How Can Biometrics Stop Synthetic Identity Fraud?

Abstract:

Synthetic identity fraud has become a significant challenge for businesses, financial institutions, and governments worldwide. This type of fraud involves the creation of fictitious identities using a combination of real and fake information, making it difficult to detect using traditional identity verification methods. Biometrics, which involves the use of unique physical or behavioural characteristics for identification purposes, has emerged as a promising solution to combat synthetic identity fraud.

This article explores how biometrics can be utilised as a powerful tool to prevent synthetic identity fraud. We will discuss various biometric modalities, their advantages and limitations, and their potential to mitigate synthetic identity fraud. Additionally, we will analyse the ethical, legal, and privacy considerations associated with the use of biometrics for identity verification, and highlight best practices for implementing biometric solutions to prevent synthetic identity fraud.

Introduction:

Synthetic fraud is incredibly dangerous and is a major problem facing the financial sector. Unlike third-party fraud, where an entire identity is stolen and used to defraud enterprises and victims, synthetic fraud frequently has no specific consumer victim.

What is synthetic identity fraud?

By definition, synthetic identity theft is the crime of committing identity fraud while using fictitious information. This means that some or all of the information behind the identity is false.

Synthetic identity fraud is a type of fraud where fraudsters create new identities by combining real and fake information, making it difficult for traditional identity verification methods to detect.

For example, when committing synthetic identity theft, a fraudster may use a real social security number. They will then combine this with fictitious information, such as false names and addresses that aren’t linked to that account. Synthetic identity theft is also linked to document tampering, which is a different type of fraudulent attack.

Biometrics, on the other hand, is a technology that uses an individual’s unique physical or behavioral characteristics to authenticate their identity.

The different types of synthetic fraud

Generally speaking, the methods used by fraudsters when creating synthetic identities fall into two categories: manipulated synthetics and manufactured synthetics.

* Manipulated synthetics

With manipulated synthetics, the fraudulent identities generated are based on real identities. In these instances, limited changes are made to an individual’s social security number or personally identifiable information.

An individual will often use a manipulated identity to hide their history and gain access to credit. For example, someone with a bad credit history may create a fictitious identity in order to be approved for credit. Manipulated identities are not always created with malicious intent, and in this instance the customer may intend to repay the credit they receive.

* Manufactured synthetics

Manufactured synthetic identities used to be composed of valid pieces of data that were assembled from multiple identities and then stitched together. For example, one person’s social security number would be matched with a different person’s address and a third person’s name. For this reason, they were also referred to as ‘Frankenstein identities’.

However, although this method is still in operation, today fraudsters instead usually build these identities using invalid information. This includes creating random social security numbers from the same range of numbers the Social Security Administration now uses to issue social security numbers to genuine citizens.

Following this, the fraudster then adds personally identifiable information that does not belong to any known customer. Criminals switched to using this technique as this form of manufactured synthetics is much more difficult to detect

Understanding Synthetic Identity Fraud

Synthetic identity fraud is a growing problem for businesses and financial institutions worldwide. The fraudsters use a combination of real and fake information to create new identities, making it difficult for traditional identity verification methods to detect. This type of fraud involves creating a new identity by combining real and fake information, such as social security numbers, date of birth, and addresses.

Detecting synthetic ID theft

Sadly, synthetic identity theft is one of the most difficult types of fraud for businesses to detect and guard against; particularly because fraudsters are beginning to employ advanced and sophisticated methods to make it look like these identities belong to real customers who have limited credit histories.

Adding to this, it’s very difficult for financial institutions to detect that synthetic identity fraud is currently taking place. This is because fraudsters establish a history for the synthetic identity and build a payment history before they use the identity for nefarious purposes. Due to this, it often looks like the account of an individual who is experiencing financial difficulties, rather than an account that is owned by a criminal who is deliberately racking up charges.

That said, businesses can put systems and processes in place to help them detect synthetic identity theft. For example, financial institutions can employ machine learning and artificial intelligence in order to understand customer behaviour patterns and spot anomalies. On top of this, organisations can improve the way they establish customer identities by analysing and connecting a greater variety of data points, including third-party data sources.

The easiest way for businesses to prevent identity fraud is to introduce sophisticated identity verification methods. While a synthetic identity that combines a real social security number with fake data may be able to bypass a credit bureau check, it will not fool an identity verification platform, which will spot the inconsistencies in the data provided. On top of this, establishing such a system will also mean that the fraudster needs to submit a fraudulent identity document, which would also be flagged by the system.

How Biometrics Can Prevent Synthetic Identity Fraud

Biometric authentication is a technology that uses an individual’s unique physical or behavioral characteristics to authenticate their identity. Biometric authentication can be used to prevent synthetic identity fraud in several ways. First, biometrics can be used to verify the identity of the individual before creating the identity document, such as a driver’s license or passport. Biometric authentication can ensure that the person is who they claim to be and reduce the risk of fraud.

Biometric authentication can also be used to verify the identity of an individual when they apply for credit, open a bank account, or conduct a financial transaction. For example, a fingerprint scanner or facial recognition technology can be used to verify the identity of the individual before granting access to the financial system. Biometric authentication can make it difficult for fraudsters to create synthetic identities and conduct fraudulent transactions.

Thirdly, biometric authentication can be used to detect and prevent fraud in real-time. Behavioral biometrics, such as typing speed, gait analysis, or voice recognition, can be used to detect unusual behavior that could indicate fraudulent activity. For example, if a fraudster is using a synthetic identity to apply for credit, behavioural biometrics can detect if the person is typing too slowly, indicating that they may not be familiar with the keyboard or the language.

How to protect yourself from synthetic fraud attacks

Although the onus on detecting and preventing identity fraud is largely placed on businesses, customers must also keep their information protected and ensure it cannot be stolen and used by fraudsters. This is crucial in the battle to detect and prevent identity fraud.

Due to this, businesses should encourage their customers to:

• Monitor their credit score regularly
• Lock or freeze their credit reports in order to stop other people from opening an account in their name
• Be careful with the information they share with others and on social media
• Keep an eye on their email and be suspicious about opening unusual links
• Be aware of the latest methods used by fraudsters, including phishing attacks and malware attacks

Of course, unless a customer is complicit in creating or using a synthetic identity, they won’t be responsible for any of the fraudulent activity. However, they should still be guarded with their information and take proactive steps to prevent fraudsters from accessing this information.

Examples of synthetic ID theft techniques to look for

In order to make the synthetic identity appear real, fraudsters will employ a variety of tactics. The more real they can make the identity appear, the higher the level of payout they can expect to receive.

Due to this, a criminal may attempt to:

• Create false identity documents for the fraudulent identity
• Establish a social media presence
• Use drop addresses
• Create fake businesses

In carrying out these techniques, the criminal can build a credit history much more quickly.

If the criminal in question is adept at committing synthetic identity theft, then they will likely employ these techniques simultaneously and at scale.

Advantages and Challenges of Biometric Authentication for Synthetic Identity Fraud Prevention

Biometric authentication has several advantages when it comes to preventing synthetic identity fraud. Firstly, biometric authentication is more secure than traditional authentication methods, such as passwords or PINs. Biometric data is unique to the individual and cannot be easily replicated by fraudsters.

Secondly, biometric authentication is more convenient for users, as they do not need to remember passwords or carry identity documents. Biometric data is always with the individual and can be used for multiple purposes.

However, biometric authentication also has some challenges that need to be addressed. Firstly, there are privacy concerns associated with biometric data. The collection and storage of biometric data raise concerns about the misuse of the data by organisations and individuals.

However, biometric authentication can be expensive to implement and maintain. The cost of biometric technology can be a significant barrier for small businesses and financial institutions.

Advantages of Biometrics in Preventing Synthetic Identity Fraud:

Biometrics refers to the use of unique physical or behavioral characteristics to identify individuals. This technology has become increasingly popular in recent years, and it has been widely adopted for various applications, including preventing synthetic identity fraud. Synthetic identity fraud is a type of fraud that involves the creation of fake identities using a combination of real and fictitious information.

Some advantages of biometrics in preventing synthetic identity fraud:

1. Unique Identification: Biometric technology can identify individuals based on their unique physical or behavioral characteristics such as fingerprints, iris scans, facial recognition, voice recognition, etc. This ensures that the identity of a person is not falsely represented and creates a unique identity in the system.
2. Authentication: Biometric technology allows for easy and secure authentication of users, as the technology verifies the user’s identity before granting access to a system or approving a transaction. By using biometrics, it becomes extremely difficult for fraudsters to create fake identities, as they cannot replicate a person’s biometric data.
3. Increased Security: Biometric technology provides an additional layer of security to the authentication process, making it difficult for fraudsters to impersonate an individual. This makes it difficult for criminals to use synthetic identities to commit fraud or gain unauthorised access to secure systems.
4. User Convenience: Biometric technology is a convenient way for users to authenticate their identities, as they do not need to remember passwords or carry around identification documents. This makes it easy for users to access secure systems, and reduces the likelihood of individuals sharing their passwords or losing identification documents, which can be used for fraud.
5. Cost-Effective: Biometric technology can be cost-effective in the long run, as it reduces the need for manual identity verification and prevents fraudulent activities. It also minimizes the time and cost involved in investigating fraudulent activities and identifying synthetic identities

Conclusion:

Synthetic identity fraud is a growing problem that requires innovative solutions. Biometric authentication is a promising technology that can be used to prevent synthetic identity fraud. Biometric authentication can be used to verify the identity of the individual before creating identity documents, verify identity when conducting financial transactions, and detect fraud in real-time. While biometric authentication has several advantages, it also poses some challenges that need to be addressed, such as privacy concerns and high implementation costs. Overall, biometric authentication has the potential to be a powerful tool in the fight against synthetic identity fraud.

By adopting biometric technology, organisations can effectively prevent synthetic identity fraud and safeguard their systems and sensitive data.

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