Synthetic identity fraud — sometimes called "Frankenstein fraud" — is the fastest-growing financial crime in North America. Unlike traditional identity theft where a real person's identity is stolen wholesale, synthetic fraud creates a new identity by combining real and fake information.
How It Works
A criminal takes a real Social Security Number (often from a child, elderly person, or recent immigrant with little credit history) and combines it with a fake name, date of birth, and address. This creates a new "person" that doesn't really exist.
They then spend months or years building credit for this fake identity — applying for credit cards, getting denied, and slowly building a credit file. Finally, they "bust out" — maxing out all available credit and disappearing.
Who Is Most at Risk?
- Children — Their SSNs are clean and won't be checked for years.
- Elderly individuals — Especially those who have passed away (using a deceased person's SSN).
- Immigrants — New SSNs with no credit history are particularly valuable.
- Foster children — Limited oversight of their financial records.
How to Protect Your Children's SSNs
- Check your child's credit report annually at all three bureaus.
- Consider placing a credit freeze on your child's file — this is free and prevents any new credit being opened.
- Never share your child's SSN unless absolutely legally required.
Detection Is Difficult by Design
Synthetic identities don't trigger the same alerts as traditional identity theft because there's no real victim reporting suspicious activity. Financial institutions lose an estimated $6 billion per year to synthetic fraud (Federal Reserve Bank of Boston).
Sources: Federal Reserve Bank of Boston; FTC; McKinsey & Company.