As far as I can tell no one is validating against government databases except for things like sanctions lists. For Americans they might use something like TLO

As far as I can tell no one is validating against government databases except for things like sanctions lists. For Americans they might use something like TLO in the best case. The identity verification companies like Onfido get a picture of both sides of an ID and then try to match the face of the person on the ID with the person in the selfie video. Presumably while doing some checks to see if it appears to be a fake. That's it. In the case of synthetic identity fraud, they establish a history with the credit bureaus by applying for cards and getting denied (eventually they are approved for some low level starter credit card) or getting added as an authorized user to someone with a good credit history (people on eBay sell this).