Tough new verification systems for passport applicants could be launched to crack down on identity theft.
Cabinet Office figures show the problem costs the UK economy £1.3bn a year.
A five-year contract between UK Passport Services and Equifax, the IT company, will bring in new verification services.
Equifax managing director Michael Shannon said: "False identity is the fastest growing type of fraud in the UK, with reports of a growth rate of 700% over the last three years.
"Through the new UKPS ID verification system to be introduced by Equifax, people will have a higher degree of protection because applications will go through a more rigorous screening procedure."
The contract is subject to a pilot due to run in the last quarter of 2002.
