December 2022 Summaries

Recent U.S. sanctions target North Korean Workers’ Party officials Jon Il Ho, Yu Jin, and Kim Su Gil as part of efforts to curb the country’s ballistic missile and weapons of mass destruction programs following an unusually high number of missile launches. The measures freeze U.S.-based assets and prohibit dealings with the named individuals, while OFAC’s 50% Rule can also apply sanctions restrictions to entities substantially owned by sanctioned parties. Businesses are encouraged to reassess their sanctions exposure, inform leadership, strengthen onboarding screenings, and move from periodic customer rescreening toward continuous monitoring as sanctions lists change rapidly. Socure presents its Global Watchlist with Monitoring product as a tool for real-time screening and alerts across OFAC, global sanctions, politically exposed persons, adverse media, and other compliance-related lists.

Synthetic fraud, involving manipulated or entirely fabricated identities, has evolved from rapid credit-card and mobile-device schemes into longer-term “bust-out” activity affecting credit, auto finance, and, increasingly since COVID-19, bank and fintech deposit accounts. The passage argues that many institutions fail to detect it because they rely on Customer Identification Program checks and credit-bureau data that may themselves contain synthetic identities, while also using unsuitable follow-up verification methods that can validate fraudulent credit profiles. It emphasizes that synthetic-fraud detection requires specialized analytics capable of distinguishing manipulated from fabricated identities, alongside separate controls for third-party, first-party, and synthetic fraud at account opening. Deposit providers are described as particularly exposed because their direct per-account losses may appear lower than those of card issuers or auto lenders, even though fraudulent accounts can facilitate scams, money laundering, benefits fraud, and other crimes. The piece attributes much of the problem to limited industry education and promotes Socure’s Sigma Synthetic Fraud product as a machine-learning-based solution for identifying synthetic identities at origination and within existing customer portfolios.

Synthetic identity fraud is becoming a more significant concern for banks, fintechs, regulators, and consumers, particularly as fraudulent accounts may be used to facilitate peer-to-peer payment scams and other financial crimes. Historically, institutions have often categorized associated losses as credit charge-offs or first-party fraud, potentially obscuring the scale and cost of the problem while distributing losses indirectly to legitimate customers. Citing FDIC household-account figures and Socure’s analysis, the discussion estimates that synthetic identities may comprise 1–3% of demand deposit accounts, potentially representing millions of fraudulent identities in U.S. banking systems. Growing P2P fraud, including scams involving services such as Zelle, has prompted scrutiny from the Consumer Financial Protection Bureau and some U.S. senators, who have considered shifting more liability for certain scams from consumers to financial institutions under Regulation E. The piece argues that stronger identity verification at account opening can reduce fraud and compliance risks without necessarily sacrificing customer onboarding, and calls for coordinated action among lenders, fintechs, and government agencies amid changing regulatory and economic conditions.