Frankenstein Fraud is the newest spooky identity theft scheme
There’s a new monster lurking in the shadows this Halloween, and it’s not a werewolf. Over the last several years, fraudsters have crafted a new method of identity theft that often takes advantage of minors who have no established credit.
What is Frankenstein fraud (a.k.a. synthetic identity theft)?
Synthetic identity theft is when fraudsters piece together bits of legitimate data, such as a valid social security number (SSN), with completely fake information to create a new, fraudulent identity — similar to how mad scientist Dr. Frankenstein pieced together different parts of multiple bodies to create his famed monster.
“Synthetic identity fraud can be harder to detect than standard identity fraud because it contains elements of real ID documents,” said Casey Morgan, director of retail operations at Commerce Bank. “These real elements can help pass verification, whereas purely fake profiles are more easily flagged.”
How synthetic identity fraud works, and why minors are especially vulnerable.
Synthetic identity theft is a long-term con. “First, a fraudster creates an identity, often using the valid SSN of a minor, and applies for a credit card,” said Morgan. “The institution might reject the application, but in the process, a credit profile associated with that synthetic identity is created. The fraudster then continues applying for credit, and eventually the application is approved.”
The fraudster then borrows money and repays it diligently, increasing the synthetic identity’s credit availability and credit score. “It usually takes fraudsters 12 to 18 months to make and nurture a synthetic identity before it’s ready to “bust out” — maxing out all available credit and disappearing,” said Morgan.
While adults often detect ID fraud by monitoring bank statements, tax returns, and credit reports, minors often have no credit history, and most parents aren’t monitoring their kids’ credit histories. As Morgan explained, “children usually don’t apply for loans or credit until age 18, which gives fraudsters a decade or longer to access credit associated with the child’s SSN before anyone notices.”
Synthetic identity fraud is becoming more common, but there are steps you can take to protect your family.
According to the Federal Trade Commission, up to 85% of identity theft is now synthetic, quite possibly making it the fastest growing financial crime in the United States, and children are often the victims .
Another alarming fact is that 73% of child victims of identity theft know the perpetrator - typically a family member or someone who has access to the child’s personal information.
According to Javelin Strategy & Research, in 2021, 1.25 million children were victims of identity fraud, and the average out-of-pocket cost for a family to resolve the fraud was $372. Even worse, some families only discover the fraud when the child turns 18 and is applying for student loans or a car loan. And it can take months or even years to clear a child’s name .
The good news is that there are steps you can take to protect both yourself and, if you’re a parent, your children.
- Regularly review your credit reports and enroll in a credit monitoring/identity protection service like Commerce ID Recover or Commerce ID Monitor link opens to a Commerce page.
- Keep a watchful eye on your child’s credit. Some ID protection services include SSN monitoring for minors.
- Create unique, complex passwords: use a password manager link opens to a Commerce page or browser feature designed to create hard-to-guess passwords.
- Use cybersecurity and fraud prevention tools like antivirus software, multi-factor authentication, and encrypted communication tools.
- Store documents and electronic records with sensitive information in a secure place, shred documents that contain sensitive data before discarding them, and wipe data from old computers, cellphones, or tablets before disposing of them.
- Be very selective about who can access personal data. Inquire about what sensitive information is needed and why, so that you’re not giving out more information than is necessary.
Consider freezing your credit – and your kids’.
“Freezing your children’s credit is one of the surest ways to prevent child ID theft and fraud,” said Morgan. “Children’s credit can usually be frozen until they seek employment, usually around age 16.” Security freezes are free, but must be placed separately with each of the three nationwide credit bureaus (Equifax link opens in a new window, Experian link opens in a new window, and TransUnion link opens in a new window). You will need to provide documentation to verify your identity and prove that you are the child’s parent or authorized representative.
Talk to your kids and show them what it looks like to be responsible online.
Kids are going online younger than ever, so it’s important to teach them about the dangers of the internet link opens to a Commerce page early – in the early primary years. “Set a good online example for your children by protecting your own personal information and identity, as well as that of your family,” said Morgan. “Parents who over-post and overshare on social media are likely to see similar online and social behaviors among their children.”
Remind your children about the dangers of communicating online with anyone they do not actually know. Explain that they should never share home addresses, phone numbers, SSNs, what school they attend or any other personal data online.
Finally, if you allow your children to use social media or any online messaging, keep an eye on their accounts using a service like Bark link opens in a new window, Aura link opens in a new window or FamilyKeeper link opens in a new window.
“You are the best protection your kids have against identity fraud,” said Morgan. “Be a good communicator and a vigilant internet user yourself, and you’ll teach them how to protect themselves as adults.”
