December 11, 2023
Needham, MA--Synthetic identity theft arrived on the scene several years ago, but as happens, the scams have gotten increasingly sophisticated, calling for commensurate systems to detect, prevent and bring the perpetrators to justice.
The challenge within every financial services realm, including real estate, is the increasing use of e-commerce to conduct business with an increasing number of customers operating at arm’s length.
Gone are the days when Mary dropped into the bank to apply for a mortgage, and John the banker knew her and her family. Granted, the anonymity with which we have chosen to operate has made it far easier to conduct business, opening up opportunities for expanding our reach to much larger pool of borrowers, allowing even local lenders to branch out to new territories.
But the ease of connection has also made it more difficult to detect criminals who have learned to manipulate the system.
Detecting synthetic identities
Identity theft itself has become more difficult to accomplish because it is far more likely to result in a whole raft of red flags, alerting financial institutions and account holders when something odd surfaces.
In creating a synthetic identity, fraudsters overcome that problem by cobbling together real data with false data to craft a fictional person. The new identity is often built around the Social Security number of a real human being who is likely inactive in the system, such someone who is homeless, recently deceased or under the age of 18. The new identity is then employed to take out credit cards, borrow under the guise of a HELOC, or sell someone else’s land out from under them.
Synthetic identity theft is often called the long con because the fraudsters build the new personae over a period of time before using it for a big take, such as a real estate transaction. The paper trail created as part of the con is then used as proof of the fake person’s existence.
Building a barrier against synthetic ID fraud
In a real estate transaction, everyone has a role in preventing identity fraud, including synthetic identity fraud.
Title agents and escrow officers are one line of defense for lenders. Title companies are heavily invested in preventing such frauds through meticulous examination of records, thorough review of all documentation presented as part of the transaction, and strict requirements with regard to identity verification.
Title agents are trained to spot the red flags of fraud and as a result, they halt thousands of transactions each year across the country to prevent criminals from illegally transferring property for illicit gain.
But lenders also must have the necessary firewalls in place to ensure criminals do not advance into the system, including taking the following steps:
Lenders should not only require identification when a new customer opens an account but ensure that the identification is authentic. This can be handled manually by trained employees or through sophisticated technologies that can be employed to make this process more seamless for both in-person and online applications.
Requiring biometric identification can go a long way towards protecting accounts from unwanted intrusion by fraudsters playing the synthetic ID game but can also thwart fraudsters who avoid sophisticated identification technologies in their attempts to create a fictional paper trail.
Employee training and empowerment
Just as title and escrow agents can provide a wall of defense to protect your real estate transactions, your own employees, properly educated about fraud detection and trained in the use of your technology detection systems, can provide your company with yet another fortification against fraud.
At Kriss Law/Atlantic Closing & Escrow, we have a full range of experienced legal professionals who are highly trained in reviewing your client’s identification and the legal documents necessary for a real estate closing, including powers of attorney, deeds, wills, divorce decrees, property legal descriptions, surveys and more. Contact us to learn more about our services and expertise.