Synthetic identity fraud is a type of fraud where criminals synthesize a false identity using information from many people, and then establish a credit history for the fake person over time until they can trick banks or financial technology companies into lending them money.
Although most synthetic identity fraud affects credit card and loan products, person-to-person payment applications could be equally vulnerable, according to federal authorities who are monitoring the problem.
Artificial intelligence could help spot anomalies in customer behaviour patterns to detect the fraud, the Fed’s October 2019 report said. Fintechs are developing artificial intelligence and money laundering models to detect synthetic identity patterns in card and loan applications, among other product areas.
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