New, Rapidly Growing Fraud Technique Costing U.S. Businesses $50 Billion per Year

Synthetic Identity
Monica Eaton-Cardone

Monica Eaton-Cardone, COO of Chargebacks911, highlights the importance of recent prevention efforts to thwart Synthetic Identity Fraud.

Synthetic identity fraud is responsible for 20 percent of credit losses, with an average charge of $15,000. Loss prevention specialist Chargebacks911 warns that effective countermeasures will likely frustrate consumers by slowing transaction times.

(Tampa Bay, FL) July 17, 2019—Synthetic identity fraud (SIF) is one of the fastest-growing and most sophisticated forms of fraud in the United States today. The Federal Trade Commission estimates that SIF, which is difficult to detect and even harder to stop, currently costs American businesses $50 billion per year.1 Chargebacks911, a leading dispute mitigation and loss prevention firm, notes that consumer-driven pressure to speed up e-commerce transaction times has opened the door to fraudsters who have the technological ability to create false identification and credit histories.

When U.S. businesses adopted chipcards as the standard for credit and debit cards in 2015, criminals were forced to channel their fraud efforts online, according to banking experts. That migration, along with large-scale data breaches, loosening credit standards and the exploitation of legacy credit creation practices and systems, laid the groundwork for fraud to flourish. particularly SIF. Today, SIF is responsible for an estimated 20 percent of credit losses, with an average charge of $15,000.1

Unlike traditional identity theft, in which a criminal obtains valid personal information to open fraudulent accounts in the victim’s name, SIF involves the creation of a fictional identity based on a stolen but inactive Social Security number (SSN). The SSNs of children, who tend to have no credit history, are particularly prized. Using the valid SSN and invented information, the fraudster applies for multiple credit cards, pays the bills punctually and gradually establishes a favorable credit rating. This process can take several years. Once a significant amount of credit is established, the fraudster stages a “bust out” shopping spree and causes the fictitious identity to vanish.2

The U.S. Federal Reserve recently created a workgroup consisting of Fed officials and payment industry leaders to find ways to reduce SIF payment fraud. The Fed has identified SIF as a major payment security initiative for 2019, citing large-scale data breaches that put personal information at risk, as well as the shift to remote payment channels and gaps in fraud detection.3

“It’s gratifying to see this level of attention being paid to the problem,” said Monica Eaton-Cardone, co-founder and chief operating officer (COO) of Chargebacks911. “People throughout the payments industry have been asking themselves what can be done to thwart SIF fraud. One card network, Mastercard, is interested in adding an authentication mechanism for online purchases and data scientists are using machine-learning to identify red flags based on a customer’s transaction patterns. Each of these efforts takes time and could potentially slow the transaction cycle. While this might encounter some consumer resistance, in the long run it will help consumers and merchants—who are often held liable for the false ID.”

SIF detection and prevention are needed to stop the financial hemorrhaging. Companies like Chargebacks911 contribute to the solution by helping e-commerce merchants defeat fraud, boost revenue and shrink chargebacks. A thought leader in the finance world, Eaton-Cardone and her team will attend a number of upcoming industry events, including the MWAA 17th Annual Conference in Chicago, Affiliate Summit East 2019 in New York and the IATA World Financial Symposium in Miami.

About Chargebacks911/The Chargebacks Company

Chargebacks911 empowers businesses to combat constantly evolving fraud tactics and mounting customer disputes that directly threaten profitability. Operating as The Chargeback Company in Europe, Chargebacks911 has pioneered effective, industry-leading solutions designed to reduce chargeback fraud, alleviate processing costs, mitigate risk and recover revenues.

The company’s unparalleled expertise and proprietary technology have earned three consecutive CNP Customer Choice Awards for Best Chargeback Management Solution, three successive AI Lions’ Den Awards for Best Airline Industry Solution, and Gold and Silver Stevie Awards from the American Business Awards (ABA). With innovative and highly scalable services ranging from Intelligence Source Detection™ (ISD) to Tactical Representment, Chargebacks911 uncovers the true source of chargebacks, battles unjustified disputes, rescues lost revenue, safeguards reputations, and defends against relentless, ever-changing cyberthreats. For details on Chargebacks911’s comprehensive risk management solutions, informative articles and other merchant resources, visit https://chargebacks911.com.

  1. Luttrell, Christina, “The Fastest Growing Form of Fraud That’s also Hardest to Detect: Synthetic Identity Fraud,” Global Banking & Finance Review, March 4, 2019.
  2. Kratovil, Jason, “Fraudsters turn to synthetic identity theft,” Credit Union National Association, October 17, 2018.
  3. “The Federal Reserve Looks to Further Define Fraud,” PaymentsJournal, June 13, 2019.

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