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Charlotte was born in 2012, a healthy, happy girl with responsible parents who immediately found a pediatrician to ensure that Charlotte would continue to be healthy and happy.  When her  proud new parents went to their new pediatrician’s office, they dutifully filled out paperwork including Charlotte’s newly issued Social Security Number.  That was their big mistake.  There is no way that the paperwork they filled out was secure.   It wasn’t long before Charlotte became the victim of one of the latest fraud schemes by crooks, Synthetic ID, when the patient records of the pediatrician were hacked.  The result was something either Charlotte nor her parents might know about for almost two decades.


The impetus for this latest scheme was the EMV card.  You know, that credit card that has an embedded chip, the kind you slide in the card reader and the bank okays the transaction.  In the bad old days, if crooks stole a credit card, they could go on a spending spree until they were either caught or ran up the card to its limit.  Now, though, stolen and counterfeited cards don’t work the way they did in the wild west of credit card theft.  So on to new schemes.


This one is particularly nefarious.  Bad guys hide under carefully constructed rocks and behind carefully cultivated bushes to create a new “person.” They create a fake identity by using a legitimate Social Security Number or even a made-up one, creating a phony name and birth date, creating a phony address, and using a burner phone as a contact number.  The address is most likely legitimate; it may be that of one of their partners in crime, but that’s where the bad guy gets mail.  The best sources of usable Social Security Numbers are children, as in the case of Charlotte, the elderly, the dead, and unused numbers.  Once they have a number, off they go and a whole new person is “born.”


In 2030, when Charlotte turns 18, she may want to get a student loan to go to college.  Trouble is, her Social Security Number was already used by a bad guy for over a year to create a synthetic identity starting 18 years earlier and has red flags all over it.  Now Charlotte has a problem to sort out before she can get a student loan, or maybe a job or rent an apartment.


Synthetic IDs are relatively easy to set up what with so much financial activity online.  Of course, this brand new person doesn’t have a credit file, but he will shortly.  He does that by applying for a credit card and gettting turned down, naturally, but that creates a file.  Step one is a success.


Now he has to establish credit.  He can do that by becoming an “authorized user” of someone else’s card.  That could well be one of his crook cronies who also used faked credit to establish a credit record.  Equifax explains in its white paper “The Stark Reality of Synthetic ID Fraud,” “An authorized user is someone who is granted access to another person’s credit card account.  Authorized users receive full access to the account’s credit line, but are not legally responsible for paying the balance. . . from their use of the account.” After account holder’s bills have been paid regularly and on time for six months, our brand new person has a credit record and can apply for a credit card again.  This time he will likely get one.  Step two is a success.


Credit established, now he can get utilities in his name, cable service, cell phones, online bank accounts, cars, and many other things that require a credit check.  Step three is a success.


Then, he applies for more credit, either loans or credit cards, all online because face-to-face is an iffy proposition.  He can accumulate thousands of dollars in credit on his way to the “bust out.”  Step four is a success.


Now he lurks, staying current on bills, but waiting for the ideal moment to “bust out” from under his rock or behind his carefully cultivated bush, ready to take advantage of all that hard work.  He maxes out every credit line and “disappears.”  Actually, disappears is probably a misstatement, since he never “appeared” in the beginning.  It was all a sham.


Creditors come looking for him, but he’s nowhere to be found because he doesn’t exist.  After a few futile months, they write off the charges.  A study by Equifax found that synthetic ID fraud costs communications and energy providers up to $25 million a year.  The average charge-off is $866 per account, and the average wireless loss is $1,500 per account.  The study found further that half a million accounts were potential synthetic identities in 2017.  Another study done by Auriemma Consulting Group (ACG) estimates that 5 percent of accounts charged off and up to 20 percent of credit losses and up to $6 billion in the past year are attributable to fake identities.  They don’t include store credit cards or auto loans in their calculations, so the total is likely much higher.


The study only looked at credit issues, not how much rental owners and managers and employers may lose.  Rental owners can be especially vulnerable if they don’t do a proper job of screening applicants.  They may run a credit check, but it comes back that the person has decent credit.  And that’s all the further they check.


The best way to combat such people is a thorough check.  First, the driver’s license has to match  the information on the rental application.  Driver’s licenses require that someone show up in person at the Motor Vehicle Department of show ID proving they are who they are.  That requires at least a birth certificate and possibly other government-issued identification.  Yes, someone could dummy up one of those, but the idea behind a synthetic identity is to steal actual money, not drive under a new identity.  Even so, no driver’s license is required to register a vehicle, so the car he is driving could be registered to the synthetic identity.


That said, the driver’s license name has to be the same as that on the credit report.  Just ask to see the license.  Now check the previous residences.  Don’t just call the names and phone numbers listed as previous landlords, they are likely his criminal buddies.  Go online to the county property tax records and find the name of the owners of the properties where he said he used to live.  If they don’t match the names of the previous landlords, your applicant has some explaining to do.  Chances are he won’t explain.  He’ll just vanish.  Better he vanishes now than six months from now owing several months’ rent.


Checking employers could be another interesting piece of research.  Same drill here.  Look up the actual phone number of the employer and see if it matches the one on the rental application.  If it doesn’t, he has more explaining to do.  Once again, he most likely won’t explain.


And what about Charlotte?  Baby Charlotte would certainly not check her credit, but parents can and might want to think about it. If an actual credit report appears, they will want to act to ensure that when Charlotte is old enough to need a Social Security number for work, school, or a place to live, the record is red-flagless.


Ira Goldman of ACG said, “Synthetic fraud will continue to be a key migration point for fraudsters in credit card, auto finance, and other segments of consumer lending.”  Those who stand to lose the most would do best to redouble their efforts to combat it by double and triple screening of applicants.


By Robert L. Cain

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