The Federal Reserve Bank of Boston published an analysis of synthetic identity fraud, warning that generative artificial intelligence is accelerating the creation of fake identities and making the fraud harder to detect, with reported losses exceeding USD 35 billion in 2023. The Bank positions the issue as a payments-system risk and highlights the need for greater awareness among financial institutions. The article explains that synthetic identity fraud typically combines real elements of personally identifiable information from multiple people into a fabricated identity, which is then used to obtain credit, open accounts, and ultimately extract funds through products such as loans. It sets out how generative AI can automate identity creation, produce convincing fake documents and deepfake audio and video, and mimic human communications to obtain additional data or pass authentication, using breached data as key fuel. To counter the threat, the Bank notes that AI can help detect synthetic identities by identifying their lack of “depth” compared with genuine customers’ long-term digital and financial footprints, and that generative AI can support institutions by developing scenarios to improve detection. It also states it will continue updating its synthetic identity fraud toolkit and partnering with industry to identify and stop this type of fraud.
Federal Reserve Bank of Boston 2025-04-17
Federal Reserve Bank of Boston warns generative AI is amplifying synthetic identity fraud and will keep updating its fraud toolkit
The Federal Reserve Bank of Boston warns that generative artificial intelligence is exacerbating synthetic identity fraud, with 2023 losses exceeding USD 35 billion. The Bank identifies this as a payments-system risk and emphasizes the need for heightened awareness among financial institutions. It suggests using AI to detect synthetic identities and plans to update its fraud toolkit and collaborate with the industry to combat this threat.