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Financial Services Law Insights and Observations

Fed releases synthetic identity fraud mitigation toolkit

Bank Regulatory Federal Issues Federal Reserve Privacy/Cyber Risk & Data Security Synthetic Identity Fraud Payments

Recently, the Federal Reserve released a synthetic identity fraud mitigation toolkit to help financial institutions, businesses, and consumers improve awareness, detection, measurement, and mitigation of identity fraud. The Fed emphasized that synthetic identity fraud (in which fictitious people are created to penetrate the financial system) is a challenge facing the payments industry and other businesses and continues to grow in frequency and impact. Synthetic fraud accounted for an estimated $20 billion in losses to U.S. financial institutions in 2020, the Fed stated, stressing the need for synthetic identity fraud awareness and continued discussions about detection and mitigation strategies. The toolkit contains several modules, including resources on the basics of synthetic identity fraud, how fraudsters use synthetic identities, what to do when synthetic identities become a reality, and how to detect synthetic identities. Additional resources will be added in the future, including more on synthetic identity fraud detection and mitigation.