Increasingly sophisticated fraud is on the rise. One of the fastest growing is synthetic identity fraud (SIF), which sees criminals creating new, false identities using a combination of real, stolen and fake data – such as birthdates and addresses – which
they then use to defraud those in financial services.
AI-powered tools are accelerating this trend by enabling the creation of synthetic identities at scale and increasing the difficulty of its detection. In fact, financial institutions are expected to see losses surge globally from $23 billion in 2025 to $58.3
billion by 2030, driven in a large part by synthetic identity fraud, according to Juniper Research.
As synthetic identities become more prevalent, outdated fraud prevention strategies are creating significant vulnerabilities within many financial organisations, especially as they expand their digital services.
Also, it’s important to remember that for every $1 lost to fraud financial institutions invest significantly more to cover the associated costs in fixing the problem, and in potential fines from regulators, for example.
Acquire accurate customer data
To prevent synthetic driven ID fraud a vital place to start is by collecting accurate customer contact data, which is key to the effectiveness of the entire ID process. The acquisition of accurate contact data supports everything from end-to-end fraud prevention
to delivering simple ID checks. This means more advanced and costly techniques, like biometrics and liveness authentication, may not be required.
Screen for deceased and change of address
Fraudsters often focus on exploiting errors in contact data to produce false identities and manipulate existing ones. In fact, synthetic identity fraud, along with some other types of fraud, usually rely on access to outdated, inactive, or deceased identities
— gaps that traditional fraud controls may overlook. Financial institutions can proactively shut down such entry points for fraudulent activity by incorporating National Change of Address (NCOA) data from the likes of the Royal Mail or the United States Postal
Service (USPS), along with deceased suppression data, into identity verification and customer onboarding workflows.
To provide an example, legacy systems that fail to detect when a genuine customer has moved offers an opportunity for fraudsters to exploit. They can hijack mail redirection processes, intercept account credentials, or create accounts using partial or outdated
address histories. Utilising NCOA files helps to ensure customer records are updated with the latest residential information, false positives during the identity verification process are minimised, and fraudsters are prevented from impersonating legitimate
individuals.
Address verification is the cornerstone of data quality
In fact, address verification – having a consistently accurate, standardised address – is the foundation of contact data quality. Having up-to-date customer addresses makes it straightforward to match and verify identities across numerous sources. This means
verifying the accuracy and legitimacy of an individual’s address should be the first stage in any identity related process, with any inconsistences between a claimed address and official records highlighting a potential fraudster.
Also, bear in mind that obtaining outdated or invalid phone numbers and email addresses creates vulnerabilities that fraudsters can exploit to bypass identity verification and system safeguards – aiding them in creating synthetic identities. So make sure
you have access to validated mobile numbers and email addresses for users.
Electronic ID verification is crucial
An electronic ID verification (eIDV) tool offers a highly effective way to deliver identity verification. Because these services are “always on” they can, in real-time, cross-check the names and addresses – for proof of address – email addresses and phone
numbers provided by prospective customers during remote onboarding. This provides a good customer experience while preventing fraud. This approach enhances the customer experience while safeguarding against fraud.
It’s preferable to source an eIDV platform with access to billions of consumer and business records from reputable sources around the world, such as government, utility and credit agencies, for the best outcome. This will result in the delivery of efficient
customer onboarding as part of an effective ID verification service, globally.
eIDV is considerably quicker, more accurate and cost effective for undertaking ID verification and preventing fraud when compared with manual checks. It also eliminates the need for additional staff or training costs and removes the risk of human error.
Role of geolocation technology
Using a geolocation service is also a key component in preventing the growing threat of synthetic ID-driven fraud. Its strength lies in validating whether an applicant’s physical location aligns with the address and personal details they provide. For example,
if the person applying for a service or product claims to reside in Manchester but geolocation data from their mobile device reveals they are actually 5,000 miles away, this discrepancy serves as a big red flag, and additional checks will be necessary.
The ability to accurately convert UK, European, and international postal addresses into exact latitude and longitude coordinates in real-time needs to be at the heart of an effective geolocation solution.
This level of accuracy enables precise data matching, strengthens fraud detection, and lowers the risk of approving fraudulent accounts.
In summary
Fraud caused by synthetic identity creation will continue to evolve, grow and breach outdated fraud prevention defences, particularly with new advances in AI. By employing innovative data quality and eIDV solutions financial institutions are empowered to
mitigate risk, enhance customer protection, and deliver a competitive advantage amid shifting regulatory and digital challenges.
