How to Prevent Synthetic Identity TheftMy Best Tips for Cardholders & Merchants

Craig McClure | August 1, 2025 | 4 min read

Synthetic Identity Fraud Detection is a Good Start, But Prevention is What Matters

You need to know that the person buying from you is actually a real person. That can be difficult for eCommerce. You aren’t necessarily in a position to stop crooks from acquiring illegitimate credit, but you can take steps to block those bogus accounts before they’re used at your store.

The techniques used to combat synthetic identity fraud are essentially the same as any type of pre-transaction fraud. It’s all about recognizing red flags and verifying suspicious buyer’s identity before the sale.

Best Practices to Stop Synthetic Identity Theft

How do you go about that? Fraud and risk mitigation plans aren’t “one size fits all.” Every business will require different elements. But there are a few actions you may want to consider.

Outsourcing Identity Verification

Identity verification is often more complex than it seems, which is why merchants commonly turn to professional third-party providers. Those services, however, are typically more cost-effective for long-term usages, like credit or loan applications, as opposed to individual transactions.

Paying Attention From the Start

New accounts often present a higher fraud risk, but tools like geolocation and device fingerprinting can help verify buyer information up front. For example, a large first order from Nigeria using a card registered in Idaho is immediately suspicious. Also, beware of multiple new accounts from the same device.

Employing Authentication Best Practices

You — and your bank — should use multi-factor authentication, CVV security codes, and address verification services to validate each buyer’s identity at login. Ideally, app-based authentication for second factors should be used in favor of SMS-based second factors, which are plagued with security vulnerabilities.

Performing Liveness Checks

A liveness check (or liveness detection) references biometric information (like a face or fingerprint) against known information. While not foolproof (as addressed in other chapters), this can help establish that a buyer is a live human being, not just a picture or AI-generated fake.

Deploying Machine Learning

Fraud detection tools with built-in machine learning capabilities can detect subtle trends and fraud patterns that less-sophisticated, rules-based systems might miss. Dynamic algorithms learn from each new set of data, helping you analyze and adapt to new threats in real-time.

AI and machine learning can help you block chargebacks before they start.

Our platform has both.

Request a Demo

The Original End-to-End Chargeback Management Platform

Getting Social

Some fraudsters even create fake social media profiles for their synthetic identities, but these rarely go very deep. If you’re suspicious about a buyer, check their online presence. No account — or accounts that were created recently and have few posts or details — automatically suggests a fake ID.

Leveraging Behavioral Analytics

Going beyond log-in monitoring, behavioral analytics let you catch potential fraud before an order is fulfilled. By comparing current actions against historical patterns of actual users, these reports can help you differentiate between genuine users, bots, and manufactured identities.

Checking Fraud Scores

You can’t physically watch each sale, but you should have a way to consistently monitor transactions in real time. Tools can cross-reference cardholder information to flag potentially bogus identities for manual review. Trained eyes can make judgement calls when software can’t understand, resulting in fewer false positives.

Requiring Documentation

You’re allowed to ask for additional verification. It’s not something you want to do in the majority of situations, but in iffy cases, consider asking for a government ID like a driver’s license. Even something as simple as a utility bill can help corroborate the buyer’s address.

Important!

The most effective strategy needs to rely on more than one data source. Many modern fraud prevention tools have the capability of cross-checking customer data across both internal and public records.

Using AI to Fight AI-Enabled Synthetic Fraud

It’s a whole new game for synthetic identity fraudsters. That’s the bad news. The good news is, fraud fighters have the perfect weapon for combatting generative AI: generative AI.

GenAI can systemize the criteria for spotting fake IDs. It could generate a “typical” user by averaging information from public records. This composite profile could then be compared against potentially fraudulent IDs.

This comparison could bring to light some minor but important factors. For example, the composite may show that an average 35 year-old woman living in Montana typically has a credit history going back 17 years. If a synthesized account representing that same criteria only shows a history of 12 months, the Gen AI would flag it as suspicious.

A Real-World Look at Chargeback Management

Based on a survey of over 400 merchants, the report presents a comprehensive, cross-vertical look at the current state of chargebacks and chargeback management.

Access the FREE Report

Along the same lines, GenAI-created profiles tend to be more generic. The program may give the persona a driver’s license, but not something more specific like a hunting license or an online gaming account. It may provide a physical address and claim the identity has owned it for years, but the accompanying mortgage might reflect current rates… not the going rates in 2001.

Did You Know?

It’s certainly possible to train Gen AI to create more nuanced identities that at least seem to have a longer history. It would take time, though, and probably still wouldn’t be enough to throw Gen AI-based programs off the trail.

These seemingly minor details can be easily overlooked by a human investigator or even rules-based detection software. Gen AI, however, can be specifically trained to ferret out identities that don’t seem to have a complete, long-term, and believable profile.

So, as it stands now, it’s AI vs. AI in the fraud arena. And, both are likely to get better in the future.

The Best Tip: Educate Yourself

If there is a single best step you can take for fraud protection against synthetic identity fraud, it’s educating yourself and your workers.

Hold regular staff training on learning the common red flags of synthetic identity fraud risks. Customer service reps and order fulfillment teams should be well-versed in Know Your Customer (KYC) and anti-money laundering (AML) mandates. You want as many people as possible to be on the lookout for the signs, so that you stand the best possible chance of detecting scams and keeping your business safe.

Synthetic Identity Theft

How to Prevent Synthetic Identity TheftMy Best Tips for Cardholders & Merchants

Synthetic Identity Fraud Detection is a Good Start, But Prevention is What Matters