Identity Fraud Frankensteins

He is a vice president of Global Analytics at Alexis Nexus and an expert on synthetic identity fraud. Jeffrey, thank you for being with us. What is it? What is synthetic identity fraud? Hello, I'm glad to be here. Synthetic identity fraud of a really complicated type of fraud that we're seeing emerged since roughly two and twelve, and it

requires a great deal of coordination. And what really happens is synthetic identities are these Frankenstein like identities that are created by fraudsters, and these identities don't correspond to real people. They basically create false identities and they register them, register these identities and the credit system with the purpose of

stealing from companies. And it's not just banks that they're stealing from the they steal from all sorts of types of companies in particular telecoms, utilities, thin texts, and even the government. So, Jeffrey, just to get a sense of what this would be, uh, if you played it out, a person would create a false identity that they would have no qualms about walking away from, leaving a lot of bills unpaid for services that they took under their

real identities. That's exactly right. So what what the fraudster does? They create a new identity that doesn't really correspond to their true identity, and they curate that identity to make them look like better and better customers. So they pay their bills on time, and they let that relationship with their financial institutions evolve so they're sure rating credit and

they're becoming good customers. And then what happens is, over a period of weeks or months, or it could even go on as years, they simply poof disappear and that that negative activity doesn't really correspond to a true identity. And in fact, that's the big challenge for financial institutions that there's no true victim so well, except that they are a victim, because that means that there are bills that are unpaid out that are outstanding, presumably at the

end uh, that somebody walks away without paying. But I'm wondering, Jeffrey, can you give a sense of what kind of scope we're talking about. How big of a problem is this. It's hard to say for sure, because financial institutions don't always know they've been they've been a victim. So what's really happening is they see a really good customer they just stop paying their bills, and many financial institutions might

assume that that's just a consumer that's fell on hard times. Uh. And also it's pretty recent, which means we don't have a whole lot of time to look at macrowick and mc trend's. But let me share a couple of numbers with you. For the last ten to fifteen years, around seven million new identities enter into the credit system, and

a surprisingly consistent over that ten to fifteen years. The little bit of fluctuation we tend to see is usually related to either fluctuations and birth rate about fifteen years prior or immigration rate, and and so what we see is that stable number. Whoever, since two thousand and twelve to about today, we've seen a ten percent increase in

that number that had been historically stable. And in fact, when you start digging into these new identities, we've seen almost an eight increase in the number of suspicious identities, and that is suspicious synthetic identities entering that system. And in fact, just speaking to a risk manager at a bank, uh this was a week or two ago, they actually indicated this was an eight digit problem. That's tens of

millions of dollars of meaningful losses to that financial institution. So, is there a situation where you have collection agencies that are trying to collect money that is due a company, whether it's a telco or a bank, they're trying to collect from people who do not exist. That's a that's a really good point and it's part of the problem.

So in true name fraud, what happens is that the consumer victim will raise their hand and work with the bank and essentially that gets wiped from the system as part of their fraud operations. But because these these synthetic or these Frankenstein consumers just disappear and they're treated as credit risk. You will see them all through the life cycle, and we do see them on collection files when we help customers figure out, Hey, why why this collection program

not working? It's pretty common to see that there are synthetic identities drifting into those collections programs. Jeffrey, has there been any progress made in identifying the types of people who create these identities? I mean, it seems like it's a relatively sophistic CADD scheme in that people are curating uh their credit worthiness over a particular period of time. This doesn't this takes This takes quite a bit of effort. Yeah, this is definitely a full time job for those fraudsters

who are committing these sorts of fraud. And while I can go through it, I don't want to say too much because I also don't want to give instructions over the radio and how to create these identities. But what we see is these fraudsters working in identity factories. It's almost like an assembly line of smoke and mirrors to create these Frankenstein identities. And in fact, we know of one in the state of Pennsylvania that created seven thousand

of these fake identities. And what's interesting about that is when you look at your own history, your your identity has really evolved at the speed of life. And what I mean by that is there are key milestones when you register a car, You've got a driver's license, your registered to vote, you got credit and so forth, and that's a relatively slow my grace. In a true identity, however, these identities factories are really scaled for time, and what

that means is they don't evolve that quickly. They evolved for a profit motive as opposed to a true life motive. That makes sense, That makes perfect sense. Jeffrey Finestein, thank you so much for joining us. Fascinating synthetic synthetic identity fraud. Uh, definitely an interesting development. Jeffrey Finstein is PhD and Vice

president of Global Analytics at Lexis Nexus. We are still digesting all the details of the horrific mass shooting at a country music festival near Las Vegas on October two yesterday. Joining us as Chris Paul Mary who is in Las Vegas. He is the Beera chief for Bloomberg in Los Angeles. Chris, can you just give us first a sense of the mood right now in Las Vegas. I'm sure you've been there before. Has it changed, Yeah, it's it's definitely very somber.

This is just coincidentally the start of the Global Gaming Expo, which is the largest trade show for the casino industry. Twenty six thousand people from all around the world coming in. So uh, some speakers had canceled, some spoken were you know, very choked up. There were you know, signs of increased security everywhere. Uh, it's it's definitely had taken a sort of a toll overall, and usually a party city. Chris,

what about the increased security measures? We know that for example worldwide sporting events, whether it's the FIFA World Cup, you know, you go to an event like that, you're gonna be scanned and there's gonna be someone with a wand do you see those kinds of products in evidence today? I just saw that for the first on yesterday at the Wind Resort, where anybody that wanted to walk into the hotel had to get their bags checked and and

be wanted, you know with the metal detector. Uh, you know that, you know, we're in immediate aftermath the some of the MGM properties were on lockdown. And they were checking ideas of people who wanted to come in to make sure they were guests. But I haven't seen any other patinos he had adopted what Win had done. Steve

Win has always been a leader in the industry. Uh. You know, I did speak to some casino as actually said that that very may wear it very well be the future of anybody that comes into building, because that that there was really no other way to prevent the situation with the shooter, with the guns in the hotel room. He wasn't attending the concert. Yeah, well, I mean, Chris that that was sort of what struck me is how does a person how many guns did he have? Eighteen?

How many he had? A whole arsenal that he brought up to a high floor of a hotel and and from that perch uh massacred fifty nine people. I mean, that's it's sort of amazing, frankly, that that could happen at all, amazing amount of planning to on his end. Uh. You know, I think he checked in on Thursday. You know, he had more gear than just all those guns, and he hit some sort of hammer that he could break

those windows which are very thick. Uh. He had a stand that he could rest the weapons on to get a better shot. Just you know, amazing and it's diabolical nature. So, Chris, are we getting any more details behind the motivation? I have read a number of stories saying that he was not connected with anybody else, that the threat has come down.

But are there any more details behind what actually transpired? Yes? Um, it's um it's a big, you know question mark because you know, I spoke to security people and there were uh, you know, no signs really uh, you know, typically on these active shooters of them, if some sort of warning speak this body leave the manifesto whatever. Uh, this guy seemingly came out of nowhere. Chris, Uh is Nevada is an open carry state? Correct? I think the thirty one

states that allow open carrying of handguns. And this was not a handgun, of course. Uh, there was a measure just recently trying to get the background checks in tighter gun control. Everyone here are sort of focus on the morning and the events and immediate security. But I would imagine if the days come and president visits will be a much greater focus on on gun control. I wonder what the mood is among some of the casino operators. I mean, this has to be a huge blow for them.

I mean, on a personal level, it's always just devastating to see this type of death toll. But aside from that, going forward, I would imagine that people would rethink some of their plans to Las Vegas unless there's some very clear measures to prevent this type of thing from happening again. No, uh,

you know, I it's it's to school intern analyzed. I said that that it happened during the start of this convention, but I think it definitely sends a message because you know, executives, you know what's happened before, because you knows there's been a massive shift here in Las Vegas to create you know, you used to be they try to keep people in the casinos. Now they're opening the doors literally with events, concerts, uh, you know, creating a pedestrian friendly areas in front of

the hotels. So as they focused on you know, these more experiential as they call them, you know, experiences that you know, they've got to take consecurity a lot more into consideration. They've got to look at things from all angles and act like the Secret Service and think about you know, tall buildings, and constant vigilance during events, and it's going to be a different world. You know, Chris

as l a bureau chief. You go from California where they have a strict uncontrol rules and regulations, but you know, firearms are allowed, and to uh Las Vegas, which is really an international tourist destination. Is there any conversation or any debate that you've heard about limiting the access of people who carry firearms legally to various private properties. Not immediately,

but you're just a little color. I went yesterday to this place called Battlefield, Vegas, which is one of these places, and they are quite a number of them, very close to the strip where you can go fire machine guns, and in this particular place looked like a natural guard arsenal. I mean they had tanks and the employees were wearing

fatigues and there were people there. There were there was I was, I don't know what the regular day is like, but you know, I talked to some guys who said, hey, we scheduled this before you know, they're walking out with these targets that are full of machine gun bullet holes. Uh. You know, there were tourists from me as you know,

getting a picture taken on tanks. Uh uh, you know, the manager I didn't want to talk to me, but you know, there is very much, uh you know, a desire in some communities to have this kind of access. So it's gonna be the tether of work going forward. Well, is that the subject of discussion just among people who you encounter as you walk around Las Vegas. Initially, I think it was really focused on on just the shock

and the UH and the and the enhanced security. I did speak to the visit the former Boston Police commissioner who was there during the Boston UH marathon attack, and you know, he did bring up the subject of gun control. He said he would have thought would been an issue a lot earlier with Sandy Hook and that. And he's actually speaking this morning to the to the convention, so we'll see what he has to say there. But you know, I'm sure it'll be uh more of a conversation as

that as the initial shock ward off. Well, apparently, you know, and this's just coming from Greg Jared who says, you know, you cannot carry a firearm into an establishment that has gambling, and most casinos do not allow concealed weapons even if you have a concealed weapons permit, you can be refus used entry because, as I said earlier, it's a private business. I want to thank you very much for joining us. Chris Palmry he is our Los Angeles Bureau chief, reporting

from Las Vegas. Well, we want to visit right now with Rebecca LENLN, executive analysts for Cox Automotive, because of course we got many of the sales reports this morning, Toyota GM posting the biggest US sales gains on the post Harvey hurricane demand, and she joins us here in our eleven three oh studios. Rebecca, always a pleasure, Thanks for being with us. What do you make What do you make of this report? I think that we've seen some fantastic sales coming out. They basically have beat all

of our analyst estimates. And I think it's a combination of things. It's really pent up demand from the hurricane because a lot of people didn't shop in the last few weeks both of August and September, and so we have some pent up demand there. And then we also

have fantastic incentives. We've got great new products coming out, We've got a stock market at record levels, high consumer confidence, there's all sorts of fantastic reasons to go out and buy a car, and there's great new product coming out as well. Well. This is such a shift in tone because just a few months ago, a lot of automakers were talking about how they're expecting to see sales declines. They were seeing sales declines, resale values of cars were

going down all of a sudden. Now, is this really a shift in the overall landscape landscape for automakers, or is this really a blip that is due to the hurricanes. It's more of a blip, And I don't think that we're necessarily going to see this continue, you know. So so come as we report in on October sales on November one, I think we could see some decline. But at the same time, people that are getting insurance payouts

may still be shopping in October. So I think it's hard to say now the full impact of the hurricanes and how that plays out over the next few months. And again, if we think about product, we've got a new Cameray, We've got a new Honda Chord that I just drove last week. So we've got some really high volume, really good vehicles coming out The difficulty through withen is that because we had a record setting every month, it's gonna you know, it's hard to beat that record. So

we're always going to be down a little bit. Yes, although you know you said they're such great incentives. Incentives are great for the buyers, they're not that great for the manufacturers because that means they're expect accepting a lower profit margin. And yes, they are coming off of an exceptionally good year, but they've seen weakness in a lot of areas and their profits have sort of have reflected that. Well, General Motors still making nine billion dollars in profits fair enough.

I mean, I think it's important to remember that this is not the industry of two thousand seven, eight and nine. This is a much more disciplined, much trimmer industry. And so you know, a coming like GM has shed brands, uh Chryslers shed models. So we're in a situation where even if they incentivize, we are still making some really healthy profit numbers. Let me just give you an example,

and I want your reaction to this. If you want to buy in camera and you want to finance it, they'll give you five dollars bonus cash zero percent a p R and seventy two months. Yes, So as a former employee of the f D i C, I do look carefully at some of these credits and credit worthiness and such. You know, one of the we own Kelly blue Book Dealer dot com Auto Trader, so we're able to track a lot of different parts of the industry. And the number one thing that I that I caution

consumers against is over extending themselves. You do not want to go for a seventy two or eighty four month loan because then when you trade that vehicle in, you probably will owe more than it's worth. So I would just caution people. Let's talk Tesla talk that everyone loves to hate and yet that just won't die. We saw them having manufacturing difficulties, unable to fulfill uh the production amounts that they had expected. Shares are down a bit

knocked down as much as money people would like. Um, do you think that they have a chance given the fact that the Detroit automakers are ramping up their electric and automotive car units. So you know, a Lisa, It's Tesla is First of all, I'm a huge fan of Elon Musk. I think that we need people like him to push our industry. So so you said something nice about him, Yes, but I do. I mean, I think

his technology is amazing. I think that his and you know, the people that buy into his dream of changing the face of mobility. He has given people a very clear why why does he want to do this? And people have reacted to that, and I think that his products are amazing as well. The challenges that once he goes through those five thousand people that have a deposit on the Model three, is he adding two thousand new deposits, you know, to make to to as that demand gets filled.

So I think that that's the challenge, is getting people to buy his electric vehicle, and not just by his dream. Dream is costly, right, because I mean he's not making any money. He is not making any money, but apparently that doesn't matter to Wall Street because they're buying into the dream as well well. And he owns a lot of the shares too, So that's one thing that a lot of short silus will raise because it's hard to uh to borrow very expensively more than a little it.

And you know, somebody very much smarter than me had mentioned that they're wondering with auto sales. You know, let's say those five thousand people, those people are kind of out of the market a little bit, like they're waiting, you know, so there's some pent up demand for people that have a deposit on the Model three that are saying I'm not going to buy Maybe I'm not going to buy that Chevy Vault or Bolt because I'm waiting for the Model three. So you know, it could be

impacting the market a little bit as well. Rebecca Linlin, thank you so much for joining us. Truly of wonderful to speak with you. Rebecca Linlin is an executive analystic Cox automate of talking about the fantastic sales numbers that we've been getting out. Thanks for listening to the Bloomberg p m L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm

on Twitter at Lisa Abramo. It's one before the podcast. You can always cat just worldwide on Bloomberg RADIOH