The latest fraud threatening the UK could cost businesses at least £4.2 billion if appropriate steps are not taken, new research from LexisNexis Risk Solutions shows.
Synthetic ‘Frankenstein’ identities exploit stolen and faked personal information to spoof credit checks and commit high-value fraud against banks and credit providers.
Synthetic fraud
The study reveals there are almost three million of these synthetic identities already in circulation in the UK, preparing to strike. Hundreds of thousands more are being created each year, with volumes of the highest-risk synthetic identities increasing nine-fold (527%) between 2020 and 2023.
The analysis looked at over 72 million consumer profiles in total and found 2.8 million showing several high-risk signs of ‘Frankenstein cloning’, where fraudsters stitch real and made-up personal details together to create a ‘new’ identity. Other high-risk signs include seeing no trace of family connections and lots of similar-looking identities living at the same address.
In the U.S. where synthetic fraud is already a major issue, businesses report an average $15 loss for each confirmed synthetic fraud case. As a result, experts at LexisNexis Risk Solutions estimate that it could cost the UK economy around £4.2 billion by 2027 unless firms start properly screening for the threat now.
Fraud defences need to be more effective
Most organisations’ existing fraud defences are ineffective against synthetic identities because they appear as normal 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 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 ab