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<p>Synthetic identity fraud (SIF), where adversaries combine real and fabricated information to create fictitious personas, poses a critical and growing threat to the digital banking ecosystem. Traditional Know-Your-Customer (KYC) processes, operating in institutional silos, are fundamentally ill-equipped to detect these sophisticated attacks. This paper introduces a novel, blockchain-based protocol specifically designed to combat SIF by enabling collaborative, cross-institutional verification of identity attributes. Our approach leverages a permissioned consortium ledger to anchor cryptographic hashes of attribute-specific Verifiable Credentials. During onboarding, Zero-Knowledge Proofs (ZKPs) are used to perform privacy-preserving consistency checks, allowing a bank to verify that a user’s claimed identity attributes have been cohesively vetted elsewhere in the network without sharing any underlying personal data. By focusing on data integrity rather than just process efficiency, our protocol provides a targeted, privacy-by-design solution that directly neutralizes the core mechanism of synthetic identity fraud, significantly enhancing the security and trustworthiness of digital identity verification.</p>

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A blockchain-based cross-verification protocol for combating synthetic identity fraud in digital banking

  • 期刊论文

  • 发表日期：

    2026年6月29日

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  • Divesh Sarkar,
  • Flynn Werner

摘要

Synthetic identity fraud (SIF), where adversaries combine real and fabricated information to create fictitious personas, poses a critical and growing threat to the digital banking ecosystem. Traditional Know-Your-Customer (KYC) processes, operating in institutional silos, are fundamentally ill-equipped to detect these sophisticated attacks. This paper introduces a novel, blockchain-based protocol specifically designed to combat SIF by enabling collaborative, cross-institutional verification of identity attributes. Our approach leverages a permissioned consortium ledger to anchor cryptographic hashes of attribute-specific Verifiable Credentials. During onboarding, Zero-Knowledge Proofs (ZKPs) are used to perform privacy-preserving consistency checks, allowing a bank to verify that a user’s claimed identity attributes have been cohesively vetted elsewhere in the network without sharing any underlying personal data. By focusing on data integrity rather than just process efficiency, our protocol provides a targeted, privacy-by-design solution that directly neutralizes the core mechanism of synthetic identity fraud, significantly enhancing the security and trustworthiness of digital identity verification.