Mobile phones are a staple of identity fraudsters' trade. However, the fraud is often hard to detect because these criminals, who continually evolve increasing sophisticated methods, often avoid detection by appearing as consumers who don't pay their bills. They do this by securing the phone and service with a seemingly legitimate identity; then they often make one or several payments before disappearing.

Mike Cook

The top U.S. carriers are wise to these methods though and are already applying the latest technologies to distinguish suspicious identities, shutting out most of the fraud. In fact, the identity fraud rates of four of the top five U.S. carriers have decreased by 30% to 40% over the past year.

So in their continual efforts to further their crimes, we believe fraudsters are moving from larger operators to smaller ones, echoing a trend that has already become apparent in the banking world in recent years.

It's time for smaller carriers to learn more about and protect themselves from the new face of fraud, which is staring in their direction. Here are a few lessons about identity fraud that can be learned from the larger carriers:

1. The first purchases made in large-scale identity fraud crimes are usually mobile phones. ID Analytics' research into sophisticated fraud rings shows evidence that criminals fraudulently establish wireless telephone service during the early phase of a complex identity fraud scam. In one case, 24 applications for wireless service spanning 13 identities shared the same home phone number and address.

2. Many identities used for identity fraud are synthetic, not true consumer identities. The fraud rings we examined actively developed synthetic identities - fabricated identities using combinations of real and false identity elements - rather than stealing consumer identities in their entirety. In fact, research shows that 85% to 90% of the identities used to attempt financial fraud are synthetic.

3. One phone number can serve one fictitious identity, or many. Research showed that synthetic identity fraud rings established wireless service either for each and every synthetic identity created, or they used one number across multiple identities throughout the scam. In one case, three synthetic identities were linked to one cell phone number across 10 applications submitted to five different companies. Synthetic identity fraud is  hard to detect because there is no victimized consumer to say "that's not me." Instead, carriers and other companies that extend credit, service or equipment are left bearing the financial losses.

4. Mobile phones make synthetic identity verification easier. Fraudsters also rely heavily on mobile phones because they make identity verification a great deal easier, whether they're using their phones to act as the identity they've created, or because they're providing the phone numbers for alleged employment verification purposes.

Once a fraudster has established credit with a mobile phone, and has a phone number where he or she can be reached for verification, the next step is typically to open new lower limit credit cards using the identity. Often, the criminal will pay the first few wireless bills to build a credit rating for the fake identity, then disappear in what is called a "bust-out" scheme.

Smaller carriers, take heed. The only way to prevent identity fraud losses is to determine if consumers actually are who they say they are, before service and equipment are granted.

Cook is COO and co-founder of ID Analytics,
an identity risk management company based in San Diego.