers has ballooned to more than $1.7 billion with more than 6,700 fake employers.

COVID Stimulus Programs and Credit Repair Programs are Fueling More Fraud

Now we know that government-issued pandemic aid and unscrupulous credit repair and tax preparation companies fueled these applications. CNBC recently suggested that fraudsters have stolen nearly $100 billion in pandemic funds, although that number is likely to be conservative.

Many of these individuals used synthetic identities to secure fraudulent funds. With an influx of cash, these synthetic fraudsters sought ways to spend these funds, and unsurprisingly, many chose cars.

Although these fraudsters had some cash for a down payment and a fake identity, they still needed a job to secure financing for a vehicle. Fortunately for them, there are thousands of individuals not only creating these identities but also providing proof of income and employment verification by leveraging fake employers.

How often could we tie fake employers to fake identities? We turned to our data to answer that question.

Study of Loan Applications with Confirmed Fake Employers Showed Synthetic Identities Used in More Than 35%

We conducted a study utilizing data from our proprietary data repository to better understand this relationship between synthetic identity and fake employers.

We reviewed a random sample of hundreds of applications that utilized known fake employers within the data repository and discovered that more 35% of these applications also used synthetic identities.

These applications were not from last year or even last month. These samples were pulled from applications sent to lenders this month (June 2022). Synthetic fraudsters are using fake employers to steal from lenders, and it is happening in real time.

Fake Employers Have High Rates of Default

Many of these fake employers are associated with auto loans that have 40% to 100% default rates. These applications represent a high risk to lenders, dealerships, and even consumers. The vehicles frequently targeted were high-end models of Dodge Chargers, Dodge Challengers, Infiniti Q50, Range Rovers, and Jeep Wranglers.

The Lesson? Use All Signals Available To You To Identify Fraud

One of the most critical takeaways from this research is that fraud does not live in silos. There is a connection between fake employers, income misrepresentation, synthetic identities, and various other forms of fraud.

Although much of the pandemic aid has dried up, the pandemic helped create the infrastructure for existing and new synthetic identities to continue to operate and exploit weaknesses in underwriting, credit policy, and automation gaps.

Point Predictive monitors these trends and identifies up to 100 new fraudulent employers each week. These fraudsters continue to communicate and share best practices not just in back channels and the dark web, but across social media, readily available chat rooms, and apps like Telegram.

The Point Predictive proprietary data repository approach gives lenders the best defense against this type of dynamic fraud, which is critical to preventing unnecessary losses.

If you are a verifiable bank, financial institution or lender, you can request a copy of our “Fake Employers” Report.