This is the challenge financial institutions worldwide are grappling with , and it ’ s known as synthetic identity fraud . Criminals are mixing genuine and stolen information to create identities that can easily get past account setup and knowyour-customer ( KYC ) checks .

The amalgamation of multiple identities into one synthetic identity makes this type of fraud particularly insidious . Often , it goes unnoticed until it reaches a point of substantial financial loss . Now imagine this is happening in the era of instant payments , where transactions occur in the blink of an eye .

How can financial institutions protect their customers and themselves from this threat ?

The synthetic conundrum

Synthetic identities that blend stolen legitimate information with fabricated details serve as powerful tools for criminals . They use them to open accounts with a fake identity and gradually build up a credit history over months or even years .

Once they have established creditworthiness , fraudsters exploit these identities , maxing out credit limits and vanishing without repaying – leaving financial institutions with substantial losses .

Estimates suggest that financial institutions miss a staggering 95 % of synthetic identity fraud cases during the account setup process . This statistic underscores the urgency of finding effective solutions . Losses attributed to synthetic identity fraud are estimated to range from US $ 20 billion to US $ 40 billion annually , with the figures steadily climbing .

Regulators are formulating new rules that require the validation of username and account information to fight this type of fraud . But in many countries , these solutions are not yet available and fraudsters remain ahead of the curve .

Taking a whole-system approach

Addressing synthetic identity fraud requires an in-depth strategy that looks at customer behaviour from the start . It needs to check the validity of customers ' identities and keep a constant watch for risks . This includes :

Deepening customer understanding

Financial institutions must invest in tools and technologies that help them know their customers . This involves scrutinising synthetic ID information , such as addresses , emails , and phone numbers , and crossreferencing with a wide range of nonfinancial data sources . www . intelligentfin . tech

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