“I collected the instruments of life around me, that I might infuse a spark of being into the lifeless thing that lay at my feet.”
This quote from Mary Shelley’s 1816 classic novel "Frankenstein" describes Victor Frankenstein’s creation of a humanoid creature from parts of corpses.
In modern times, one of the fastest growing forms of identity theft is sometimes called “Frankenstein Fraud” because it involves creating a new identity using someone’s real identity elements with other unrelated or even fabricated data. Crooks may combine the Social Security number of a real person with a fake birth date and the address of an abandoned property to create a fake identity. The most desirable Social Security number is one belonging to a person who isn’t
likely to be checking his or her credit file or applying for credit, such as a child, a homeless person or a prisoner.
The actual name of the crime is “synthetic identity theft” and it’s harder for financial institutions to detect than traditional identity fraud such as use of a stolen credit card. Deloitte projects it will generate at least $23 billion in losses to financial institutions and other companies by 2030, with an average loss between $81,000 and $98,000 but potentially running into the millions of dollars. The perpetrators are often overseas crime rings.
The crooks may take months or even years to pull the trigger (called “busting out”) on synthetic identity fraud. The Federal Reserve describes one scenario:
- Step 1 – the fraudster buys a stolen Social Security number on the dark web and combines it with other data to create the synthetic identity.
- Step 2 – the fraudster applies for credit online. The lender submits an inquiry to a credit bureau, finds out the applicant has no credit history, and declines the application. But the inquiry causes a credit file to be created.
- Step 3 – the fraudster continues to apply for credit until a lender, often one that makes high-risk loans, approves the application. The fraudster establishes a timely repayment history with the credit limit increasing over the years, while also using the account as a springboard to open additional accounts.
- Step 4 – the fraudster bolsters the synthetic identity through such means as being added as an authorized user on other accounts by compensating the owner of the account, establishing a social media presence, obtaining false identification documents like a library card, and even creating fake businesses.
- Step 5 – the fraudster cashes out the lines of credit and disappears. The lender may simply treat it as another case of a borrower defaulting on an obligation and never know there never was a real borrower.
The BBB offers these tips to reduce the chances that your personally identifying information can be used to create a synthetic identity and to mitigate damage to you if it is:
- Monitor your credit reports for free through AnnualCreditReport.com.
- Consider freezing your credit reports to prevent fraudulent accounts being opened in your name or maybe using some of your information. Ask the credit bureaus to create and then freeze reports for your children.
- Be careful what you share on social media.
- Use strong, unique passwords and enable Multi-Factor Authentication wherever it’s offered.
- Be alert to unusual mail indicating your information has been compromised.
Randy Hutchinson is president and CEO of the BBB of the Mid-South.
This article originally appeared on Memphis Commercial Appeal: BBB of the Mid-South: Frankenstein fraud is growing
