HOW IS A SYNTHETIC

IDENTITY CREATED?

Synthetic identity fraud is defined as 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. Before this type of fraud can be
committed, the identity itself must be created. Read on to understand how a
synthetic identity is created and then often groomed for a specific use.

MODULE 1 – SECTION 1
HOW A SYNTHETIC IDENTITY ISSynthetic
CREATED identity fraud (SIF) is the use of a combination of personally

be used to create a synthetic identity. These are solely examples and do not

INITIAL CREATION OF THE IDENTITY represent an exhaustive list.

PASSPORT
Two critical pieces of synthetic identity creation are the
Synthetic Synthetic
elements used and how they are pieced together.
Identity Fraud Identity Fraud
PRIMARY ELEMENTS: NAME BIRTH CERTIFICATE
DOB
Elements Used
Name SSN
Fraudsters can use a multitude of PII elements to Name
create a synthetic identity. Below are examples of theDate of Birth / / Date of Birth

types of elements (primary versus supplemental) that

IP ADDRESS

Social Security Number

are often 000 00
utilized: 0000 Social Security Number + other government issued identifiers
PASSPO
• Primary elements: Identity elements that are,
MOBILE PHONE ACCOUNT RT Passport
Tax
in combination, typically unique to an Examples include: name, date of birth, Social Security number and other ID
Other Government-Issued Identifiers
individual or profile. TAX I
D

Examples include name, date of birth,

Social Security number (SSN) and other
government-issued identifiers (such as a passport or tax identification number).

• Supplemental elements: Elements that can help substantiate or enhance the validity of an identity
but cannot establish an identity by themselves.

Examples include mailing or billing address, email address, phone number(s) or digital footprint
(such as device ID or IP address).

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 HOW IS A SYNTHETIC
IDENTITY CREATED?

How the elements are pieced together

These PII elements can be taken from a real identity or made up as part of the synthetic creation process.
There are three main ways, or methods, for creating synthetic identities:

Method Description

Involves creating completely fictitious personally identifiable information

elements, without using any known real or compromised elements.

Fabrication Example: An individual creates a synthetic identity by inventing a new name,
selecting his favorite holiday for the date of birth, and choosing a
random number for the SSN (keeping in mind the conditions that
must be met to be considered valid).

Limited modifications to a real identity’s personally identifiable information

elements.

Manipulation
Example: An individual creates a new identity with his name and date of birth,
but with a modified SSN (altering just a few digits of the SSN).

Involves a combination of real and fake personally identifiable information.

Compilation Example: An individual creates a synthetic identity using his SSN but a made-up
name and post office box as a mailing address.

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 HOW IS A SYNTHETIC
IDENTITY CREATED?

VALIDATING THE IDENTITY FOR FUTURE USE

Once an identity is created, the fraudster must introduce it into the financial system. The steps below identify a
common approach used by fraudsters to prepare the synthetic for maximum use.

CREDIT LINE EXAMPLE

Step 1: Fraudster applies for credit using the created identity

The fraudster begins validating the identity by first applying for a credit line of some sort. This prompts the
financial institution to submit an inquiry to one or more credit bureaus, which will report that the identity does not have
a credit history. As a result, the financial institution typically rejects this initial application for credit. However, this initial
inquiry creates a credit file for the synthetic identity – even though the application was rejected.

Step 2: Fraudster repeatedly applies for credit until approved

The fraudster continues to apply for credit at various financial institutions until one finally grants approval.

Step 3: Fraudster builds, and sometimes accelerates building of, a positive credit history
The fraudster will typically use this line of credit and establish a timely repayment history to cultivate higher credit limits
and possibly open additional accounts using this identity. This cultivation can take place over months or even years,
especially when the owners of the associated SSNs are not active in the credit system and therefore, are not aware of
credit activity (e.g., children and the elderly).

The fraudster can accelerate the process of building good credit by piggybacking – being added as an
authorized user to an account with good credit to then acquire the established credit history of the primary
user. Piggybacking also can occur on another established synthetic identity with a positive credit history, or
on synthetic identities associated with fictitious businesses, which also may extend lines of credit.
Note: In some cases, the fraudster may “skip” this step if satisfied with the initial credit line or loan approval.

Step 4: Fraudster leverages synthetic identity to conduct a purchase(s)

Once the fraudster is satisfied with the amount of credit available, a purchase (or series of purchases) is made with no
intent to repay the lender. Fraudsters also use synthetic identities to create fake businesses and sign up with merchant
processors to obtain credit card terminals and run up charges on fraudulent cards. Sophisticated crime rings use these
tactics at scale, developing intricate networks that support the cultivation of synthetic identities to commit fraud.

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IDENTITY CREATED?

While it is common to use a synthetic identity in creating and growing a credit line, as depicted in the example
above, synthetic identities also can be used to open other accounts, such as a demand deposit account (DDA).
By using a synthetic to open a DDA, the fraudster can deposit and withdraw money seamlessly with little or no
scrutiny from the institution. This comes in handy when the fraudster wants to move or withdraw funds acquired
from other fraudulent acts or endeavors (often using synthetics for those, as well). It also allows them the means to
capitalize on timing gaps in deposit and withdrawal activity.

SUBSTANTIATING THE IDENTITY

Fraudsters have become increasingly more sophisticated in how they make the identity appear real. This is typically
done for both the credit line and DDA account opening scenarios. Tactics that help validate the “proof of life” of
the synthetic include:

• Setting up common household utilities (e.g., electricity, water, gas, etc.)

• Creating and maintaining social media pages
• Signing up for reward and loyalty program accounts
• Obtaining fictitious identity documentation, such as a fake driver’s license or passport
• Using drop addresses (e.g., P.O. Box addresses or addresses of vacant properties or vacation homes)
that allow fraudsters to receive credit cards or goods without disclosing their actual locations

LEARN MORE
Explore the fraud mitigation toolkit to learn how synthetics are used.

The synthetic identity fraud mitigation toolkit was developed by the Federal Reserve to help educate the industry about synthetic identity fraud and outline potential
ways to help detect and mitigate this fraud type. Insights for this toolkit were provided through interviews with industry experts, publicly available research, and team
member expertise. This toolkit 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. While use of this toolkit throughout the industry is encouraged, utilization of the toolkit is voluntary at the discretion of
each individual entity. Absent written consent, this toolkit may not be used in a manner that suggests the Federal Reserve endorses a third-party product or service.

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