Synthetic Identities Are Becoming a Business Problem, Not Just a Banking Problem
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By PAGE Editor
Synthetic identity fraud is the use of combined personally identifiable information to fabricate a person or entity for a dishonest act or financial gain, according to the definition developed by a Federal Reserve-convened group of fraud experts. A synthetic identity can combine genuine information, such as a Social Security number, with fabricated names, addresses, dates of birth, telephone numbers, or other identity attributes.
The Federal Reserve has documented effects of synthetic identity fraud on financial institutions, government agencies, private companies, and individuals. The problem therefore extends beyond fraudulent credit applications and bank accounts. Businesses that create customer, seller, employee, contractor, or supplier accounts can encounter fabricated identities during digital onboarding.
Synthetic Identities Can Pass Individual Verification Checks
A synthetic identity differs from the unauthorized use of one real person's complete identity. Its components can originate from several sources, while other components can be invented.
This structure creates a verification problem because individual data points may appear legitimate even when the assembled identity does not represent a real person or business.
Digital identity investigations can consequently involve several checks:
Names, addresses, telephone numbers, government identifiers, and dates of birth can be compared for consistency.
Email addresses and telephone numbers can be evaluated for their history and association with other accounts.
Device, network, and transaction information can reveal relationships between apparently separate accounts.
Domain registration information can provide additional evidence when a customer, supplier, merchant, or business claims to operate a website. A whois lookup at Namecheap can be used to query publicly available WHOIS domain-registration data.
WHOIS information cannot independently establish whether an identity is genuine because domain privacy services can legitimately conceal registrant details. Registration dates, registrar information, nameservers, and other available domain records can nevertheless be compared with claims made during business verification.
The Risk Extends Beyond Bank Accounts
The Federal Reserve has identified synthetic identity fraud as a problem affecting private industry as well as the financial system. Synthetic identities can interact with businesses wherever an account or commercial relationship depends on identity information.
Relevant business processes include:
Customer account registration and account recovery.
Marketplace seller and merchant onboarding.
Supplier and vendor verification.
Credit, payment, and deferred-payment applications.
Insurance applications and claims.
Employment and contractor onboarding.
Loyalty and rewards programs.
Synthetic businesses create an additional corporate risk. Federal Reserve Financial Services reported in 2025 that criminals can manufacture companies using stolen, manipulated, or fabricated information such as addresses, telephone numbers, and names of company officers. Such entities can then be presented as legitimate companies when applying for accounts, loans, credit, or other products.
Artificial Intelligence Changes the Production of Fraudulent Evidence
Generative AI can produce text, images, audio, and video. These capabilities can be incorporated into identity fraud by generating supporting material or impersonating real people.
The Federal Reserve Bank of Boston reported in 2025 that generative AI was making synthetic identities faster and easier to create and harder to detect. The Federal Trade Commission has also identified AI-generated deepfakes and voice cloning as technologies relevant to impersonation fraud.
AI tools can be used to create or manipulate:
Profile photographs and identity images.
Documents presented during verification.
Written communications used during onboarding.
Voice recordings used in impersonation.
Video used to imitate an individual.
Messages designed to resemble communications from employees or organizations.
The role of generative technology in making fraudulent communications more convincing is also described in reporting on why AI-powered scams are becoming harder to identify.
The FTC reported that consumers lost $2.95 billion to imposter scams in 2024. The agency also stated that email was the most commonly reported method through which consumers were contacted by scammers that year.
Business Impersonation Creates Direct Corporate Exposure
Synthetic identities and impersonation are distinct forms of fraud, but both exploit weaknesses in identity verification. Synthetic identities fabricate people or entities, while impersonation presents a fraudster as an existing person, company, or government organization.
FTC data show the commercial scale of impersonation. More than 330,000 business-impersonation scam reports were recorded in 2023. Combined reported losses from business and government impersonation exceeded $1.1 billion that year.
The FTC's Government and Business Impersonation Rule took effect in April 2024. The rule prohibits materially and falsely posing as a business or government entity and prohibits material misrepresentations of affiliation with those organizations.
Identity Verification Requires Multiple Data Sources
A single successful identity check does not establish that every component of an identity belongs to the same person or entity. Synthetic identities are specifically constructed from combinations of information, which makes relationships between data points relevant to detection.
Business verification systems can therefore examine identity information together with account, device, domain, behavioral, and transaction records. Repeated devices, shared contact information, recently created domains, inconsistent company records, and connections among nominally unrelated accounts provide data that can be investigated.
The Federal Reserve's synthetic identity fraud framework emphasizes consistent identification and classification because inconsistent definitions and reporting make the fraud more difficult to measure and mitigate. For non-bank companies, the same issue applies to customer onboarding, marketplace integrity, supplier management, insurance, employment, and other processes in which a digital identity determines access to products, payments, data, or commercial relationships.
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Synthetic identity fraud is the use of combined personally identifiable information to fabricate a person or entity for a dishonest act or financial gain, according to the definition developed by a Federal Reserve-convened group of fraud experts.