Spike in fake ID

Identity fraud, especially so-called synthetic schemes that use completely or partly made-up identities, is on the rise and hitting banks hard.

In a classic example of synthetic identity fraud, fraudsters create fake IDs to obtain credit cards, diligently pay their bills for years and keep getting the credit limit raised. Once they’ve reached a certain threshold (say $50,000), they do a “bust out,” where they take out a cash advance for $49,000 and skip town. The bank keeps calling and trying to collect, but there’s no real person to collect from and the lender ends up writing off the credit loss.

More recently, another type of synthetic ID fraud has emerged, fueled by the massive data breaches of 2014. In these schemes, hackers cross-reference data obtained from different sources — card numbers from Home Depot, for example, and Social Security numbers from another breached organization. Then they call the bank and ask to change the PIN on the card account, which some banks will do for a customer who can provide a Social Security number and card number. (Some even offer automated systems to take care of this.) Hackers can stitch all this data together and sell it on the black market as a fully emulated debit card that allows an individual to walk up to an ATM, enter the PIN and withdraw cash.

 

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