The 5 Categories of Synthetic Identity Fraud Reveal Different Motivations

The hottest buzzword in the world of fraud prevention: Synthetic Identity Fraud. If you’ve recently scoured LinkedIn or read your favorite publication, you’ve probably seen an article referencing synthetic identities.

What these articles rarely discuss however are the different types of synthetics that financial institutions (FIs) might come across, and the risks that they present.

Here at Point Predictive, we’ve determined 5 different categories synthetic identities can fall into.

5 Categories of Synthetic

1. Performing Synthetics

These are identities that are created and used to obtain credit WITHOUT the intent to bust out. This is important to understand, because often times these types of identities perform and will end up paying off the loan. However, there are still concerns because even though their intent may be pure, the end result may still be a charged off loan. The borrower’s using these kinds of identities are typically new immigrants, or those that have very poor credit. You’ll normally find these more in the subprime market.

2. Staging Synthetics

This is typically the first stage for Criminal Synthetics. I also refer to this as the “credit gestation” phase of synthetic identity fraud. These may perform for a while, but the financial institution is normally being used to further create legitimacy for the identity. These present a serious risk to lenders because they hide beneath the surface and perform for a time. But soon they move to the next stage.

3. Criminal Synthetics

This is the category that gets all the attention. And rightfully so as these are causing the biggest losses (for now). These are created with the sole purpose of accumulating as much credit as possible, and then busting out. These identities target the prime market more often because they are manufactured to look perfect. On the surface, they are the premier customer an FI wants to do business with. But when you look at their credit history, it doesn’t align with the actual borrower profile.

4. Synthetic Mules

The problem no one is talking about. Identities manufactured not to cause loss, but to move it afterwards. Synthetic Mules open deposit accounts to transfer illicit funds. After bust out has occurred, these synthetics can be used to further launder the proceeds and help the criminal organization remain undetected. Although they may not necessarily cause loss for the lender, these are just as nefarious.

5. Shell Persons

Another that flies under the radar. You can think of these similar to a shell corporation. Being used to conduct fraud under the guise of a legitimate entity. These synthetics are manufactured with the intent to maneuver government sanction lists and allow bad actors to operate undetected.

Point Predictive Can Help Lenders Accurately Spot Synthetics And Bring Peace of Mind

Synthetic Identity Fraud is currently a hot topic. But it’s important to understand that, like many other fraud schemes, it has layers. And if you can better understand what kind of synthetics you’re dealing with, the more effective your actions can be.

Powered by data from over 94 million applications, Point Predictive’s unique approach to detecting synthetic identity fraud delivers a high confidence of identifying true frauds while removing unnecessary alerts that may drive increased friction in the member onboarding process.

Synthetic Identity Alert leverages Point Predictive’s patented Artificial + Natural Intelligence™ technology to continuously assess the risk of default and loss by coming through these millions of applications. So, Synthetic ID Alert will instantly let a lender know that the risk of synthetic identity fraud is present. Coupled with the expertise of seasoned fraud fighters, any institution’s fraud operation can find more fraud, reduce false positives, and accelerate throughput of a loan origination operation.