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Synthetic ID fraud mitigation discussed in latest Fed white paper
Last week, the Federal Reserve released a new white paper on synthetic identity fraud in the U.S. payments system. The white paper is the latest in a series of publications about synthetic identity fraud and examines factors that influence synthetic identity fraud mitigation.
In the report, the factors discussed that are found to influence fraud mitigation include:
- technological advancements, such as artificial intelligence and machine learning;
- regulatory or environmental influences; and
- information sharing and data integrity.
While the report suggests there is no single solution to completely mitigate this type of fraud, the Fed believes information sharing within and between organizations can help the industry draw connections between datasets to identify potential synthetic identities. The report mentions a credit union with a machine learning solution which flagged approximately 85% of credit applications originating from synthetic identities in early tests.
More information, as well as the two previously released whitepapers on this topic, can be found here.
NAFCU continues to lead on this issue, having served on both the Fed's Faster Payments and Secure Payments Task Forces. Additionally, NAFCU President and CEO Dan Berger previously met with Lael Brainard to encourage the Fed to play an operational role in a future, faster payments system.
The Fed has also established a Fraud Definitions Work Group, which is developing a more consistent and holistic view of the terminology used and other ongoing efforts to reduce fraud risk and advance the safety security and resiliency of the U.S. payments system. The group released a new fraud classification model in June.
As the Fed works to develop a real-time payments system – the FedNow Service – NAFCU has shared the ways in which credit unions and their members would benefit from affordable faster payments capabilities as it encouraged an accelerated launch.
In addition, NAFCU has also worked with member credit unions to understand what they would like out of the new system, and the association’s Cybersecurity and Payments Committee has engaged in early discussions with Fed representatives to discuss features and strategies that would promote adoption.