The Threat From Synthetic Identity Fraud Remains Potent, TransUnion Finds

The risk exposure to businesses from synthetic identity fraud totaled $3.2 billion during the first half of 2024—an all-time high, and up from $3 billion during the same period a year ago, says TransUnions’s “H2 2024 Update” to its State of Omnichannel Fraud Report.

Criminals actively used synthetic identities to open bank- and retailer-issued credit cards and take out auto and unsecured personal loans. The share of accounts opened across those four categories by criminals using synthetic identities rose 18% year-over-year in the first half of 2024, according to the report. The increase in the percentage of accounts opened using synthetic identities is expected to dramatically increase chargeoff rates in the future, the report adds. 

The risk exposure to bank card issuers from this issue was essentially flat during the first half of 2024, totaling $1 billion, compared to $1.1 billion for the same period in 2023. Risk exposure from synthetic identities to retail card issuers declined during the first half of 2024, totaling $121 million, compared to $143 million a year earlier. 

Synthetic identities are typically cobbled together from consumer information gathered from data breaches combined with false information. For example, criminals create synthetic identities by pairing valid Social Security Numbers with personally identifiable information that is often false

“The total lender exposure to synthetic identities for auto loans had balances roughly double those of the bankcard sector which ranked second among credit types analyzed,” the report says.

As this type of fraud increases, criminals often look to recycle a synthetic identity that has been successfully used to open a new account through a technique called credit washing. Credit washing is a credit-manipulation scam intended to wipe out negative information from an identity’s credit history by making a false claim of identity fraud.

“These false credit-report disputes could be made against accounts opened using a stolen consumer identity or synthetic identity, or unauthorized transactions on a consumer’s legitimate credit account,” the report says.

The percentage of newly opened accounts connected to synthetic identities was 0.20% of all accounts across bank and retail cards and auto and personal loans. Bank card issuers had the highest percentage of accounts opened with synthetic identities (33%) during the half of 2024, followed by auto lenders (27%).

On a global basis, synthetic identity fraud increased more than 1.5 times during the first half of 2024, compared to the same period a year earlier, making it the fastest-growing form of digital fraud. Electronic funds transfer fraud is another fast- growing segment in the synthetic-identity category, more than doubling during the first half of 2024, compared to a year ago.

More broadly, businesses in the United States, Canada, the United Kingdom, and India reported fraud losses totaling 6.5% of their revenue. Collectivley, those losses totaled $359 billion.

Businesses in the U.S. reported fraud losses equaled 6.7% of their revenue over the past year, totaling $112 billion.

For its report, TransUnion surveyed executives at more than 800 business across the four countries.