Spoooooky types of identity fraud

At the end of this month, an army of ghosts, ghouls, witches and goblins will roam the streets in search of candy. As terrifying as these hungry souls may be, a more ghastly monster — in search of something much more lucrative than sugar — is wreaking havoc on the world’s population: identity fraud.

Identity fraud refers to the exploitation of someone else’s identity for financial or personal gain. Through a dizzying array of methods, fraudsters will steal the identity of an individual or business to eventually extract something that benefits themselves at the expense of the victim.

The scale of ID fraud is massive; according to Javelin Strategy & Research, in 2018 there were over 14 million victims of ID fraud, costing consumers nearly $15 billion in losses. Despite the widespread adoption of anti-fraud practices, fraudsters are finding increasingly sophisticated and terrifying ways to conduct their malicious behavior.

As we raise our goosebumps this Halloween season with scary films, haunted houses and spooky costumes, let’s pile on the fright with a look at four horrific types of identity fraud that are impacting real people every day. This list will make “trick” seem like an okay option …

Note: The spook levels below range from 1 to 5, with 5 being the most terrifying.

Synthetic ID fraud

Spook Level: 3

With synthetic ID fraud, fraudsters create fake identities usually based on combining fake information with actual ID data. One example of a fake identity is one that contains a real national ID number along with a fake address and other synthetic data points. The fraudster can then use the fake identity to acquire driver’s licenses, passports and other ID documents as well as credit cards and other accounts.

What’s truly terrifying are the losses tied to this type of fraud, which are estimated in the billions annually in North America. In a report from Equifax, “synthetic ID fraud accounts for 80% of all credit card fraud losses, and nearly one-fifth of credit card charge-offs.” Another study found that synthetic ID fraud is responsible for 20 percent of credit losses, with an average charge-off of $15,000. It’s also one of the fastest growing forms of identity theft.

The losses aren’t just financial. Often, criminals will use the social security numbers of children to apply for government benefits, open bank and credit card accounts, apply for loans or utility services, or rent a place to live. In 2017, more than one million children were victims of identity theft or fraud and, according to Carnegie Mellon CyLab, children’s SSNs are 51 times more likely to be used in synthetic fraud schemes than adults.

Gaming fraud

Spook Level: 3

Online gaming is a global phenomenon; it’s already a massive business in Europe, and the U.S. Supreme Court’s recent decision to allow states to make their own gaming rules has pushed the global market north of $170 billion, according to some estimates. With great scale and transaction volumes comes great potential for terror in the form of gaming fraud.

According to research from Harvard’s Jean-Loup Richet, fraudsters gravitate to role-playing games — particularly the massively multiplayer online role-playing games which host millions of gamers (think Second Life, World of Warcraft and Fortnite). Here’s how they commit their money laundering:

1. Launderers purchase credits (or “gold” in gaming parlance) in online games; the purchase is made using prepaid or stolen cards.
2. Once the gold is purchased, the launderer sets up shop on a gold-selling site. These reseller sites attract a large number of gamers, as the gold is often sold at a marked-down price.
3. A buyer purchases the gold, and the launderer cleans his illegally obtained money. Neither party is aware of the other’s identity …

Ghost fraud

Spook Level: 5

Perhaps the creepiest of all types of ID fraud, ghost fraud happens when criminals use the identities of deceased people to perpetrate fraudulent activities. For example, a thief uses fake identity credentials to take advantage of the deceased person’s credit rating. They will then apply for credit cards and loans with the fake ID, purchase a wealth of items and take off with the proceeds.

Also called “ghosting,” this type of fraud affects an estimated 2.5 million Americans annually, and in 800,000 cases it was used to open lines of credit or secure a mobile phone plan. Often, this type of ID theft is committed by someone who knows the deceased person, allowing them easier access to the necessary documentation needed to pull off the crime.

Shouldn’t financial institutions know when someone has passed? Not always; if the identity information is accurate and the person’s account is in good standing and has not been halted, the deceased person’s ID appears like a good customer. It can take months before they discover that the account has been compromised.

Patient ID fraud

Spook Level: 5

Healthcare is highly personal and highly sensitive. One patient may interact with a dozen healthcare professionals, and each party of the health care journey needs to know the identity of the patient to make sure they are treating the right person. This is why the industry has regulatory requirements to govern ID verification and due diligence, which mandate that patient information remain confidential and shared only with the identified person and appropriate health care providers.

With such governance comes potential for fraud, in this case patient ID fraud. According to one U.S. study, in 2017 there were over 300 medical/healthcare data breaches, potentially exposing 171 million personal medical records and costing the average victim $13,500. Compare that number to the average cost of a non-medical ID theft (~$55) and the scope becomes terrifyingly apparent. Patient ID victims may also face potential loss of insurance coverage, damage to their credit history and even criminal charges due to prescription drug activity.

The spookiest part? Patient ID fraud can result in inaccurate and potentially life-altering information being put on someone’s medical record erroneously. Once on there, medical record information is very difficult to change. If healthcare professionals are diagnosing issues that are misrepresented or aren’t even there, patients may receive the wrong care.

Despite the spooky fraud above, it’s not all doom and gloom. As ID fraud has proliferated, so too has a wave of technological innovations — like authentication tools and ID verification software developed to help companies and consumers avoid fraud and associated fines. And they’ve proven to be incredibly effective. So this Halloween as millions pretend to be someone/thing else for an evening, remember that our real identity is the most valuable thing we own.

This post originally appeared on Finextra.