Digital identity fraud occurs when criminals steal, forge, or exploit elements of digital identities to impersonate real individuals or businesses for illegal purposes. For example, they use someone’s personal details, company information, or even behavioral data to:
-
Open fraudulent accounts.
-
Apply for loans or credit under false pretenses.
-
File false tax returns or insurance claims.
-
Launch social engineering scams such as phishing attacks.
Digital identity fraud is a daily threat facing organizations of all sizes, from global corporations to small and medium-sized businesses (SMBs).
Javelin Strategy & Research estimates that identity fraud cost Americans $20 billion in 2022. For your business, it can result in financial losses combined with reputational damage and possible regulatory sanctions.
To stay safe, it’s vital to understand how digital identity fraud happens and the steps you can take to prevent it.
What makes up a digital identity?
Your digital identity comprises more than your username and password. It’s a collection of information that includes:
-
Personal identifiers: Name, date of birth, social security number, and so on.
-
Financial data: Bank details, payment card numbers, transaction histories.
-
Professional and social attributes: Corporate email addresses, and professional profiles or qualifications.
As you use the internet, this information builds up over time to form your digital footprint. This includes everything from your social media posts and online purchases to your browsing history and the metadata collected by the websites you visit. Digital footprints often include sensitive information such as login credentials, email addresses, and transaction data.
If a business or website you use suffers a data breach, this information can fall into the hands of cybercriminals.
For example, in 2021 an employee at Ubiquiti stole gigabytes of confidential data and anonymously demanded a $2 million ransom to give it back. When the company refused to pay, he published some of it online. The exposed data included names, email addresses, social security numbers, phone numbers, job titles, employers, geographic locations, and social media profiles.
The evolving playbook: Methods of digital identity fraud
Cybercriminals commit digital identity fraud using various tactics.
Synthetic identity creation
Synthetic identity creation means piecing together real and fake details to create an identity. For example, combining real names and social security numbers with fake addresses and phone numbers.
A synthetic profile can be used for purposes such as opening fraudulent credit lines or creating fake online accounts.
Document forgery
Criminals create fake utility bills, company registrations, and other documents and use them to submit fraudulent applications.
With today’s technology, document forgery has never been easier. The results can be convincing enough to pass automated verification checks.
Phishing and social engineering
Phishing means sending messages that pretend to come from a trustworthy source to trick the victim into giving away sensitive information, such as their password or bank details.
Phishing and pretexting are the cause of 73% of data breaches (source: Verizon 2024 Data Breach Investigations Report).
Spear phishing
As its name suggests, spear phishing is a targeted form of phishing aimed at a specific individual or company.
Spear phishing attacks often use personal information about the victim to put them under greater pressure. For example, the message pretends to come from a senior executive at the victim’s workplace, demanding immediate action.
Data breaches
A data breach occurs when unauthorized people access or expose sensitive information, such as customer or financial data, or intellectual property.
Stolen information can be sold on dark web marketplaces or used to construct synthetic identities for further fraud.
According to Surfshark, more than 5.5 billion accounts were breached in 2024 worldwide, which equates to almost 180 per second. At Cybercheck we’ve recovered 50 billion records from cybercriminals so far in 2025.
Falsification for credit fraud
Fraudsters create or manipulate digital identities to obtain credit, goods, or services.
Unlike account takeover, this method doesn’t involve breaking into an existing account. Instead, the fraudsters create fake identities or modify real identity data. For example:
-
Creating a fake business profile with a stolen company number and fictitious directors, then applying for credit or loans.
-
Creating fake employees or contractors in a company’s internal systems so that they’re paid into fake accounts.
Protecting your digital identity: 7 ways to prevent identity fraud
To protect against digital identity fraud, you need a multi-layered approach:
-
Practice selective disclosure: Think carefully before you post information on social media, whether it’s personal or professional. Don’t overshare.
-
Use strong, unique passwords and enable multi-factor authentication (MFA) on all your accounts and systems.
-
Stay alert to suspicious requests for information by phone, email, or social media. Think before you act. Never supply information unless you’re sure the request is genuine.
-
Educate your employees about how to spot potential phishing and the dangers of synthetic identity fraud.
-
Strengthen your due diligence processes: Implement strict identity verification for new accounts and partnerships.
-
Monitor for leaked or misused PII using advanced credential and PII monitoring tools such as Cybercheck.
-
Conduct regular security audits to catch lapses in data handling and compliance.
Credential and PII monitoring are the new gold standard
In today’s threat landscape, organizations of all sizes are at risk, and proactive vigilance is vital for everyone.
Cyber threat intelligence (CTI) solutions such as Cybercheck help you to stay safe by continuously monitoring for exposed credentials and personal data.
At Cybercheck, we scan forums across the open, deep, and dark web where cybercriminals buy and sell stolen data. If cybercriminals are trading information about you or your organization, we immediately alert you.
That means you can change passwords, block cards, and act to shut out the attackers before they make you their next victim.
