Cyber-attacks leads to Synthetic Fraud

There is a strong connection between increasing cyberattacks and the rise of synthetic fraud. Stolen personal information (PII) like names, addresses, social security numbers, and credit history from data breaches become raw materials for creating synthetic identities.

Hackers use stolen login credentials from one platform to access other accounts, potentially obtaining more PII for synthetic identities. Synthetic fraud, often perpetrated with "Frankenstein identities," is posing a major challenge for financial institutions and businesses alike. Malware can infect devices and steal personal data directly, further feeding the pool of information used for synthetic fraud.

In addition to cyber-attacks, there is an increase in people creating artificial identities what we can term as “Frankenstein Identities”, created with the primary purposes of stealing, defrauding, and even money laundering.

Unlike traditional identity theft, which uses stolen identities, synthetic identities are entirely fabricated, making them harder to detect through conventional verification methods. Synthetic fraud losses are rapidly increasing, surpassing traditional identity theft in some cases, particularly affecting credit cards and banks.

Synthetic identity fraud begins with the theft of identification numbers such as Aadhaar, PAN, or license numbers, which perpetrators may acquire through various means such as hacking into databases, storing them, or obtaining them from the darknet. Such Frankenstein Identities then apply for loans, credit cards and operate until detected, but keep multiplying rapidly thereby landing heavy damage to the financial system besides laundering the money.

Unlike "smash-and-grab" scammers, synthetic fraudsters play the long game, patiently building a seemingly legitimate credit history over months or even years.

They start with small credit requests, like secured credit cards or store cards, gradually building trust with lenders and increasing their credit limit. They make timely payments and carefully manage their credit utilization to further bolster their creditworthiness.

Financial Institutions can predict and capture “Synthetic Fraud” applicants early in the process by applying accelerated deep learning and statistical machine learning technologies.

Moving ahead, it’s high time to work on cracking down on the big emerging risk of cyber-attacks and Synthetic fraud for the country to continue its safe and secure journey towards Digital India.

Dr. Deepak Kumar Sahu Editor-in-chief- VARINDIA