The Federal Reserve recently published the third white paper in its Payments Fraud Insights (Off-site) series, Mitigating Synthetic Identity Fraud in the U.S. Payment System (Off-site), to share how organizations – both individually and collectively – can approach mitigating synthetic identity fraud in payments.

A synthetic identity is created by using a combination of real information (such as a legitimate Social Security number) with fictitious information (which can include a false name, address or date of birth). Synthetic identities can behave like legitimate accounts and may not be flagged as suspicious when using traditional fraud detection models.

Our latest white paper highlights how no single organization can stop synthetic identity fraud on its own. Fraudster tactics continually evolve to stay a step ahead of detection, and it is imperative that payments industry stakeholders work together to share information and keep up with the threat. In addition to sharing information about trends, behaviors, threats and best practices, organizations can fight back by employing a comprehensive and multi-layered approach to mitigation.

Organizations have the best chance to identify synthetics if they use a layered fraud mitigation approach and share information both internally and with others across the payments industry. Information sharing helps organizations learn about shifting fraud tactics and creates a greater dataset to identify potential synthetic identities that may require additional vetting.
Jim Cunha Senior Vice President
Federal Reserve Bank of Boston

The Federal Reserve began raising awareness and encouraging voluntary action on the growing problem of synthetic identity payments fraud in late 2018. Through primary and secondary research and industry dialogue, we seek to improve understanding of the issue, create a greater sense of urgency about addressing it and promote voluntary industry action to both identify and mitigate this type of fraud.

Action Item:

Be sure to read the Federal Reserve’s third Payments Fraud Insights white paper, Mitigating Synthetic Identity Fraud in the U.S. Payment System (Off-site). For more information on synthetic identity fraud, you can: