Can risk management teams keep pace with the rise of synthetic identity fraud?
In 2025, synthetic identity fraud has surged as a fast-growing financial crime, with lenders exposed to an estimated $3.3bn from suspected synthetics in the first half of the year alone. Fueled by GenAI, which enables fraudsters to craft convincing hybrid identities from real and fabricated data, this threat is outpacing traditional defenses and escalating global losses into the billions. The pressing question: Can overburdened risk teams evolve quickly enough to stem the tide?
In the view of Fraser Mitchell, chief technology officer at SmartSearch, the financial and regulatory landscape has long been a game of cat and mouse, with risk and compliance teams working often tirelessly to stay one step ahead of bad actors.
He added, “But in the age of generative AI, the rules of engagement have changed. The rise of sophisticated tools has given criminals the power to create hyper-realistic “synthetic identities” and deepfakes, posing a new and complex threat that requires an equally advanced response.”
For Mitchell, the uncomfortable truth is that traditional onboarding processes – which rely on document review and a limited set of data checks – are proving to be no match for the new generation of AI-drive fraud.
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Editorial Comment: The author highlights one of the toughest challenges in financial crime today. Synthetic identity fraud—mixing real and fake identity elements—has surged by exploiting gaps in KYC/AML, credit reporting, and digital onboarding.
Fraser rightly asks: “Can overburdened risk teams evolve quickly enough to stem the tide?” He argues fraud can’t be eliminated—it adapts too fast—but it can be contained. Like cybersecurity, success depends on layered defenses, information sharing, and analytics that raise the cost for criminals.
Governments, however, must do more. With most fraudsters operating abroad, tougher law enforcement and bilateral trade negotiations should target safe havens. Without that, the fight remains uneven. Joachim C Bartels