Source: Federal Reserve
Synthetic identity fraud is reported to be the fastest-growing type of financial crime (Off-site) in the United States, accounting for billions in losses annually.
Moreover, the use of multiple definitions for synthetic identity fraud throughout the industry poses a fundamental problem - inconsistent categorization and reporting, making it difficult to identify and mitigate this type of fraud.
To respond to this challenge, the Federal Reserve convened a cross-industry focus group of 12 fraud experts in the fall of 2020 to develop a recommended definition of synthetic identity fraud.
“A shared understanding of what constitutes synthetic identity fraud is expected to improve its detection, measurement and mitigation in the payments industry,” said Jim Cunha, senior vice president at the Federal Reserve Bank of Boston. “Consistent use of this definition within and across organizations can enable us to discuss, identify and classify synthetic identity fraud in a similar manner.”
This spring, the focus group concluded their work with the recommendation that the following definition be used by the payments industry as it relates to synthetic identity fraud:
Synthetic identity fraud (SIF) is the use of a combination of personally identifiable information (PII) (Off-site) to fabricate a person or entity in order to commit a dishonest act for personal or financial gain.
To supplement the definition and further educate the industry, the group also outlined identity elements that may be used to create a synthetic identity, common uses of synthetics and the potential applications of the definition. Learn more about the focus group’s efforts and the development of this definition.