What a synthetic identity is
The US Treasury's financial crimes unit (FinCEN) defines a synthetic identity as a combination of real and fake personal information used to build a person or business that can pass identity checks. It reports that criminals have combined AI-generated images with stolen or entirely fake personal data to create such identities. Europol warns that criminals can also abuse biometric data, using photos gathered online and deepfake technology to impersonate people.
FinCEN reports that accounts opened with suspected AI-made identities were used to receive and launder the proceeds of other frauds. That is why customer checks matter to everyone, not just compliance teams: the fake customer may be the end of a chain that began with a scam on someone else.
Remember
Facts and sources for this part
- FinCEN defines a synthetic identity as a combination of real and fake personal information used to build a person or business that can pass identity checks. [KS31]
- It says criminals have combined AI-generated images with stolen or entirely fake personal data to create synthetic identities. [KS31]
- Europol warns that criminals can abuse biometric data, using harvested photos and deepfake technology to impersonate people. [KS28]
- It reports accounts opened with suspected AI-made identities were used to receive and launder the proceeds of other frauds. [KS31]
Fake documents can be made in minutes
Scamwatch says professional-looking certificates, licences and official documents can be created in minutes, and gives examples: fake regulatory papers for investment scams, and fake passports and work permits for romance scams. The FBI says criminals use generative AI to produce fake identification documents, such as licences and law enforcement, government or banking credentials, and AI-generated images for believable profile photos. FinCEN reports that criminals have used generative AI to create false documents, photos and videos to get around customer identification and verification.
A smooth, clean-looking document is therefore no longer a sign of a genuine one. Checks work best when they compare a document with other things the customer says and with independent records.
Remember
Facts and sources for this part
- Scamwatch says professional-looking certificates, licences and official documents can be created in minutes. [KS7]
- Scamwatch gives examples of fake documents made with AI: fake regulatory papers for investment scams and fake passports and work permits for romance scams. [KS7]
- The FBI says criminals use generative AI to produce fake identification documents, such as fake licences or law enforcement, government or banking credentials. [KS14]
- The FBI says criminals use AI-generated images to make believable profile photos, identification documents and other images that support their fraud. [KS14]
- FinCEN reports that criminals have used generative AI to create false documents, photos and videos to get around customer identification and verification. [KS31]
What customer checks can catch
FinCEN says institutions often found fake identity documents by re-reviewing account-opening documents, and that reverse image searches can show an identity photo matches a gallery of AI-generated faces. Indicators that deserve a closer look include inconsistencies between several identity documents or between a document and the rest of the customer's profile, and a customer who cannot satisfactorily prove their identity or source of income.
Further signs include a newly opened account with rapid transactions, many similar accounts acting in a coordinated pattern, and money withdrawn straight after deposit in ways that are hard to reverse. FinCEN stresses that no single red flag proves wrongdoing, so each case is judged on the surrounding facts. A flag means "look harder and escalate through your normal process", not "accuse".
Remember
Facts and sources for this part
- Institutions often found fake identity documents by re-reviewing account-opening documents, and reverse image searches can show that a photo matches a gallery of AI-generated faces. [KS31]
- Indicators that deserve a closer look include inconsistencies between several identity documents, or between a document and the rest of the customer's profile, and a customer who cannot satisfactorily prove their identity or source of income. [KS31]
- Further signs include a newly opened account with rapid transactions, many similar accounts acting in a coordinated pattern, and money withdrawn straight after deposit in ways that are hard to reverse. [KS31]
- FinCEN says no single red flag proves wrongdoing, so each case should be judged on the surrounding facts and circumstances. [KS31]
Live checks and their limits
Live verification, where a customer is asked to confirm identity by audio or video, can help. FinCEN cautions that criminals may use tools that generate synthetic audio and video, so inconsistencies may be the only clue, and that some systems flag third-party webcam plugins which can show previously generated video instead of a live feed. Europol notes that a higher-quality synthetic image makes a forged document more likely to pass a visual check, and that the strength of an identification process depends on the whole process, not only the visual step.
Our advice: do not rely on one check. Combine document review, independent records, a live step and ongoing monitoring, and write down who decides what when the checks disagree.
Remember
Facts and sources for this part
- Live verification, where a customer is asked to confirm identity by audio or video, can help, but criminals may use tools that generate synthetic audio and video, so inconsistencies may be the only clue. [KS31]
- Some identity checks flag the use of third-party webcam plugins, which can show previously generated video instead of live video. [KS31]
- Europol notes that a higher-quality synthetic image makes a forged document more likely to pass a visual identity check, so the strength of an identification process depends on the whole process, not only the visual step. [KS30]
Protect your own documents
Staff and customers can also be victims. Peru's data protection authority advises not letting anyone photograph your identity document, not sharing photos of it on social media or messaging, and using watermarks or crossed-out areas on any copy you must send. INCIBE advises not sharing personal documents before validating why they are requested and who is asking. In an INCIBE case, an employee shared a photo of their identity card as part of a fake executive's payment request.
Remember
Facts and sources for this part
- Peru's data protection authority advises not letting anyone photograph your identity document, not sharing photos of it on social media or messaging, and using watermarks or crossed-out areas on any copy you must send. [KS44]
- INCIBE advises not to share personal documents without first validating why they are requested and who is asking. [KS36]
- An INCIBE case shows a forged document used as proof: the fake CEO emailed a document with forged signatures, and the employee also shared a photo of their identity card. [KS36]
- Peru's public prosecutor describes identity impersonation as using information technology to pass as another person or institution in order to harm them, including to commit financial fraud. [KS45]
Scenario 1: an email
A new business customer, "Cove Street Trading" (invented), applies online. The director's passport photo is very clean. The utility bill shows a different spelling of her surname and an address that does not match the passport. She says her ID photo is "an old scan" and asks you to hurry because she wants to start paying suppliers today.
Red flags: Documents do not agree with each other; A very clean photo with a vague explanation; Pressure to hurry the checks.
What to do: Do not approve on the strength of the documents. Record the inconsistencies, ask for independent evidence through your normal process, and escalate to whoever decides on onboarding. A mismatch is a reason to look closer, not proof of fraud.
Remember
- Documents do not agree with each other
- A very clean photo with a vague explanation
- Pressure to hurry the checks
Facts and sources for this part
- Indicators that deserve a closer look include inconsistencies between several identity documents, or between a document and the rest of the customer's profile, and a customer who cannot satisfactorily prove their identity or source of income. [KS31]
- FinCEN says no single red flag proves wrongdoing, so each case should be judged on the surrounding facts and circumstances. [KS31]
- Europol notes that a higher-quality synthetic image makes a forged document more likely to pass a visual identity check, so the strength of an identification process depends on the whole process, not only the visual step. [KS30]
Scenario 2: a video call
During a live video check, a new customer's face is slightly out of sync with his voice. When asked to turn his head and hold up a hand in front of his face, the video freezes for a second. Your system shows he is using a "virtual camera" application.
Red flags: The video is out of sync and freezes on request; A virtual-camera application is in use; The customer avoids the live task.
What to do: Pause the onboarding and follow your procedure for failed live checks. Note what you saw and heard. Do not tell the customer what triggered the flag. Escalate; the decision whether to refuse or ask for another route belongs to your compliance lead.
Remember
- The video is out of sync and freezes on request
- A virtual-camera application is in use
- The customer avoids the live task
Facts and sources for this part
- Live verification, where a customer is asked to confirm identity by audio or video, can help, but criminals may use tools that generate synthetic audio and video, so inconsistencies may be the only clue. [KS31]
- Some identity checks flag the use of third-party webcam plugins, which can show previously generated video instead of live video. [KS31]
- Europol notes that a higher-quality synthetic image makes a forged document more likely to pass a visual identity check, so the strength of an identification process depends on the whole process, not only the visual step. [KS30]
Scenario 3: an email
An account opened three days ago receives five payments from unrelated senders, totalling $46,000. The account holder asks to send all of it overseas the same day. Two other accounts opened that week share the same phone number and device.
Red flags: A new account with rapid, large movements; Funds sent out immediately in a way that is hard to reverse; Several new accounts linked by the same phone and device.
What to do: Do not process the transfer yet. Escalate under your own procedures so the right person can review the pattern. Do not tip off the customer. Keep a record of what you saw and when.
Remember
- A new account with rapid, large movements
- Funds sent out immediately in a way that is hard to reverse
- Several new accounts linked by the same phone and device
Facts and sources for this part
- Further signs include a newly opened account with rapid transactions, many similar accounts acting in a coordinated pattern, and money withdrawn straight after deposit in ways that are hard to reverse. [KS31]
- It reports accounts opened with suspected AI-made identities were used to receive and launder the proceeds of other frauds. [KS31]
- FinCEN says no single red flag proves wrongdoing, so each case should be judged on the surrounding facts and circumstances. [KS31]
Check what you have learned
Three questions from the test, each explained. Tap an answer.
Question 1 of 3
What is a synthetic identity?
Show the answer
Right answer: C, A mix of real and fake personal details used to build a person who can pass checks. FinCEN gives this definition. [KS31]
Question 2 of 3
A new customer's utility bill spells her surname differently from her passport and shows a different address. She asks you to hurry. What is the right approach?
Show the answer
Right answer: D, Record the inconsistencies, ask for independent evidence, and escalate through your process. FinCEN lists inconsistencies between documents as a reason for closer scrutiny, while stressing that no single flag proves wrongdoing. [KS31]
Question 3 of 3
What does FinCEN say about red flags?
Show the answer
Right answer: A, No single red flag proves wrongdoing, so each case is judged on the surrounding facts. A flag means look closer and escalate through your normal process. [KS31]