By David White, Global Head of Product and Data at LSEG Risk Intelligence
When we talk about fraud prevention, most conversations centre on adult consumers, corporations, or digital infrastructure. Children are often an afterthought, if not forgotten altogether.
Child identity theft is one of the fastest growing and least detected forms of fraud globally. In the U.S. alone, more than 1 million children were victims of identity theft in a single year, according to research from Javelin Strategy & Research. Most are under 12 years old. Many won’t discover they’ve been affected until they apply for their first job or attempt to open a bank account years later. By then, the damage is done.
Unlike traditional identity theft, where fraudsters exploit existing adult credit profiles, child identity theft often underpins synthetic identity fraud where real personal information (such as a child’s national ID number or date of birth) is fused with fabricated details to create entirely new personas. These identities are then used to open accounts, secure credit, or initiate payments across the financial ecosystem.
This isn’t fringe criminal activity. Synthetic identities are now frequently used by organised fraud networks to exploit gaps in onboarding, AML, and transaction monitoring systems, particularly in fast-scaling digital environments.
Why It’s Hard to Detect
Child identity fraud is uniquely difficult to detect. Children have no credit history, so synthetic identities can grow undisturbed for years. Traditional fraud detection systems, geared toward adult behavioural patterns and financial anomalies, often miss the cues. Worse still, over 70% of cases involve a perpetrator known to the child, such as a family member or guardian. This internal access makes unauthorised use difficult to monitor without proactive, preventative systems in place.
The Role of the Industry
No single player can solve this alone. We need a coordinated response across financial services, government, data providers, and consumer protection organisations. Here are three critical shifts the tech and financial services industry must make:
- Embed age verification in onboarding processes
Any new account application should be automatically screened for age logic. A Social Security Number or national ID number tied to a child should trigger enhanced due diligence or automatic flags. - Include synthetic identity risk scoring in fraud detection tools
Many vendors now offer fraud scoring that considers how verifiable the identity is, digital footprint, and behavioural red flags. Integrating these into AML and KYC workflows makes synthetic profiles easier to isolate and block. - Elevate child data protection to a governance issue
Boards and compliance leaders should treat the misuse of child identity data as a serious threat as opposed to just a consumer complaint. This means investing in policies, training, and technologies designed to keep vulnerable individuals out of criminal ecosystems.
Child identity theft is a silent crime. But silence shouldn’t mean inaction. Fraud professionals are uniquely placed to change the narrative from reactive loss prevention to proactive protection of those who cannot protect themselves.
Photo by Towfiqu barbhuiya on Unsplash
