Loan Fraud with Stolen and Synthetic Identities: How It Works and How to Stop It

Loan fraud, often facilitated through stolen or synthetic identities, poses significant challenges for lenders due to the difficulty of detecting such fraud until financial losses occur. Stolen identities involve the use of real personal information, typically acquired through data breaches or phishing, whereas synthetic identity fraud involves the creation of fictitious identities using real and fabricated information, often going unnoticed until the perpetrator maxes out credit lines. These types of fraud exploit gaps in verification processes, particularly where document authenticity is checked without confirming the identity of the applicant in real-time. Didit addresses these vulnerabilities with a $0.33 KYC (Know Your Customer) core flow that includes ID verification, passive liveness detection, face matching, and device/IP analysis, aiming to confirm the applicant's identity and detect fraud rings. This approach helps close the identity verification gap, enabling lenders to prevent fraudulent applications before making credit decisions and mitigating the risk of charge-offs from fraudulent activity.