Social Security to let banks access data after years of reluctance

NEW YORK — Banks fighting the fastest-growing financial crime in the U.S. have found an unlikely ally: the Social Security Administration.

Banks have spent years lobbying Congress for better access to the agency’s data as a way to fight costly forms of identity theft. Now, the agency has invited lenders and other firms to join a planned real-time electronic system for verifying that credit applicants’ names match their Social Security numbers.

The system would help banks eliminate sham identities created when fraudsters apply for credit cards using Social Security numbers that aren’t in use. Known as synthetic identity fraud, it is the fastestgrowing financial crime in the U.S., according to a Federal Reserve report. U.S. lenders lost $6 billion from this type of fraud in 2016, according to consultant Auriemma Group.

“It’s a painful type of fraud,” with criminals commonly targeting children and immigrants, said Jeremy Grant, a coordinator for the Better Identity Coalition, which works with lawmakers to improve digital security.

The new system is “a pretty big arrow to have in your quiver,” he said. “So much of synthetic identity fraud has been targeted around the inability of the private sector to validate whether the SSN matched to a real name. It’s going to have a pretty significant impact.”

Spokesmen for the Social Security Administration didn’t respond to messages seeking comment.

The Fed is pushing to raise awareness and encouraging banks to help prevent the crimes. Last month, U.S. prosecutors in New York alleged that 11 people participated in a scheme using synthetic identities to charge $3 million on lines of credit from banks including JPMorgan Chase & Co. and Synchrony Financial between 2013 and 2017.

Synthetic identity fraud is typically a long con. Armed with a made-up identity, fraudsters spend years paying the monthly credit-card bills, watching their credit limits slowly tick higher. When they’re ready, they max out the cards with no intent of paying the debt, a phase known as “busting out.”

The Social Security Administration has long said the numbers it issues aren’t intended to serve as the country’s universal personal identifier and were instead created to administer government benefits. But last year, under a law signed by President Donald Trump, Congress required the agency to begin developing the system for banks.

There’s a catch: The agency has to have 50% of startup costs funded before it can begin developing the portal. In a notice posted with the Federal Register last month, Social Security said banks have until July 31 to join the program.