Are You Prepared?
Fraudsters utilize generative AI to gather large amounts of personally identifiable information from data breaches, public records, and social media. Using a combination of real and fake information, fraudsters then create a fraudulent identity to circumvent an financial institution’s KYC and CIP program. After using this synthetic identity to open an account, the fraudster will use the account to conduct fraud schemes such as: scams, check fraud, authorized push payment fraud, or use the account as a money mule.
This fraud is an example of an Unauthorized Party Took Over Account under the Fed’s FraudClassifer model.
How to Identify Threat
Fraudsters will use generative AI to create a synthetic identity or create images for identity documents, such as driver’s licenses or passports. Fraudsters will then use the forged documents to open accounts with the goal of establishing a long-term relationship with the financial institution to strengthen the synthetic identity’s profile and create a false legitimacy.
To help identify a potential synthetic identity, institutions should look for suspicious details such as:
- Inconsistencies among multiple identity documents, such as source of income and proof of address.
- IP address or physical address inconsistencies.
- High risk transactions, such as gambling websites or digital currency.
- A new account uses the account to make several transactions, such as immediately withdrawing funds after making a deposit.
- Utilize databases to compare and match application details across different financial institutions.
How to Protect Against This Threat
Institutions should strengthen their KYC and CIP processes by implementing strong, multi-layered authentication controls at every step. Improvements to authentication controls can include:
- Utilizing reverse image searches, which may reveal that an image is a part of an online gallery of faces created with generative AI.
- Multi-factor authentication.
- Live verification checks, such as requiring the new customer to undergo an audio or video verification process.
- Implement lower limits and higher restrictions for new accounts.
Additional Resources
What is Real? How AI is Transforming Synthetic Identity Fraud
Synthetic Fraud Mitigation Toolkit: Synthetic Identity Fraud Basics
LexisNexis: Synthetic Identity Fraud Rises Significantly in 2025