Reported by Luke Boddis

(Excerpt featured below. To read full report, go to: https://www.forbes.com/councils/forbesbusinessdevelopmentcouncil/2025/07/14/synthetic-identity-fraud-in-the-age-of-genai-are-traditional-kyc-tools-still-fit-for-purpose/)

In recent years, synthetic identity fraud has quietly become one of the fastest-growing forms of financial crime. Now, with the explosion of AI, the threat is accelerating at an alarming pace. Fraudsters no longer need stolen identities to commit large-scale fraud. Instead, they can generate entirely fake but highly convincing personas using AI-powered tools. This evolution presents a serious question for all businesses: Are traditional Know Your Customer (KYC) tools still fit for purpose?

As someone working at the intersection of identity, fraud prevention and customer experience, I’ve seen firsthand how rapidly emerging technologies, particularly the use of AI, are reshaping the digital risk landscape. In my current role, helping global platforms modernize their onboarding and authentication journeys, I’m constantly engaged with businesses trying to stay one step ahead of increasingly sophisticated fraud. That’s why synthetic identity fraud, and its growing impact on traditional KYC processes, is a topic I’m especially passionate about.

The Rise Of Synthetic Identities

Synthetic identity fraud is essentially creating a fake identity using a combination of both real and fictitious information. Fraudsters often use legitimate data points, like a real social security number or phone number, and blend them with false details such as fabricated names or photos. These identities can pass basic checks and are used to open accounts, build credit profiles and ultimately extract value from financial systems.

In the pre-GenAI era, crafting believable identities at scale was time-consuming and technically difficult. Today, with free and widely available AI tools, a single individual can generate thousands of fake profiles with:

• AI-generated faces that appear photorealistic

• Deepfake videos to mimic liveness and fool facial recognition systems

• Fabricated documents that bypass optical character recognition (OCR) tools

• Language models to respond to verification questions convincingly

The speed and accessibility of AI are nothing short of remarkable. But as impressive as these advancements are, they also pose serious risks, particularly for businesses facing a growing wave of identity-based fraud.

Why Traditional KYC Falls Short

Many KYC systems were built for a different era. Their reliance on static photo uploads, basic document matching and form-based data collection leaves them vulnerable to increasingly advanced synthetic techniques.