a16z Podcast

a16z Podcast: Stories from the Frontlines of Synthetic Fraud

Jun 25, 2019
Naftali Harris, co-founder and CEO of Sentilink, dives into the fascinating world of synthetic fraud in the financial sector. He uncovers how this new form of deception costs $1-$2 billion annually and the complex lifecycle of fake identities. Harris discusses how fraudsters exploit gaps in identity verification, particularly during the 'bust out' phase. He emphasizes the urgent need for better detection methods and a national identification system, making it clear that traditional approaches are no longer sufficient to combat this evolving threat.
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INSIGHT

Synthetic vs. Identity Theft

  • Synthetic fraud differs from identity theft because it uses entirely fabricated identities, not real ones.
  • This makes it harder to detect, as there's no actual victim to report the crime.
INSIGHT

Scale and Detection Challenges

  • Synthetic fraud causes $1-$2 billion in annual losses within lending, a significant amount.
  • Banks struggle to differentiate these losses from legitimate hardships, making detection difficult.
INSIGHT

No Central Database of Identities

  • Financial institutions and credit bureaus lack a central database of all name, date of birth, and SSN combinations.
  • Fraudsters exploit this by repeatedly applying for credit with fake information until a record is created.
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