Suspected terrorist links to synthetic ID fraud are being 'ignored'

The growing problem of synthetic identity fraud is raising concerns that terrorist cells could be linked to these schemes, experts say.

“This requires immediate attention. This is extremely serious, and it’s been ignored for way too long,” said Kalyani Munshani, an expert in financial crime.

Synthetic identity fraud is a scheme that procures new and genuine credit and identification cards using false names in order to create a fake identity.

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Fraudsters have been able to obtain driver’s licences, passports, phone numbers and credit cards, as well as open bank accounts, take out bank loans and create companies, all under fake names. By the time police move in, many of the fraudsters have vanished, leaving investigators trying to locate people who never existed.

While domestic organized crime is certainly involved in these frauds, Munshani has warned of the possibility of a terrorist link.

She said synthetic identities are used for two purposes: revenue generation and logistical purpose.

“And this is where the real concern lies," said Munshani, who has referred to synthetic identity fraud as a "game changer."

“Using synthetic identities, safe houses can be established, cars can be rented, heavy vehicles can be bought, international travel can be facilitated, restricted goods can be bought without any flags being raised,” she said. "This is not a conventional crime. This is more towards terrorism, I believe, not just merely revenue generation.”

The RCMP has also warned that terrorism may be a motivating factor in creating identity-related fraud schemes including synthetic identities.

John Russo, vice-president and legal counsel of consumer credit reporting agency Equifax, said they’ve uncovered cases of people on do-not-fly lists using synthetic IDs for travel purposes.

“They’ve created these fictitious IDs to escape and avoid being caught at airports, and being able to travel across the borders in terms of exchange of materials. 

"So it’s not only financial gain, but for other criminal elements.”

Police have also uncovered synthetic identity fraud involving airline tickets between New York, Toronto and Pakistan, a high-risk state in the world of global security.

Toronto Police Detective Constable Mike Kelly, who has been investigating synthetic identities for the past four years, said these schemes can be “very useful to anybody with bad things on their mind.

“Think of the potential of having an apartment and a vehicle and a phone, all registered in different names. That you can come and go as you please. You have the ability to open businesses and transport large volumes of materials in trucks with appropriate permits and licence designations," he said. 

“And then at the end of the day, when people like myself and police agencies go to investigate who's behind it all, there’s a puff of smoke and there’s nobody there.”

Fraudsters didn't enjoy 'spoils of their efforts'

 In a five-month investigation called Operation Mouse, Kelly and his colleague discovered synthetic identities were responsible for $25 million in fraud losses in which credit card bills and mortgages were never repaid. But Kelly said one of his concerns is that the vast majority of fraudsters they’ve come across who are involved in these schemes are living modestly.  

“Generally people do fraud for financial gain and most people get financial gain so they can enjoy the spoils of their efforts. In this case, we never saw that,” he said.

Instead, Kelly said he believes the money is going to “something overseas that isn’t anything positive.”

“I don't think anything good comes from somebody in an organization hoovering tens of millions of dollars out of our legitimate economy and feeding some form of organized crime. Particularly one that operates overseas.”

Mushani suggested that the ease with which identities can be created, the amount of money that can be raised and the destination of the funds should be cause for concern.

“There are streams of money. We don’t know where it’s going. Hezbollah? Perhaps, I can’t say. Or any organization? I can’t say.

“In your own backyard you have safe houses being put up by people you're not aware of. You don't know the size of this group of individuals, but they're highly financially- sophisticated,” she said.

“They know how the departments work, government departments. Where the access points are. Where the weaknesses are. They seem to know a lot of things. I think it would worry anyone.”

Terrorist finance laws brought in after the Sept. 11, 2001 attacks are just not effective to deal with this  new type of crime, she added.

“The complete structure cannot appropriately address this crime,” she said.