Synthetic Identity Theft: A Deep Dive.


Abstract on Synthetic Identity Theft

Synthetic identity theft is an emerging form of fraud that severely threatens individuals, financial institutions, and governments. This article dissects the intricate processes through which synthetic identity theft occurs, its impact on victims, and its ramifications for banking systems worldwide. Additionally, this paper presents an overview of existing and potential governmental efforts aimed at curbing this growing problem on a global scale.


Identity theft is not a new phenomenon, but synthetic identity theft has added a new dimension to this problem. Unlike traditional identity theft, which involves the unauthorized use of another person’s identifying information, synthetic identity theft involves the creation of a new, fake identity by combining real and fabricated information. The aim is often to deceive financial institutions into extending credit or services.

How Synthetic Identity Theft Works: A Step-by-Step Explanation.

Step 1: Data Collection

Criminals collect pieces of personal information from various sources. This could include Social Security numbers, names, addresses, and more. Criminals start by procuring a valid Social Security number (SSN), often from a child, deceased individual, or someone who doesn’t frequently use their credit. This SSN is combined with a fabricated name, date of birth, and other personal details.

Step 2: Creation of a Synthetic Identity

The gathered information is used to fabricate a synthetic identity. The criminal combines legitimate information, often from multiple individuals, with fabricated details to create a new identity.

Step 3: Establishing a Credit File

The criminal applies for credit using the synthetic identity. Initially, these applications are likely to be rejected due to a lack of credit history. However, this process creates a credit file and credit score for the synthetic identity. The denial, however, creates a record of the synthetic identity in the credit bureau’s database.

Step 4: “Piggybacking” or “Tradeline Boosting”

The synthetic identity is added as an authorized user on an existing credit card account owned by another person (sometimes a colluding individual with a good credit score). This artificially inflates the synthetic identity’s credit score.

Step 5: Credit Extension

With a boosted credit score, the synthetic identity can now successfully open new lines of credit, apply for loans, or secure other financial products.

Step 6: “Bust Out”

The criminal maxes out all available credit under the synthetic identity and then vanishes, leaving the financial institutions with unpaid debts. Since the identity was fake, to begin with, traditional recovery methods or collections are ineffective. The criminal disappears without any real individual being traced.

Effects on the Victim.

  1. Credit Score Impact: Even though the synthetic identity is technically not a real person, the individual pieces of information used are real. Therefore, individuals may find their credit scores affected.
  2. Legal Consequences: Individuals whose information was used could be wrongfully implicated in fraud investigations.
  3. Psychological Stress: Victims have to go through complicated processes to prove that they did not commit fraud, leading to stress and anxiety.
  4. Financial Loss: While the primary financial burden is on the lender, individuals might need to hire legal services to clear their names, incurring financial costs.

Impact on Banking Systems.

  1. Financial Losses: Financial institutions face billions in losses annually due to synthetic identity theft.
  2. Operational Disruption: Banks have to invest in advanced verification and fraud detection systems, which increases operational costs.
  3. Regulatory Consequences: Banks may face sanctions for failing to detect and prevent fraud effectively.
  4. Reputational Damage: Failure to prevent fraud can result in reputational loss, making it difficult to attract and retain customers.

Global Countermeasures by Governments.

  • Data Protection Laws: The implementation of stringent data protection laws can make it difficult for criminals to access personal information.
  • Advanced Analytics: The public and private sectors collaborate in many nations to develop algorithms that can detect patterns consistent with synthetic identity creation.
  • Stricter ID Verification: Many governments are improving the methods used to verify identities at the time of issuing critical documents like SSNs or national IDs.
  • Centralized Biometric Systems: Some countries are considering the adoption of centralized biometric identification systems for verification.
  • Collaborative Efforts: Intergovernmental bodies, such as the Financial Action Task Force (FATF), share best practices and promote collaboration among nations to tackle this global issue.
  • International Collaboration: Interpol, Europol, and other international organizations are working to facilitate data sharing and collaborative efforts to fight synthetic identity theft.
  • Legislative Actions: Governments are enacting laws specifically targeting identity theft and related financial crimes.
  • Public Awareness: Educating the public on the risks and signs of synthetic identity theft can also act as a deterrent.


Synthetic identity theft is a sophisticated and damaging form of fraud that poses significant challenges for victims, financial institutions, and governments. While technology and globalization have made it easier to commit such fraud, they also offer the tools to combat it effectively. Through concerted international effort and advanced countermeasures, it may be possible to substantially mitigate synthetic identity theft’s impacts.