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Dr. Donald Rebovich,
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drebovich@utica.edu
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CIMIP Participates in Federal Reserve Development of Industry-Recommended Definition of Synthetic Identity Fraud



The Federal Reserve has announced an industry-recommended definition of synthetic identity fraud, which was developed by a focus group of fraud experts in response to a widespread issue: differing definitions in use make it difficult to identify and address this type of fraud. CIMIP served as one of 12 expert groups participating in the effort.

Contact
drebovi@utica.edu

Utica, NY (09/13/2021)
- The Federal Reserve has announced an industry-recommended definition of synthetic identity fraud, which was developed by a focus group of fraud experts in response to a widespread issue: differing definitions in use make it difficult to identify and address this type of fraud. CIMIP served as one of 12 expert groups participating in the effort.

The industry-recommended definition of synthetic identity fraud (SIF) is the use of a combination of personally identifiable information (PII) to fabricate a person or entity in order to commit a dishonest act for personal or financial gain.

The Need to Define Synthetic Identity Fraud
Problem: Multiple definitions in use which can lead to inconsistent categorization and reporting, making it difficult to identify and mitigate this type of fraud.

To respond to this challenge, the Federal Reserve assembled a focus group of 12 fraud experts to develop an industry-recommended definition of synthetic identity fraud

Final Synthetic Identity Fraud (SIF) Definition
The use of a combination of personally identifiable information to fabricate a person or entity in order to commit a dishonest act for personal or financial gain.

As defined by the special focus group , Synthetic Identity Creation pertains to the following:

Below, are personally identifiable information (PII) elements that may be used to create a synthetic identity.

Note: These are solely examples and do not represent an exhaustive list.

Examples:

Primary
Identity elements that are, in combination, typically unique to an individual or profile

  • Name
  • Date of birth
  • Social security number
  • Other government-issued identifiers (such as a passport or tax identification number)
Secondary
Elements that can help substantiate or enhance the validity of an identity but cannot establish an identity by themselves

  • Mailing or billing address
  • Email address
  • Phone number(s)
  • Digital footprint (such as device ID or IP address)

Common Uses of Synthetic Identities in Fraud:

Type of Use

Description

  • Credit Repair : Used to hide from previous negative credit history or bad debt in order to appear creditworthy
  • Fraud for Living: Used to apply for employment or services such as utilities, housing, and bank accounts because an individual is unwilling or unable to do so with existing primary PII elements, with no intent to default on payment
  • Payment Default Scheme: Used to obtain goods, cash, or services with no intent to repay over a period of time
  • Other Criminal Activity: Used to facilitate a means to an end as part of illegal acts

Note: These illegal acts can include activities such as avoiding legal responsibilities, money laundering, human and/or narcotics trafficking, up through and including terrorist financing; these types of activities can be conducted by a wide variety of criminals, ranging from individuals to transnational organized crime groups.

About the Federal Reserve and Payments
As the U.S. central bank, the Federal Reserve System provides payment services and seeks to foster the stability, integrity and efficiency of the nation’s monetary, financial and payment systems. In 2013, the Federal Reserve initiated a broadly collaborative effort to enhance the end-to-end speed, security and efficiency of payments in the United States. The 2015 Strategies for Improving the U.S. Payment System paper defined five desired outcomes and strategies for pursuing advancements in speed, security, efficiency and international payments through stakeholder collaboration. For more information, visit FedPaymentsImprovement.org.

The synthetic identity fraud definition was developed by a cross-industry focus group to provide a consistent way to identify and classify this type of fraud across the payments industry. This definition of synthetic identity fraud is not intended to result in any regulatory or reporting requirements, imply any liabilities for fraud loss, or confer any legal status, legal definitions, or legal rights or responsibilities.

Defining Synthetic Identity Fraud: Federal Reserve Launches Focus Group - FedPayments Improvement