Synthetic identity fraud accounts for billions in credit losses annually. Fraud experts have identified the most effective approach to detection and mitigation for this type of fraud is a multi-layered strategy that involves better data, technological efficiency and information sharing.
Over the past year, the Federal Reserve has spoken with over 50 industry experts on this topic for its Payments Fraud Insights (Off-site) white paper series. Following the release of the final white paper in this series (Off-site), the Federal Reserve hosted a webinar to discuss strategies for mitigating synthetic identity payments fraud with two of these experts. Jim Cunha, senior vice president at the Federal Reserve Bank of Boston, moderated the webinar and led a lively discussion with guest panelists Greg Woolf and Jack Lynch.
Woolf is the founder and chief executive officer of Coalesce.ai (Off-site), a company focused on leveraging artificial intelligence (AI) technology to provide fraud detection solutions. His remarks emphasized the complexity of synthetic identity fraud and the need for the industry to work together and leverage technology to modernize financial crime detection. He noted that fraudsters are using AI and user-defined machine learning to advance their tactics, so organizations have to be prepared to meet this threat with new technologies. Woolf also stressed that organizations need to be vigilant in combatting synthetic fraud and that collaboration is key, as “the fast pace in which fraudsters leverage automation can outpace that of financial institutions.”
Lynch, senior vice president and chief risk officer of credit-union service organization PSCU (Off-site), echoed Woolf’s sentiment about the difficulty of staying ahead of rapidly evolving fraudster schemes. “Our teams are essentially reacting to new events at a human rate of speed, while the fraudsters, in many cases, are looking globally and working at a digital rate of speed, trying to commit fraud across a wide variety of institutions,” he said during the webinar. Lynch recommended that credit unions and other financial institutions fight synthetic identity fraud using a holistic approach. He also noted the success credit unions have experienced by using link analysis – a process that allows institutions to look across customer data and transactions to identify anomalies. Lynch concluded that fraudsters are going to find holes in defenses, and organizations need to be respond with multi-layered mitigation strategies.
For the full discussion on mitigating synthetic identity payments fraud, watch a recording of the July 29 webinar below. Follow our FedPayments Improvement accounts on Twitter (Off-site) and LinkedIn (Off-site) to stay engaged on the Fed’s ongoing efforts toward payments improvement.