St. Petersburg, Fla.-based payments CUSO PSCU offers a real solution to the growing threat of synthetic identity theft, where a cybercriminal combines real and fake information to forge a new ID.

A Federal Reserve white paper released last July, "Synthetic Identity Fraud in the U.S. Payment System," focused on the severity of this somewhat misunderstood fraud type, a mounting problem for credit unions and other financial institutions. The study cited McKinsey, which described synthetic identity fraud as the fastest-growing type of financial crime in the U.S., and the Auriemma Group, which in 2016 estimated that fake personas accounted for 5% of charged-off accounts and up to 20% of credit losses – or $6 billion. 

The Fed paper reported fraudsters increasingly use synthetic identities to execute payments scams, which can evade detection by ID verification and credit-screening processes. Over time, fraudsters build up the synthetic identity's creditworthiness, then "bust out" by purchasing high-value goods and services on credit before disappearing. "Because the identity was not real to begin with, there is limited recourse in tracing the perpetrators and holding them responsible for their debts," the Fed report explained. Other consequences include denial of benefits, tax return rejections and health record inaccuracies.