Synthetic identity fraud is quickly becoming one of the most dangerous and hard-to-detect forms of financial crime. It hides in plain sight and may slip through systems and deceive lenders and businesses. Unlike traditional identity theft, synthetic identity fraud isn’t about impersonating one real person. It’s about blending fiction with fact to build a new identity from scratch.
This guide breaks down what synthetic identity fraud is, how criminals build these fake profiles, and why it’s such a growing concern.
What is synthetic identity fraud?
Synthetic identity fraud is when a criminal creates a fake identity using a mix of genuine and fabricated information. This type of fraud is different from typical identity theft, where a criminal steals and uses someone’s full identity. Only parts of the information might be real (like a Social Security Number) while the rest is entirely made up.
This makes detection difficult. The synthetic identity appears like a real person on paper, even though it doesn’t belong to anyone in particular. That’s why synthetic identity theft can go undetected for months, even years. It has become one of the fastest-growing types of financial crime across the globe.
How criminals create synthetic identities
The process behind synthetic fraud is methodical. Criminals don’t just create a fake name and walk away. They may build an entire digital life for their persona.
Criminals often start with stolen personal data such as Social Security Numbers (SSNs), which are frequently bought and sold on the dark web.
Children’s SSNs are particularly attractive targets because they usually go unused for years, making them less likely to raise red flags.
Once the criminals have real data like an SSN, they combine it with fabricated personally identifiable information (PII), such as fake names, addresses, and phone numbers, to build a synthetic identity.
This hybrid of real and false data forms a synthetic ID that looks authentic to most systems.
Fraudsters then use the synthetic identity to open smaller accounts like a card or mobile phone contract and pay them off. Over time, this builds a credible credit history and allows fraudsters to access higher credit limits and larger loans.
Once the synthetic identity appears established and trustworthy, larger fraudulent activity begins. Criminals apply for bigger loans and credit cards with no intention of ever paying anything back.
Why synthetic identity fraud is such a growing threat
Synthetic identity fraud is becoming more common for a few key reasons. First, the lack of a clearly defined victim makes it harder for authorities to detect or prioritize. There’s no individual crying foul – just a trail of financial damage and confusion.
It’s also incredibly stealthy. Criminals build these synthetic IDs slowly, taking their time to make them seem real. A fake profile that’s used for minor transactions for a year or two won’t raise immediate red flags. By the time banks catch on, the damage is done.
Children are frequent targets, as their personal data often isn’t tied to any active financial records. It’s easy to use a child’s SSN and create an entirely separate life with it – a life that could go unnoticed until that child becomes an adult and tries to use their credit.
Banks and credit agencies may even misclassify these issues as poor credit behavior rather than suspicious activities.
How criminals use synthetic identities to steal from you
Criminals don’t stop at just using synthetic identities to rack up credit card debt, the ways they exploit these fabricated personas stretch far beyond the financial world. These identities, built from a blend of stolen and fake information, open doors to a wide range of fraud that often flies under the radar.
One of the most common uses is financial fraud. With a synthetic identity, fraudsters can open credit card accounts that look completely legitimate to lenders.
At first, they may even behave like responsible borrowers; making small purchases and paying off balances on time to build trust. But once the credit line grows, the scam kicks in.
The synthetic borrower vanishes into thin air after racking up huge debts. In some cases, these fake identities are used to apply for personal loans, car financing, and even mortgages. All the while, there’s no real person left to track down when the bills go unpaid.
In 2024, Toronto Police made 12 arrests and laid 102 charges in a crackdown they called Project Déjà Vu. It came off the back of a financial institution employee reporting synthetic accounts – many of them were owned by the same person.
“The perpetrators of this scheme, which began in 2016, are alleged to have created more than 680 unique synthetic identities, many of which were used to apply for and open hundreds of bank and credit accounts at various banks and financial institutions across Ontario,” Financial Crimes Detective David Coffey explained.
Synthetic identity fraud has also found its way into government systems. Using made-up names tied to valid Social Security numbers, criminals file fraudulent tax returns to claim refunds that don’t belong to them. Others apply for unemployment benefits or even disability support. These are systems designed to help real people in need, yet they’re being drained by identities that were never real to begin with.
Some scammers go further still, using these identities to apply for social housing or other forms of public assistance, exploiting safety nets with ease.
Healthcare systems haven’t escaped either. In some cases, fake identities are used to gain access to medical care. That could mean receiving treatment at a hospital under a made-up name or filling prescriptions that end up resold illegally. This not only creates fake medical records but also leaves real institutions footing the bill. Doctors may unknowingly treat a non-existent patient, while the person behind the fraud stays hidden.
There’s also a darker use for synthetic identities; evading justice. Criminals looking to stay off the radar use synthetic identities as a kind of camouflage. With no direct ties to their real identity, they can travel, rent properties, or even pass background checks. That makes tracking and apprehending them far more difficult for law enforcement. Some fugitives have used synthetic IDs to create entire second lives and slip through systems that rely on names and numbers that no longer represent real people.
Why synthetic identity fraud is hard to detect
One of the biggest challenges with synthetic identity fraud is its subtlety. It doesn’t scream for attention. Instead, it whispers and slips through unnoticed.
There’s usually no clear victim. In traditional identity theft, someone notices a suspicious charge or a loan they didn’t take out. But with synthetic fraud, there’s no one checking — no real person being impersonated fully.
Fraudsters also play the long game. They don’t blow their cover immediately. They often spend months or years building the synthetic identity’s credit reputation before launching major fraud. That patience makes it even harder to track.
On top of that, financial institutions often misinterpret synthetic identity fraud as simple bad credit or financial mismanagement. The accounts are flagged as delinquent but not fraudulent, so the crime continues undetected.
How to spot and prevent synthetic identity fraud
Knowing how to prevent synthetic identity fraud is a massive challenge as this is one of the trickiest types of financial crime. It’s designed to stay under the radar, often going unnoticed for months or even years. But even though it’s complex, there are ways to spot synthetic identity fraud early and stop the fraudsters from causing serious damage.
Spotting synthetic identity fraud isn’t always straightforward. Since it’s built on pieces of both real and fake information, many red flags might not look obvious at first. But there are still signs worth watching for.
Credit report red flags often offer the first clues. If there are accounts or loans showing up that were never applied for, something’s not right. A sudden dip or jump in a credit score with no clear reason could be another warning sign. Misspellings of your name on applications could also be linked to synthetic identity fraud and is a known tactic of scammers.
These irregularities suggest someone else might be using a fake identity linked to a real Social Security Number.
How to protect yourself from synthetic identity fraud
No one can stop fraud entirely, but there are strong ways to reduce the risk. A few good digital habits can make it harder for fraudsters to build synthetic identities using real information.
1: Secure your Social Security Number
The first line of defense is the Social Security Number. That one number is often at the heart of synthetic ID creation. It’s important to keep it out of reach—never hand it over without a legitimate reason. If you are asked for your SSN online, think about whether you are dealing with an official organization or whether you might be the victim of a scam.
Keeping physical documents locked away and digital files password-protected goes a long way toward keeping information safe. Monitor your SSN exposure on dark web.
2: Monitor your credit regularly
Your credit reports aren’t just about whether you are likely to get a loan.
Checking credit reports regularly helps to spot trouble early. Keeping an eye out for unfamiliar accounts or credit activity can catch synthetic identity fraud before it gets worse. Most people can check their credit for free once a year through each of the major agencies. These are Equifax, Experian, and TransUnion.
Some also choose to set up fraud alerts or use a credit freeze. Fraud alerts make it harder for anyone to open new accounts using stolen data. Credit freezes go a step further and lock credit files entirely until they’re manually lifted. These tools are free and effective for adding another layer of protection.
3: Be aware of phishing attempts
Criminals often use phishing to gather pieces of personal data. These scams usually come disguised as emails or texts that ask for sensitive information. Even clicking on the wrong link can expose details that might help build a synthetic identity.
Phishing is still the most common cybercrime that gets reported in the United States by some distance.
Staying cautious around unsolicited messages, especially those that seem urgent or strange, helps keep private data from falling into the wrong hands. Always take time to verify who is getting in touch when being contacted by any organization requesting personal details.
4: Monitor your digital footprint
Run your email through a digital footprint scan (free!) and receive dark web monitoring alerts weekly.
What to do if you’re a victim of synthetic identity fraud?
Sometimes, even with all the right precautions, synthetic identity fraud can still happen. It is vital to act quickly and take steps to freeze your accounts as well as credit to prevent further lending. It is also crucial to report the fraud to the authorities.
1: Freeze your credit
The first move is to contact the three major credit bureaus: Equifax, Experian, and TransUnion. Freezing credit blocks new accounts from being opened under the stolen information. It won’t affect current accounts, but it keeps any new fraud attempts from progressing.
A freeze can usually be done online, and it stays in place until removed. It’s a solid step for stopping further damage while investigating the situation.
2: Report the fraud
The next step is to make it official. Filing a report at IdentityTheft.gov, the US government’s central hub for identity theft issues, creates a paper trail. The system provides a recovery plan and can help with documenting what happened for future claims or investigations.
Reporting also helps build bigger cases. Many synthetic fraud operations involve networks and organized crime groups, rather than just one thief. Reports help authorities spot patterns and trace activity back to the source.
3: Notify banks and lenders
Banks and credit card companies need to be informed. Fraudulent accounts should be closed and fake charges disputed. Most financial institutions have fraud teams ready to help with account recovery, and early notice improves the chances of a smooth resolution. Your bank may even contact you if they think something is suspicious.
Providing documentation from the IdentityTheft.gov report can help speed up the process. In some cases, it might also be necessary to file a police report, especially if large sums are involved or criminal activity extends beyond financial accounts.
4: Invest in identity theft protection and monitoring
Invest in a reputable identity theft protection and monitoring tool, such as Malwarebytes Identity Theft protection.