Federal Reserve System White Paper Examines the Challenges of Identifying Synthetic Identity Payments Fraud

October 23, 2019
For release at 1 p.m. EDT

Detecting fast-growing synthetic identity fraud presents a challenge to financial institutions, despite Know Your Customer processes and other tools designed to provide reasonable assurance of their customers’ identities. A white paper released today by the Federal Reserve System, Detecting Synthetic Identity Fraud in the U.S. Payment System (PDF), explores behaviors and characteristics that indicate potential synthetic identities.

A synthetic identity (PDF) is created by using a combination of real information (such as a legitimate Social Security number) with fictitious information (which can include a made-up name, address or date of birth). Synthetic identities can be difficult to detect because fraudsters know how to make the identity appear to be real, which can include applying in person with fabricated identification credentials or creating social media accounts for the identity. Common characteristics of synthetics include multiple identities with the same Social Security number, physical address and/or phone number, and multiple account applications from the same IP address.

“No single organization can stop wide-ranging, fast-growing synthetic identity payments fraud on its own,” said Jim Cunha, secure payments and fintech division head and senior vice president at the Federal Reserve Bank of Boston. “Fraudster tactics continually evolve to stay a step ahead of detection, resulting in significant losses for the payments industry. The Federal Reserve is publishing these white papers to encourage information sharing among payments stakeholders and law enforcement, which is critical to help us all keep up with the evolving threat posed by creative synthetic identity fraudsters.”

Visit FedPaymentsImprovement.org to learn more and to read the Federal Reserve’s latest white paper, Detecting Synthetic Identity Fraud in the U.S. Payment System (PDF).

About the Federal Reserve and Payments

As the U.S. central bank, the Federal Reserve System provides payment services and seeks to foster the stability, integrity and efficiency of the nation’s monetary, financial and payment systems. In 2013, the Federal Reserve initiated a broadly collaborative effort to achieve ubiquitous, nationwide access to safe and efficient faster payments in the United States. The Federal Reserve now collaborates with industry stakeholders to advance five desired outcomes outlined in the 2015 Strategies for Improving the U.S. Payment System (PDF) paper: speed, security, efficiency, international payments, and collaboration. For more information, and to read the first installment (PDF) of our Payments Fraud Insights series, visit FedPaymentsImprovement.org.