Fighting Synthetic Identity Fraud
Commercial lenders must grapple with fighting synthetic identity fraud. It is one of the recent trends most fraudsters use to get away with their malicious acts. With this strategy, at least $6 billion is lost per year.
Synthetic identity fraud
It is a process that involves the fictitious manufacture of a unique identity using stolen but real identity characters. The perpetrator then uses the information to apply for credit from multiple lenders. You will notice that there is a trend of enormous borrowing from a particular identity.
You can mistake this trend with the real identity of the applicant as they present similar details. The fraudulent credit profiles become significant and continuous until the credit is issued. When this trend is noted, suspicion amongst commercial lenders is substantial as they might have lost more than could be imagined.
Credit bureau solutions
This strategy is one of the most common solutions used to combat synthetic identity fraud. The system generates data that determines the number of times someone has transacted from a commercial lender. However, this solution has a loophole since it can be manipulated by the fraudsters, making it impossible to identify the trend.
Using tax data to verify the authenticity of a borrower
This solution is one of the most reliable tactics that comes with a new data source, IRS tax information. It is a requirement by the law for all businesses to file tax returns through the IRS. A business owner must give extensive information when filing tax requirements, including their employer identification number, filing returns (quarterly and annually), and withholding and depositing employee’s taxes.
These requirements provide the real name of a business and must be like the information in the EIN provided in the IRS database. Most fraudsters will avoid going through these procedures as it is time-consuming and costly. With this strategy, you get rid of fraudulent individuals and any possible synthetic business.
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