The landscape of synthetic identity creation is evolving rapidly, driven by unprecedented advancements in AI tools that are both more powerful and widely accessible. While automation in identity fraud and its prevention isn’t new, today’s developments dramatically shift the paradigm. What strategies can we adopt to respond effectively? Banks have allocated significant tools and resources to fight fraud, but these efforts have only achieved partial success. Despite their initiatives, fraud losses continue to climb, with synthetic identity fraud now emerging as the leading contributor. It has surpassed traditional forms of fraud like credit card fraud and identity theft. Notably, a 2023 TransUnion report identified synthetic identity fraud as the fastest-growing form of fraud worldwide. Synthetic identity fraud is fundamentally a manipulation of data — blending fragments of genuine personal information with fabricated data to bypass systematic controls and alerts. The focus is shifting away from established schemes such as card fraud, account takeover, impersonation and application fraud involving fake identities and documentation. More sophisticated fraud models like authorized push payment schemes are surging, where legitimate customers initiate payments themselves. This approach simplifies the process of circumventing security measures, making detection and prevention increasingly challenging. Why You’re Probably Not Ready for the Next Wave of Synthetic AI Fraud BY STEVE LENDERMAN, CFE, Head of Fraud Prevention, isolved Most banks are not equipped to tackle a new AI-fueled era of synthetic identity fraud, writes Steve Lenderman, CFE, an expert in fraud and synthetic identities and head of fraud prevention at isolved. Utah Banker 8
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