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Kelvin Lyles had been busy. When police raided his home in Atlanta in December 2015, they found “information for over 300 synthetic identities, fake driver’s licenses, a fake social security card, and numerous credit cards held in the names of individuals other than Lyles,” reported the US Attorney’s office. Police said that “Lyles attempted $435,862.10 in fraudulent credit card transactions and succeeded in obtaining approximately $350,000.” Lyles is now spending three years and 10 months in federal prison for wire fraud.

He had used synthetic identities to establish credit histories involving false Social Security numbers with credit reporting agencies. He had created synthetic identities to obtain credit cards in the names of people who did not exist, then used online credit processing to charge transactions to credit cards with all the ill-gotten funds going directly to him.

The news release from the US Attorney’s office doesn’t mention whether Lyles rented an apartment with a phony identity, but he probably didn’t apply for work since his criminal activity was so lucrative that he didn’t need a job. But if he had applied somewhere, the rental or business owner would have had a difficult time finding out that who Lyles claimed to be was fraudulent.
Unfortunately, Kelvin Lyles case is rare, not rare that his crime is unusual, but rare that he got caught and prosecuted. Synthetic identity fraud is a growing criminal activity and rarely results in a prosecution much less a conviction simply because the crooks are hard to find. “It’s almost like a ghost is committing these crimes,” said prosecutor Warren Kato with the Los Angeles County District Attorney’s Office. Synthetic Identity fraud has become the largest kind of identity fraud accounting for some 80-85 percent of identity fraud, reports ID Analytics.
Because it’s a danger to anyone who checks the qualifications of applicants, it’s up to us to protect ourselves. With synthetic identities, it’s hard to know if the person who is applying is actually the person he or she claims to be. Synthetic people are hard to pin down, but you can do it with careful screening, by believing only what you can confirm. We’ll look at how in a minute.

There are obvious reasons why someone would use a fake identity. One is credit so bad he or she would be sent packing when trying to rent a Barbie playhouse, but there are far more nefarious reasons. One is sex offenders. They are required to register and report their addresses forever, putting a damper on the possibility of their renting an apartment or getting a job. But if they hide their identities, if they become another person entirely, they have a “new life,” so to speak. Then there are the violent criminals, people you almost assuredly don’t want living in any place you own or working in your business. New identity, presto! They can live where they want or maybe even get a job.

The General Account Office reports, “Synthetic identity fraud (SIF) is a crime in which perpetrators combine real and/or fictitious information, such as Social Security numbers (SSN) and names, to create identities with which they may defraud financial institutions,
government agencies, or individuals.”

Here’s how these crooks create synthetic identities.

Credit Profile/Privacy Numbers (CPN): They are called Credit Privacy Numbers (CPN), or Secondary Credit Numbers (SCN), creating “File Segregation” that begins a new credit identity. The companies that sell them promise new credit lines attached to a new credit report based on the Credit Privacy Number. The lowest price to create a new self I found on the internet is $250 and up to $1500 for the full package of a “guaranteed 790 FICO score within 30 days and two new credit lines of up to $25,000 each.” Sounds great, doesn’t it? It isn’t.

These companies give their customers a new number that looks very much like a Social Security Number, and in fact may be a real one, just not theirs. One way they do it is by going online and getting an Employer Identification Number (EIN) from the IRS. It is nine digits long, just like a Social Security Number. Trouble is, in order to obtain an EIN, the IRS wants a Social Security Number that belongs to the person applying for the EIN. Use a bogus one, and it’s a felony. Another way is by finding the Social Security Numbers of children with no credit history, long-term prison inmates, or dead people and selling it to the their customer as a CPN. The General Accounting Office indicates that over 1 million children have their identity stolen each year and are 50 times more likely than adults to be a victim of SIF than adults

The third way is by “issuing” a Social Security Number that hasn’t been issued, and in fact may never be issued. The Social Security Administration lists the ranges. They might be any numbers that include -83-, second number set, because the SSA doesn’t issue any of those until all the numbers from -01- to -82- are issued. In addition, area numbers, the first three, run from 001-772. Areas 666 and 734-749 are unused by the Social Security Administration.

Identity manipulation or compilation: slightly different from the CPN, they modify data slightly to create a new identity that is not recognized by a credit bureau. They may use an existing Social Security Number, such as one from a dead person or a child, who has no credit record, and add a new address and such. They create a new credit record by applying for a credit card. Because there is no record, they get turned down, but the fact that they applied creates a credit record. Then they apply for another credit card. This time there’s a credit record and they may get a credit card with a $250 or $500 limit. They use it and pay it off as agreed. That creates a better credit record, albeit a phony one. They apply for more and more credit, each time getting higher credit limits. Before long, there’s a whole new person, but, of course, a synthetic one.

The more industrious among them will go so far as to start a shell company to facilitate the creation and maintenance of credit files associated with synthetic identities. The shell company gets a merchant account so it can process credit card charges. The criminal reports transactions charged through the shell company, and in the process, creates a credit history for a synthetic identity. The credit reporting agency might catch on and cancel the account, but the crook just creates another shell company to take its place.

Now they wait. When they have enough credit built up, they “bust out,” running up huge balances and getting cash. Then they vanish.

How to catch them
If you are an employer or landlord and checking the credit of an applicant, you may see some red flags run up when you look at a credit report. The first thing to always check is the Social Security Number itself. By doing a “Social Search,” available from a screening company, you can see first, the name or names the number belongs to and second, if it has even been issued at all. If a number has not yet been issued or is an EIN, it will come back as “no record found.” That’s a red flag too large to ignore and entitles you to immediately reject the applicant, assuming he or she wrote the supposed Social Security Number correctly. Another indication might be a credit file that is just a few months old and you’re looking at a 40-year-old person. Hmmm? Then there’s picture ID. It’s difficult to get a driver’s license without proper ID such as a birth certificate, and the license will have the person’s picture, name, address, and birth date on it. Who was the license issued to and what’s the address on the license? Will it always work? No, nothing always works. After all, Kelvin Lyles had phony licenses.

Doubt everything. Verify everything. Check everything by using a screening checklist. The Federal Trade Commission reports that businesses lose $50 billion a year because of Synthetic Identity Fraud, and it is growing. Don’t let it grow in your business.

When Kelvin Lyles gets out of prison, where will he live? Will some rental owner rent to him? Will he apply for a job using a synthetic identity? Check carefully.

By Robert L. Cain

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