A new fraud scheme, called "synthetic identity theft," has arisen, reports Stateline. These frauds involve the swindling of a bank using new identities formed from fake names paired with real Social Security numbers. Typically, the banks give loans to the owners of the fake identities who never pay them back. One man, Adam Arena, used the same scheme on the federal government to obtain nearly $1 million from the the Paycheck Protection Program, which was promptly spent on vehicles, spa services, clothes, restaurants, and gym memberships. Similar schemes have been perpetrated on state unemployment benefit systems as well.
Synthetic identity fraud has become the largest form of identity theft in the U.S., says the financial company FiVerity. The Federal Reserve pegged their negative effect on the economy at $20 billion for 2020, up from around $6 billion in 2017. The IRS has urged taxpayers to look out for documents that detail unemployment benefits they never received, which may indicate that someone else filed for benefits using their information. Being the target of such a fraud can have long-term effects on the credit of victims, who may not learn of the scheme until their credit limits are maxed out or they apply for a loan. A 2018 federal law was designed to curb the problem, but it has not been as effective as it could have been because financial institutions have been slow to enroll in a program created by the law.