LONDON, June 12,
2024 /PRNewswire/ -- The latest fraud threatening the
UK could cost businesses at least £4.2billion if appropriate steps
are not taken, new research from LexisNexis Risk Solutions
shows.
A new study looked at over 72million consumer profiles and found
2.8million showing several signs of 'Frankenstein cloning', where
fraudsters stitch real and made-up personal details together to
create a 'new' synthetic identity to spoof credit checks and commit
high-value fraud against banks and credit providers.
In the U.S. where synthetic fraud is already a major issue,
businesses report an average $15k[1] loss to each confirmed
synthetic fraud case. As a result, experts at LexisNexis Risk
Solutions estimate that it could cost the UK economy around
£4.2billion by 2027, unless firms start properly screening now, for
the threat.
Most organisations' existing fraud defences are ineffective
against synthetic identities because they appear as normal, good
customers until the fraud is committed. Once they 'bust out' with
the funds, the lender is left to suffer the loss, as there's no
'real' person to pursue for the debt.
Noreen Altaf, Identity Fraud
specialist at LexisNexis Risk Solutions, explains: "At first, a
synthetic ID has little value to a fraudster, as it has no credit
history, so they need to play the long game. Scammers nurture each
false identity by building what appears to be a real credit profile
over time, making the synthetic ID seem like a trustworthy customer
– because of this the fraud threat is effectively invisible to
firms' existing fraud defences, until it's too late.
"Once a fraudster thinks the synthetic ID has enough
plausibility, they'll aim to max out available credit lines. This
might be applying for a loan or credit card for thousands of
pounds, taking a PCP contract for a new vehicle, or making a
high-value purchase via a buy now pay later arrangement. The
fraudster has no intention of repaying this, leaving organisations
to foot the bill and chasing ghosts to recover the debt.
"There is still much businesses don't know about this
fast-emerging threat, so it's difficult to predict the true
potential cost of synthetic fraud to the UK. However, even a very
conservative estimate of a £1,500 loss per fraud attack amounts to
£4.2 billion in future credit write-offs for companies, with
synthetic identities already hiding amongst their customer base –
and it could be a lot higher."
The study found strong evidence of scammers up and down the
country using 'synthetic farms' in rural locations and 'synthetic
factories' in urban areas to build up the credit scores of new
synthetic identities on an industrial scale, in readiness for fraud
attacks.
In one example, rental cottages based on a farm in Chichester appeared to have 439 highly suspect
identities 'living' there over the past seven years, only 22 of
which showed any evidence of being real people. The identities were
making hundreds of applications for credit, such as short-term and
payday loans and some were also linked to a similar farm hundreds
of miles away near Dundee,
Scotland.
A heat map produced alongside the report shows similar activity
is happening across the whole UK. Suspected synthetic farms can be
seen in multiple locations across rural Wales and the Scottish Highlands.
Noreen continues: "A common characteristic of synthetic farms
and factories is that they are properties where the mail can be
easily intercepted by the fraudsters making credit applications. A
farm, for example, might have a mailbox that's at the end of a
track, while empty buildings or shared mailboxes in cities can be
exploited in a similar way.
"Synthetic fraud has been around for a while, but with
sophisticated fraud modelling, we can, for the first time, more
accurately detect and put a figure on it.
"Businesses need to act fast to protect themselves by investing
in tools capable of spotting synthetic identities at application or
onboarding stage, before they become customers. Given the length of
time fraudsters have already been creating and nurturing synthetic
identities in the UK – as evidenced by our research – banks,
lenders and credit providers, in particular, should take
appropriate action to review their existing portfolios to ascertain
the extent to which synthetic identities may have infiltrated their
organisations over time, before those identities get a chance to
cash out."
About LexisNexis Risk Solutions
We harness the power of data, sophisticated analytics platforms
and technology solutions to provide insights that help businesses
reduce risk and improve decisions to benefit people around the
globe. LexisNexis Risk Solutions have multiple offices across the
UK and throughout the world and are part of RELX PLC (LSE:
REL/NYSE: RELX), headquartered in London, a global provider of information-based
analytics and decision tools for professional and business
customers. For more information, please visit LexisNexis Risk
Solutions and RELX.
[1] Synthetic identity fraud: A $6 billion problem, KPMG, 2022, KPMG.com
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