A Culture of Cyber Readiness
When we think about payment fraud, we usually think of it as hijacking the identities of real payees (people, businesses or other organizations) and using them to trick payors into making payments to accounts that appear to be entities they know.
But, the fastest-growing form of financial fraud in the U.S. is synthetic identity theft based on fictitious Personally Identifiable Information (PII) such as a Social Security number, a modified version of existing PII or a combination of the two.
This type of fraud is most pervasive as a threat to credit card companies and banks, but criminals also target insurance companies, government agencies and businesses that extend credit.
Continue reading to find out:
It begins with a new identity that has no credit history. A synthetic identity fraud scheme takes time to develop. Scammers often start on the dark web, purchasing little-used PII and other information (such as that of children or seniors) that has been compromised by data breaches, social engineering or other methods. Other times, they concoct it from scratch. Fraudsters impersonate HR departments, directing employees to sign in using what appear to be official links. Then they apply for credit, knowing that they will be rejected. But by applying, they trigger the creation of credit profiles. Then they repeatedly apply for credit from companies that offer cards to higher-risk applicants. Once they obtain limited credit, they make small purchases and pay for them in order to build credit histories over time.
Often, scammers build credit by attaching themselves as authorized users to existing credit cardholders using the compromised data they’ve acquired. The scammers do not have cards assigned to them and no activity is reported, but they are using their unwitting hosts’ good credit to burnish their own.
With a positive credit profile built, a fraudster will “bust out” by maxing out the credit line and disappearing. In some cases, they’ll milk it for even more by claiming, ironically, that they’ve had their identities stolen, to effectively double their take when the charges are removed. Also, they may enhance their take by maxing out their credit and paying it off with a phony check.
This type of fraud is difficult to detect, but there are precautions you can take to spot it and actions to take if you suspect it.
Read more on how to protect yourself and your business from synthetic identity fraud.
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