Synthetic Identity Fraud Mitigation Toolkit

Synthetic identity fraud is a real problem facing the payments industry and other types of businesses. Furthermore, feedback from the Federal Reserve’s ongoing engagement with payments fraud experts and a June 2021 survey reinforces the need for synthetic identity fraud awareness and dialogue about detection and mitigation strategies.

The Fed supports the payments industry in combatting synthetic identity fraud by encouraging education, understanding and broad industry collaboration. This fraud mitigation toolkit offers a wide variety of informative resources for financial institutions, consumers and businesses. Through future phases of the toolkit, new resources will be added over time, including in the areas of synthetic identity fraud detection and mitigation.

Why is it Important to Know About Synthetic Identity Fraud?

In the continued progress toward a vision of faster, safer and more efficient payments in the United States, synthetic identity fraud is a high priority for the payments industry and broader U.S. economy because:

  • Accounts for substantial financial loss
  • Growing in frequency and impact
    • The ease of synthetic creation, combined with the increase in digital account applications capabilities, have simplified the process of creating these fictitious people and allowing them to penetrate the financial system.
  • Often undetected by traditional fraud models
    • Most traditional fraud models are not built around the idea that a person is not real.
  • Numerous avenues for fraud
    • The same synthetic can be used to defraud multiple industries at the same time, including financial, healthcare and government.
  • Potentially devastating impacts on individuals
    • Although the initial financial impact is usually felt by a financial organization, the use of synthetic identities can also negatively affect individual consumers.

Watch this video for an overview of synthetic identity fraud and the Fed’s efforts to increase awareness and understanding on this topic.

The synthetic identity fraud mitigation toolkit was developed by the Federal Reserve to help educate the industry about synthetic identity fraud and outline potential ways to help detect and mitigate this fraud type. Insights for this toolkit were provided through interviews with industry experts, publicly available research, and team member expertise. This toolkit is not intended to result in any regulatory or reporting requirements, imply any liabilities for fraud loss, or confer any legal status, legal definitions, or legal rights or responsibilities. While use of this toolkit throughout the industry is encouraged, utilization of the toolkit is voluntary at the discretion of each individual entity. Absent written consent, this toolkit may not be used in a manner that suggests the Federal Reserve endorses a third-party product or service.