By Barley Laing, the UK Managing Director at Melissa
Financial institutions are facing a surge in increasingly sophisticated fraud. One of the fastest growing threats is Synthetic Identity Fraud (SIF), which sees criminals creating new, false identities using a combination of real, stolen and fake data – such as birthdates and addresses – which they then use to defraud those in financial services.
AI-powered tools are accelerating this trend, enabling the creation of synthetic identities at scale and increasing the difficulty of detection. According to Juniper Research financial institutions are expected to see losses surge globally from $23 billion in 2025 to $58.3 billion by 2030, driven in a large part by synthetic identity fraud.
With the growth in synthetic identities serious vulnerabilities due to outdated fraud prevention strategies within many financial organisations are becoming a serious issue, particularly as they expand their digital services.
Additionally, it’s important to realise that for every $1 lost to fraud financial institutions spend significantly more to cover associated costs in fixing the issue and in potential fines from regulators, for example.
Obtain accurate customer data
Ensuring the collection of accurate customer contact data is key to supporting the effectiveness of the ID process and preventing synthetic driven ID fraud. Having accurate contact data supports everything from end-to-end fraud prevention to delivering simple ID checks; meaning more advanced and costly techniques, like biometrics and liveness authentication, may not be necessary.
Scan for deceased and change of address
A big issue is fraudsters exploiting inaccuracies in contact data to create false identities and manipulate existing ones. In fact, synthetic identity fraud, along with some other types of fraud, often rely on outdated, inactive, or deceased identities — gaps that traditional fraud controls may overlook. By incorporating National Change of Address (NCOA) data from the likes of the Royal Mail or the United States Postal Service (USPS), along with deceased suppression data into identity verification and customer onboarding workflows, financial institutions can proactively shut down key entry points for fraudulent activity.
For example, fraudsters frequently exploit legacy systems that fail to detect when a genuine customer has moved. This allows them to hijack mail redirection processes, intercept account credentials, or create accounts using partial or outdated address histories. Leveraging NCOA files ensures that customer records reflect the most up-to-date residential information, reducing false positives in identity checks and preventing fraudsters from impersonating individuals.
Address verification is the foundation of data quality
In fact address verification – having a consistently accurate, standardised address – is the cornerstone of contact data quality. With up-to-date customer addresses it’s much easier to match and verify identities across multiple sources. Therefore, verifying the accuracy and legitimacy of an individual’s address should be the first stage in any identity related process, with any discrepancies between a claimed address and official records highlighting a potential fraudster.
Having validated mobile numbers and email addresses for users is also crucial, because obtaining outdated or invalid phone numbers and email addresses creates vulnerabilities that fraudsters can exploit to bypass identity verification and system safeguards – aiding them in creating synthetic identities.
Electronic ID verification is essential
Obtaining an electronic ID verification (eIDV) tool is a highly effective way to undertake ID verification. Because these tools are “always on” they can, in real-time, cross-check the names and addresses – for proof of address – email addresses and phone numbers provided by prospective customers during remote onboarding. This provides a good customer experience while preventing fraud.
For the best outcome sourcing an eIDV platform with access to billions of consumer and business records from reputable sources around the world, such as government, utility and credit agencies, is advised. The end result is the delivery of efficient customer onboarding as part of an effective ID verification service, anywhere in the world.
When compared with manual checks eIDV is considerably quicker, more accurate and cost effective for undertaking ID verification and preventing fraud. It’s because this technology requires no additional staffing or training costs, and there’s no risk of human error.
Geolocation tool
Using a geolocation tool is also crucial to prevent the growing threat of synthetic ID driven fraud. It can validate whether an applicant’s physical location aligns with the address and personal details they provide. For instance, if an applicant for a service or product claims to reside in London but geolocation data from their mobile device reveals they are actually 5,000 miles away, this discrepancy serves as a significant red flag, and additional checks will be required. An effective geolocation solution should accurately convert UK, European, and international postal addresses into exact latitude and longitude coordinates in real-time. This level of accuracy facilitates seamless data matching, enhancing fraud detection capabilities and reduces the likelihood of approving fraudulent accounts.
In summary
In the age of AI fraud caused by synthetic identity creation will continue to evolve, grow and breach outdated fraud prevention defences. But with the right combination of advanced data quality and eIDV technologies financial institutions can mitigate this risk, protect customers, and maintain a strong competitive edge in an increasingly dynamic regulatory and digital landscape.
