The impact of synthetic identities on businesses Written on
Synthetic fraud poses significant challenges to Know Your Customer (KYC) systems and onboarding processes. Synthetic fraud involves creating fictitious identities or combining real and fake information to deceive financial institutions.
The rise of Generative AI has brought forth a new era where deepfakes, once relegated to science fiction, are now a tangible and deployed weapon. The consequences of inaction are severe, making it imperative for every industry and company to comprehend this threat and promptly take measures against it. The preservation of trust and, ultimately, the survival of businesses hinge on proactive engagement in this battle.
Identity onboarding and authentication challenges
Composed of a mix of real and fake information, synthetic identities pose a challenge for traditional KYC systems to accurately verify individuals. Fraudsters may use stolen or manipulated documents, such as social security numbers, to create synthetic personas that resemble legitimate individuals.
Fraudulent account openings
Synthetic fraud can result in the opening of fraudulent accounts, leading to financial institutions unknowingly providing services to criminals. Fraudsters may exploit weaknesses in onboarding processes, such as online account creation, to establish a false identity and gain access to financial services.
The need to enhance KYC systems and onboarding processes to combat synthetic fraud can result in increased operational costs for financial institutions. Investments in advanced technologies and additional manpower may be necessary to stay ahead of evolving fraud techniques.
Credit risk, losses, and erosion of trust
Synthetic fraud can lead to increased credit risk for financial institutions, as the fraudsters may build up a credit history using the synthetic identity and then default on loans or credit lines. Financial institutions may incur significant financial losses due to these defaults, affecting profitability.
Additionally, the prevalence of synthetic fraud irreversibly erodes user trust, as customers may become concerned about the security of their personal information and financial transactions. KYC systems may generate false positives, flagging legitimate customers as potential fraud risks due to the complexity of identifying synthetic identities. This can lead to customer dissatisfaction and delays in onboarding processes.
Cross-channel fraud
Fraudsters may exploit multiple channels, such as online and offline interactions, to create and use synthetic identities. Combating synthetic fraud requires a holistic approach, considering various touchpoints in the customer journey.
Financial institutions need to continuously improve and adapt their KYC systems to address these challenges, incorporating advanced technologies like biometrics, machine learning, and data analytics to enhance identity verification and fraud detection capabilities. Collaboration between industry stakeholders and the implementation of standardized security measures is also a major contributor to a resilient defense against synthetic fraud.
Protect your business and your customers from synthetic identity fraud
Many businesses are now exposed to the risk of deepfakes attacks. To stand apart and protect against this growing threat, it is crucial to take immediate steps to fortify your defenses. The future of business integrity and resilience depends on your commitment to address the challenges posed by deepfake technology.
Position yourself for success by preparing for upcoming shifts in the identity landscape.
Download our e-book on account protection and fraud prevention and get started.
