Synthetic identity theft crimes growing fast, targeting kids
You might be the victim of the fastest-growing form of identity theft, and not find out for years.
It's called synthetic identity theft or synthetic identity fraud, and the bad guys may use your Social Security number, along with bits and pieces of real and fake information -- such as a name, address and date of birth -- to create a new "person."
If that occurs, credit cards or other accounts may be opened under your Social Security number, and there is no easy way for you to find out.
"People can be using [synthetic identity theft] forever to open up new accounts and you won't know until a lot of damage is done," says Stephen Coggeshall, chief analytic and science officer at ID Analytics, which provides credit and fraud risk solutions and is a subsidiary of LifeLock.
A study by ID Analytics found the prevalence of synthetic identity theft has increased by more than 100 percent since 2010. The company estimates 2 percent of the U.S. population, or about 6 million identities, are "synthetic."
Children are particularly vulnerable because typically they are issued Social Security numbers as babies, and the numbers are not used for obtaining credit for years, says Steven D'Alfonso, a financial crimes expert with IBM.
"A child is sort of like a blank canvas for fraudsters to work with," D'Alfonso says.
As kids come of age and look for their first job, try to rent an apartment, or apply for a credit card, they may learn their credit record is marred and their Social Security number has been used by someone else.
This practice of creating synthetic identities started in the early 2000s, says Amy Walraven, chief analytics officer at Turnkey Risk Solutions, an identity risk management company.
"We're going to be seeing a lot more of this going forward," Walraven predicts, as kids get older and learn their Social Security numbers have been swiped.
How synthetic identity theft works
Typically with identity theft, fraudsters steal an individual's personal or financial information, and use it to profit. In such cases, it's clear that the person is the victim of the crime.
But because fraudsters who specialize in synthetic identity theft cobble together real and false information, "there's no classic victim to the theft," Coggeshall says. Yet "it can still cloud someone's credit," if the bad guys include your Social Security number in their synthetic stew, he says.
Crooks may use your Social Security number by chance, or they may swipe it intentionally.
Synthetic identity theft has been made easier thanks to changes by the Social Security Administration.
In the past, the first three digits of a Social Security number denoted the geographic area where you lived when the card was issued. Since 2011, the numbers have been randomly generated, making it harder to tell if they are valid.
In other cases, bad guys specifically target the Social Security numbers of those who don't currently make use of credit. That could be someone who is indigent, an elderly person who lives with relatives and has no credit cards and utility bills in his or her name, or a child, D'Alfonso says.
Children particularly vulnerable
Crooks may steal your child's Social Security number from a medical office, school or sports league. It could come from "anyone who is entrusted with minors' information," D'Alfonso says. Someone working for the doctor's office or school district may even be responsible for the theft, and sell the Social Security number to the bad guys.
Children are particularly vulnerable because parents don't routinely check their kids' credit reports, so the fraud could be undetected for years, says financial expert Jean Chatzky. (Chatzky is also a contributing editor for Bankrate.com, a sister website of CreditCards.com.)
You should check your children's credit report at least every two years, Chatzky says. "If they have a credit file, it's likely they have a problem," she says. [Read: "How to check your child's credit report."
Walraven says fraudsters have turned to synthetic identity theft because of the potential to perpetrate the fraud for years, raking in more cash. With traditional ID theft, "The clock is ticking until they get caught."
Criminals you would normally find doing things such as selling drugs have gotten into the synthetic identity theft act because, "It's not as risky to commit this type of fraud," says Anissa Roney, chief product development officer for Turnkey Risk Solutions. While they will may serve time in federal prison, compared to the sentences of drug offenders, it's "a slap on the wrist," Roney says.
ID Analytics found that synthetic identity theft results in up to 20 percent of card charge-offs and up to 80 percent of credit card fraud losses.
A child is sort of like a blank canvas for fraudsters to work with.
|-- Steven D'Alfonso
IBM financial crimes expert
Ultimately, that "raises the price of everything we buy. We pay for the losses from fraud," Coggeshall says.
What you should do
There's not much you can do to protect yourself against synthetic identity theft if crooks randomly choose to use your Social Security number. But you can keep the bull's-eye off your back. Try to keep your number out of their hands by shredding documents that contain your Social Security number. Also shred anything that contains your date of birth, bank and credit card account information and other personal details, Coggeshall says.
You should be wary of unsolicited calls and emails seeking your personal information, he says.
Scammers may claim to be from the Internal Revenue Service or your financial institution. If you receive such a call, hang up and call the IRS or your bank back, using a number you look up yourself, he says.
Also watch for mail that comes to you, but has someone else's name on it.
Regularly check your credit reports and those of family members. The sheer number of data breaches is enough to raise concern, Chatzky says. In 2014, more than 700 data breaches were reported. In the first few weeks of 2015, more than 100 were reported.
"We have to be much more on the offensive [about] than we had to in the past," she says.
If you don't check your details regularly, use an identity protection service, Chatzky suggests.
You also should keep an eye on your bank and credit card statements and verify all the transactions.
"All of these things need to become second nature," Chatzky says.
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