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IDENTITY THEFT.
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Paper Abstract:
Examines causes, incidence and effects. One of the fastest growing white-collar crimes in the United States. Financial loss and problems caused by identity fraud or theft. Role of electronic technology, the Internet and E-commerce in facilitating identify theft. Overview of white collar crime. Law enforcement action.
Paper Introduction:
Identity Theft
Introduction
The purpose of this report is to examine the causes, incidence, and effects of identity fraud or identity theft. The problem is of significance in that identity theft is one of the fastest growing white-collar crimes in the United States, affecting an estimated 900,000 new victims each year (Pollock & May, 2002). Identity theft is defined by Pollock and May (2002, p. 1) as “the criminal act of assuming someone else’s identity for some type of gain, normally financial.”
A recent survey indicated that 38 percent of all Americans have experienced some form of identity theft, usually as a result of a criminal gaining access to a victim’s personal identifying information and then accessing current accounts, including credit cards, t
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Through these mechanisms and efforts, the government and a number ofprivate sector agencies discussed in the review of literature have begun toaggressively if inadequately to pursue those individuals and/ororganizations that commit identity fraud or theft. Federal laws that make identity theft a crime are relatively new . (2 ). Thoughmost financial institutions do not hold victims liable for fraudulentdebts, victims are negatively affected because they often incur highexpenses in trying to restore their credit and financial health. Sometimes, identity thieves steal cars for their own use,but the big-time professionals typically resell fraudulently obtainedvehicles. It is also recommended that the FBI and other lawenforcement agencies initiate a program to differentiate identity fraud andtheft from other white-collar crimes so that a more comprehensive analysisof the problem can be undertaken. This is because: . The settlementrequired Martinez to disgorge illegal earnings from his scheme (Harrington,2 1). Involved in thisprocess was the investigation of a number of databases, some of which wereavailable in libraries and some of which were available on the Internetitself. In mid-2 , about 88 million American adults had Internet accessand by the end of 2 , more than 1 4 million American adults were known tobe online. Further, Groves (2 2) recommends that consumers questionorganizations that collect too much information about their customers. U.S. (2 1). (2 2). (2 2). Canadian andAustralian organizations are also partners with the Consumer Sentinel. The GAO (2 2) reported on Master Card and Visa fraud losses. No specific data areavailable on how much these companies spend to combat this problem. Imagesand a fear of "Big Brother" are seen as inhibiting the capacity ofgovernment and business with respect to the deployment of more sensitiveand accurate identity authentication techniques. Many consumers see the technologies as being a key enabler ofpersonal tracking by the government and businesses or as a means of makingit possible for identity thieves capable of accessing such information,even harder to stop. Law enforcement at the local, state, and nationallevels have been enhanced and an Internet Fraud Complaint Center and aNational Cybercrime Training Partnership have been created. Other dataprovided by the Consumer Sentinel can be found in the Appendices of thisreport. Expensesthat are covered include legal fees, loan reapplication fees, telephone andcertified mailing charges, notary expenses, and lost wages for time takenoff work to deal with identity fraud. of Complaints Percent$1-1 5 2 .5$1 1-5 653 .7$5 1-1, 399 .4$1, 1-5, 669 .7$5, 1-1 , 2 7 .2Over $1 , 2 3 .2Totals 2,633 2.8(GAO, 2 2, p. Theyare also vulnerable to telecommunications or utility fraud and bank fraud.Interestingly, members of this age cohort appear to be less likely targetsfor government documents or benefits fraud than younger Americans. Knocking the starch of white collar crime. Conclusion This report has examined a number of important issues related to theincidence, cause, and prevention of identity theft or fraud. Boulard (1999) asserts that cyberspace has made it too easy forthieves to steal and abuse people's identities. With the expansion of the Internet and itsmyriad shopping opportunities, and because millions of people each day puttheir credit card numbers and other personal information on the Internet,such data are in effect floating in cyberspace and waiting for a clevercriminal to access and then use them. Identity theft victim complaint data. The Web siteoffered "high quality" templates to be used in creating fake driver'slicenses for 1 states. Legislators at the statelevel are trying to stay ahead of the crime wave by passing strict laws andmandating that both law enforcement and prosecutorial agencies enforce thelaw. Available at www.ftc.gov/os/2 2/ 7/ 2 718identitytheft.htm.Berghel, H. Overlapping local, state, and federal agencies share responsibility for making arrests and prosecuting identity theft. (2 1). (2 1). Identity theft. Before making purchases online or providingpersonally identifying information, consumers should determine that the Website contains appropriate firewalls and public key infrastructure (PKI). Some 2,633complaints logged in at the Clearinghouse from November 1999 throughSeptember 2 1 involved dollar amounts that victims reported as having beenlost or paid as out-of-pocket expenses linked to identity theft. The new laws create felony sentences of up to tenyears for corporate criminals who participate in any scheme to defraudshareholders (Senate toughens corporate..., 2 2). ID counterfeiters (Berghel, 2 ). Under theGramm-Leach-Bliley Act, financial institutions, including banks, were givennew rules to follow with respect to privacy obligations owed to customers.This particular bill made it a federal crime to fraudulently obtain privateconsumer information, a practice known as "pretext calling" (Bielski,2 1). When shopping on the Internet, consumers must use only secureand well-encrypted Web sites. Nevertheless, as much as $5 , in debt can be charged against avictim's credit before they discover that someone has obtained some pieceof simple information about them - their name, their Social Security ordriver license number - and has used to obtain credit and to make purchaseunder the assumed name. According to the GAO (2 2), the following generalizeddata represent the extent of what is currently known about identity crimesin the United States: . The defense rests. There islittle doubt that electronic technologies - particularly the Internet - areboth intimately related to the upswing in identity fraud or theft.Identity Theft U.S. The new Identity Fraud Expense Coverage canbe added to a Travelers homeowners or tenants' policy for an additional $25per year. Some 65 percent ofcomplainants reported that they had already contacted at least one of thethree major consumer reporting agencies (CRAs). Who's who: Can digital technology really prevent identity theft? By2 , this figure had increased to $114.3 million. Jodie Bernstein (2 ), former Director of the Bureau of ConsumerProtection of the Federal Trade Commission (FTC), told Congress in 2 that the fear of identity theft has gripped the public because consumersfear the potential financial loss associated with criminal use of theiridentity to obtain loans, open utility accounts, or make purchases usingcredit card information. Washington, D.C.: U.S. The cities reportingthe most complaints were New York, Chicago, Los Angeles, Houston, andMiami. Identity theft and Social Security numbers. This will be discussed ingreater depth below. The GAO (2 2) also reported on the cost of identity theft to thefinancial services industry and noted that banks of all sizes attributedcheck fraud-related losses emerging from identity theft as comprising 29percent of all such losses. The Clearinghouse (2 1) solicited information from victims as to thesteps they took in response to identity theft. Identity theft. Making matters worse is thedeterioration in companies' ability to monitor, ferret out, and preventfraud. Communications of the ACM, 43(2), 17-2 +.Bernstein, J. (2 2). Some states have begun to toughen corporate fraud penalties in thewake of a Senate amendment to the Public Company Accounting Reform andInvestor Protection Act. New YorkCity, Chicago, Los Angeles, Houston, Miami, San Francisco, Philadelphia,Phoenix, Las Vegas, and San Diego were the cities in descending order inwhich identity theft tended to predominate. Phone or utilities fraud comprised 2 percent of all reports, followed by bank fraud (13 percent), employment related fraud (9 percent), loan fraud (7 percent), and government documents/benefits fraud (1 percent) Figure 6, presented in the Appendix, identified the cities with thehighest number of identity theft victims (Clearinghouse, 2 2). Beales (2 2) claims that 8 percent ofthose who report identity theft to the FTC do not know how or where theidentity thief obtained their personal information. (2 2). Fleischer-Black (2 2) stated that the newemphasis on security has resulted in the mass reassignment of lawenforcement personnel (including FBI agents and prosecutors) away fromwhite-collar crime to security investigations. Prepared statement of the Federal Trade Commission on identity theft. Again, credit card fraud, unauthorized phone or utilityservices, bank fraud, fraudulent loans, forged government documents orbenefits, and other forms of identity theft were reported. ThoughInternet vendors, banks, the government, and other institutions are makingefforts to build security systems that prevent identity theft, consumersmust also become more proactive in ensuring that their identity is lessvulnerable to theft and that personal and confidential information issecure. For automobile lenders,this is a problem because they suffer financial losses if a car disappearsor is recovered in damaged condition. (1999). Social Security numbers werecreated in conjunction with the 1935 Social Security Act authorizingestablishment of an old-age pension system for workers in the UnitedStates. Internet fraud. Information Management Journal, 36(3), 27-32.Guidance on protection of customer financial information against identity theft. Some identitythieves steal pre-approved offers for loans or credit cards from people'sgarbage cans. Dec. Harrington (2 1) told Congress that the FTC has brought oneimportant law enforcement action that directly confronted identity theft.In the case of FTC v Jeremy Martinez d/b/a Info World Civ 127 1 C.D.Cal. Unlike other white-collarcrimes such as embezzlement, theft from a company or business,falsification of financial data, and intellectual property violations,identity theft targets unknowing individuals who in no way participate evenpassively in their own victimization (Conley, 2 ). A sensor takes an observation of the face, producing the person's "biometric signature" . A difficulty encountered inthis context by ordinary individuals is that obtaining primary informationon the issue can be all but impossible (Bielski, 2 1). Henry (2 2) drew upon FTC data to estimate that in 2 1, about 1,7 complaints of identity theft included a car loan or lease taken in the nameof the victim. Equallysignificant, according to Adrianson (2 2), is that victims of identitytheft are often further victimized because identity theft is at timesconnected to more serious crimes like drug trafficking and terrorism. (2 2). Joining in the effort to stop or at least reduce identity theft areprivate sector organizations. Local and state law enforcement agencies, like theirfederal counterparts, do not specifically report statistics on this crime.The result is that any statistical analysis depends upon information thatis inherently limited, generalized, and sporadic. Total e-commerce sales for 2 were about $25.8 billion(Harrington, 2 1). Consumer Sentinel logged more than 2 , complaints in 2 1,ranging from identity theft (42 percent) to Internetauctions/services/computer complaints (17 percent), and other sales orcredit offers, including lotteries, magazines and buyers clubs, telephoneservice, and travel/vacation offerings. (2 2). The only conclusionabout the intersection between age and type of victimization that can bedrawn at the present time is that those over the age of 6 experienceproportionately more credit card fraud and less fraud involving utilitiesand telecommunication. The research methodology is therefore qualitative rather thanquantitative in nature. Bielski (2 1) reported that in 2 , there were an estimated 5 , cases of identity theft at an average cost of $17, per victim. Drawing upon Congressional testimony,reports from the Identity Theft Clearinghouse, and the General AccountingOffice (GAO), and other sources, it will be argued that identity theftconstitutes what Adrianson (2 2) calls one of the fastest-growing white-collar crimes in the United States. This report began with the statement that at thisjuncture, no single hot line or database captures the universe of identitytheft victims. Under Gramm-Leach-Bliley, financial institutions are required tooffer consumers a chance to "opt out" of having personal financial datashared with other institutions (Bielski, 2 1). Though more than 25 law enforcement agencies or consumer organizations around the world havejoined with the FTC in trying to stop these online frauds, thetechnological sophistication of Internet criminals has made the FTC's taskquite difficult. The Fedrecommended to its member banks a number of steps to safeguard information. Identity fraud lossesrelated to the use of these two credit cards comprised a relatively smallportion of total fraud losses linked to lost or stolen credit cards, neverreceived cards, counterfeit cards, and mail order/telephone order fraud.In 1996, total Master Card and Visa fraud losses were set at $7 .2million, which increased in 2 to $1, 13.2 million. CRAs maintain 356, 1 files with fraud alerts, of which 25 percent were tagged because of suspected identity fraud . In 1998, the U.S. In 2 1, the Postal Inspection Service identified 1,752 identity theft-related arrests while the Secret Service reported 3,163 arrests of this type in the same time period. Lease and Burke (2 ) state that identity theft or fraud ispositioned within the larger category of white-collar crimes that areregularly reported to law enforcement agencies. Identity theft: The FTC's response. Beales (2 2B) also told Congress that identity theft knows nobarriers. To combat white-collar crime, Johnson (2 2) identified a number ofimportant channels or developments. One in every three American households are victims of white- collar crime, but just 41 percent actually report it . Thisorganization collects data from each of the 5 states. State Legislatures, 25(3), 24-28.Conley, J. (2 2). Since passage of the ITA, the FTChas increased its production of informational and educational materials,established and maintained a toll-free hotline for complaints, and workedwith law enforcement agencies and CRAs to ensure that complaints are dealtwith in the most timely and effective manner possible. Attorney General John Ashcroft (2 2) spoke recently at an FTCpress conference on identity theft, stating that identity theft is the oneof the fastest growing crimes in the United States today. Persistent identifies in both hard and soft cookies . Attorneys (EOUSA) told theGAO (2 2) that the agency's timekeeping system could not specificallyisolate the cost of prosecuting identity theft cases. The recommendation emerging from this study is that the governmentand the private sector must become more cooperative and aggressive inidentifying and prosecuting identity thieves. 57) The GAO (2 2) also asked key agencies in the federal criminaljustice system to describe their costs related to identity theftinvestigation, arrest, and prosecution. Both of these recommendations arepotentially costly, but may ultimately be necessary. Additionally, a number of government-generated reports and/orexpert testimony presented by key actors before Congressional committeesand subcommittees were reviewed. The Secret Service, which also does not differentiate between identitytheft and other financial crimes in its cost accounting procedures,estimated that it spends an average of about $15, for each financialcrime investigation. EOUSA revealed the following, noting that identity theft cases aregenerally categorized as white-collar crimes: . These dataare also somewhat misleading in that some victims of identity theftexperienced multiple instances in which their information had been misused.On average, as reported above, 12.3 months elapsed between the initialmisuse of the victim's personal information and the discovery of the crimeoccurred. Sadly, few white-collar criminals spend any time in court letalone in jail. Identity theft plagues dealerships, lenders. However, Berghel (2 ) offered what appears to be a relativelysimple solution to part of the problem associated with identity theft,which is greatly facilitated by the over-reliance on Social Securitynumbers as a primary form of identification. Lawenforcement exports agree that identity theft is committed by a cottageindustry of professionals who dive in dumpsters, steal mail or wallets,pose as prospective employers, or hack into the Internet. Speakingspecifically about the effect of identity theft on the elderly, Beales(2 2B) stated that Americans aged 6 and above represented only about 1 percent of those victims reporting to the FTC in both 2 and 2 1. Of the 38 percentwho contacted the police, 8 percent indicated that local law enforcementofficials made a formal report of the crime. This is because many individuals do not know they have beenvictimized until months or even years after the fact and that some victimsdo not choose to report their victimization to authorities. Congress passed the Identity Theft and AssumptionDeterrence Act (ITA) which enabled the FTC to play a key role in thenational dialogue on identity theft (Beales, 2 2). Methodology Bernstein (2 ) and Beales (2 2), both of whom have been intimatelyinvolved in creating the federal response to identity fraud and theft viathe FTC, have pointed out that there are several very real barriers to anyanalysis of the true incidence of this white-collar crime. A computer algorithm normalizes the biometric signature so that it is in the same format as other signatures on the computer system's database . Report to Congress. Encrypted authentication environments and pseudonymservices, online Web monitors that report to clients when personalinformation is being processed, remailers that redirect mail so that thesource remains confidential, and Web anonymizers that redirect Web accessso packet headers are sanitized of personal information are among thesetechnologies (Berghel, 2 ).Summary of the Section This review of literature has identified what is known about theincidence, causes and sources of identity theft and fraud. Protecting your identity. More recently, the current director of the Bureau of ConsumerProtection, Howard Beales (2 2) told Congress that data captured by theClearinghouse revealed that 2 percent of all victims reporting identitytheft experienced more than one type of such theft. Some lenders hold auto dealersliable of dealership employees were negligent in checking out the customer. Identity theft complaint data. Overall, white-collar fraudcosts the United States about $4 billion each year. 1) as "the criminal act of assuming someoneelse's identity for some type of gain, normally financial." A recent survey indicated that 38 percent of all Americans haveexperienced some form of identity theft, usually as a result of a criminalgaining access to a victim's personal identifying information and thenaccessing current accounts, including credit cards, to make fraudulentpurchases or to open new accounts (Pollock & May, 2 2). With the passage of the ITA in 1998, the FTC was required toestablish procedures to log the receipt of complaints by the victims ofidentity theft, provide identity theft victims with informationalmaterials, and refer complaints to appropriate entities (Beales, 2 2).Identity theft, says Beales (2 2), occurs because an individual, throughlegal or illegal means, gains access to personal information for anotherperson. The Federal Reserve Board (the Fed) has undertaken efforts designedto protect consumer information against identity theft. (2 ). Identity theft, according to Wallich (2 2), has flourished in partbecause of the increasing proliferation of electronic and digitaltechnologies and the Internet. Despite the ITA and itssubsequent amendments, comprehensive statistics on this crime are notcollected in a single database. Pollock and May (2 2) suggested thatauthentication procedures must be increased to help ensure that theindividual processing the access device or personal check is the person wholegitimately "owns" these items. About one-half of thevictims who logged onto the Clearinghouse indicated that they had contactedone or more local police departments. Table II Monetary Losses Reported by FTC ComplainantsDollar Losses Reported No. The problem is ofsignificance in that identity theft is one of the fastest growing white-collar crimes in the United States, affecting an estimated 9 , newvictims each year (Pollock & May, 2 2). Addresses,phone numbers (past and present), date of birth, employers, mother's maidenname, and similar vital personal data, including Social Security and creditcard numbers, can be accessed. Best's Review - Property-Casualty Insurance Edition, 1 (7), 1 .Wallich, P. (2 2B). Unfortunately, in the wake of September 11, 2 1, the FBI and theDepartment of Justice has refocused much of its energy on terrorism andthreats to national security. Surprisingly, thissame source reported that 62 percent of all identity theft victims whocontacted the Consumer Sentinel between January 1, 2 1 and December 31,2 1 did not report their victimization to the police. Of those reported, only 21 percent are addressed by law enforcement or consumer protection agencies, with only 8 percent of all white-collar crimes reaching the proper authorities . Face recognition is one of the most advanced of the biometrictechnologies and is now being studied by the U.S. Though identityfraud - accomplished through the misuse of private personal information,including Social Security and driver's license numbers, credit card andother financial data and so fort - is not a new crime, it is a crime thatis increasing due to the enhanced viability of Internet shopping, banking,and information management. Because Social Security numbers are the"holy grail" of identity thieves, Berghel (2 ) recommends that they notbe required or reported on the Internet. While government agencies and private sector institutions clearlyhave a responsibility to reduce opportunity for identity fraud and theft,consumers themselves are being asked to take greater responsibility in thisarea. (2 ). Thus, developing more effective identity authentication proceduresfor use on the Internet and at physical point-of-sale locations is bothadvantageous and disadvantageous in the view of consumers (Groves, 2 2).At issue, invariably, is the fear that the government (and, to a perhapslesser degree, business) will use personal data obtained from biometrics to"keep tabs" on consumers and potentially to violate privacy rights. This point wasmade by the Clearinghouse (2 1). Available on the Internet are any number ofresources that make it possible for an identity thief to gain personal,confidential, and financial information regarding consumers. Bernstein (2 ) statedthat about 54 percent of the complaints received involved credit card fraudfollowed by communication services (26 percent), bank fraud (16 percent),and fraudulent loans (11 percent). Embezzlement, employee theft, and overt fraud perpetuated againstcompanies and customers alike are seen by Conley (2 ) as particularlytroubling. Accounting Today, 16(13), 3-4.Travelers launches identity fraud coverage. Postal Inspection Service, the U.S.Secret Service, the National Association of Attorneys General, the BetterBusiness Bureau, and the National Consumers League. The tools contained in the kitinclude a model privacy program, an informational self-assessmentinstrument, employee training models, and customer communication tools thatalso address provisions of Gramm-Leach-Bliley (Bielski, 2 1). The GAO (2 2) based its statistical analysis on information obtainedfrom consumer reporting agencies, the FTC's Identity Theft DataClearinghouse, the Social Security Administration, and federal lawenforcement data. (2 2). At the point-of-sale locations, consumersshould insist that merchants protect the security of transactions by addingto their privacy. Identity theft complaint data. It is important to recognize that the data discussed above generatedby the Clearinghouse (2 ) does not represent a complete picture of theextent of identity theft or fraud in the United States. Unfortunately, for the average citizen or, for that matter, thegovernment itself, it is extremely difficult to gain an accurate orcomplete understanding of the extent of this crime. Its partnersinclude the FTC, the FBI, the U.S. Identityfraud is one of a variety of white-collar crimes that have myriad negativeimpacts on individuals, communities, and law enforcement. In fiscal year 2 , over 2,2 cases were filed by U.S. The Clearinghouse (2 , 2 1)advises those reporting identity theft to take the steps of reporting thecrime to local law enforcement agencies and to contact the CRAs to place afraud flag in their personal credit files. Theguidance is consistent with Gramm-Leach-Bliley (Guidance on protection...,2 1). Other private sectorcompanies, such as Ford Credit and General Motors Acceptance Corporation,are cognizant of the problem and are beginning to work with CRAs and lawenforcement agencies when identity theft is discovered. The total cost for these cases was $157 million . The Internet and related new technologies are beginning todemonstrate that they are accompanied by new opportunities for crime andidentity theft. The next sectionof this report will present a review of relevant literature, followed by adescription of the research methodology employed herein. The FTC's Identity Theft DataClearinghouse is a major source of information on this crime, as is theSocial Security Administration (SSA). Face recognition uses athree-fold process: . An organization called the Consumer Sentinel (2 2) is an Internetrestricted access site that permits law enforcement agencies access tohundreds of thousands of complaints posted by consumers regarding identitytheft, Internet con schemes, telemarketing scams, and other frauds. The Social Security Administration fraud hotline received 65,22 allegations of Social Security number misuse, of which 38,883 had fraud allegations attached to them . There are also unscrupulous information brokers that selldata to anybody willing to pay for it. These barriersnaturally impact upon the research methods that have been used in thisstudy. Fraud trends. Lenders do not like to disclose the size of their losses . Companies that rely upon e-commerce should take a lead role inproviding their customers with the kinds of secure platforms for e-commercethat are clearly needed. The Executive Office for U.S. Hardest hit were community banks or banks withassets under $5 million. The ITA helps the FTCto enforce a number of laws that address consumer privacy, among which anidentity theft program is an important element. Data from the FTC's Identity Theft Data Clearinghouse (2 2) ispresented in the Appendix to this study as a series of charts and figures.These charts and figures reveal several significant trends in identitytheft of fraud in the United States. (2 2). Economic crime cost the nation $5 billion in 197 , $2 billion in 198 , and $1 billion in 199 . However, until such timeas a more effective mechanism for reporting and data collection isdeveloped and more victims of this crime agree to report and prosecuteidentity thieves, it is likely that the problem of identity theft willcontinue to escalate. Consumers also fear the long-lasting impact thatcan result from identity theft, including the denial of a mortgage,employment, credit, or an apartment lease when their credit reports containfraudulently incurred debts of an identity thief. The GAO (2 2) also assessed the cost to banks and CRAs of preventingidentity fraud. If one turns to information generated by the ConsumerSentinel (2 2), further insight can be gained into the problem. Automotive News, 76(599 ), 2 .Identity Theft Clearinghouse. That being noted, it is important to recognize that in its UniformCrime Reports, the FBI does not isolate identify theft or fraud from otherwhite-collar crimes. Additionally, companies such as Master Card and Visa use their ownresources in the fight to control identity theft. Numerous articles appearing in thescholarly, business, and popular press were also assessed, and informationcontained in these publications was discussed in the review of literature. ConsumerSentinel (2 2) reported that the top ten theft victim locations betweenJanuary 1, 2 1 and December 31, 2 1 were: Table III Identity Theft Victims Top 1 Locations (per 1 , )Location RateDistrict of Columbia 76.7California 44.6Nevada 4 .5Maryland 37.3New York 37.3Arizona 36.9Oregon 36.7Florida 35.6Washington 35. It has providedan overview of efforts undertaken by government, businesses, and consumersto protect privacy rights and prevent identity theft. Available at www.usdoj.gov/ag/speeches/2 2/ 5 2 2agidtheftranscript.htmBeales, H. Available at www.ftc.gov/os/2 1/ 5/internetfraudttmy.htm.Henry, J. Thus, the estimated average annual cost of prosecuting a white-collar crime case was set by EOUSA at $11,443 (GAO, 2 2). Travelers Property Casualty Corporation has begun to offer consumersinsurance protection for the cost of clearing their name and correctingtheir financial records if they become victims of identity fraud (Travelerslaunches identity..., 1999). Victims reporting out of pocket expenses related toidentity theft totaled 11, 12 of the total reported complaints (13 percent)with an average out-of-pocket expense per victim of $1,173. To reduce identity theft that begins with obtaining acc4ess to anindividual's Social Security number, Berghel (2 ) recommends thatreliance on this identifier as a primary key and/or authenticator indatabases should be eliminated. Despite enhancedefforts on the part of the FTC and the U.S. These data, though limited and spotty, indicate that identitytheft impacts upon all age and income groups in the United States. JimHenry (2 2) reported that identity thieves are attacking automobiledealerships and auto lenders. Data from Consumer Sentinel (2 2) records is also useful inproviding for an analysis of the extent and causes and this white-collarcrime. (2 2). After obtaining personal financialinformation in any number of ways, from reading a credit bureau reportonline to sifting through trash, identity thieves get loans byimpersonating someone with a good credit record. It draws upon admittedly limited and incompletestatistical data to depict a profile of a rapidly growing white-collarcrime. The United States government has undertaken other actions to helpreduce identity theft and to protect consumer privacy rights. Consumers' Research Magazine, 85(8), 43-44.Ashcroft, J. Identity theft is defined byPollock and May (2 2, p. Beales(2 2B) suggested that for the most part, victimization by an identitythief does not vary significantly across age cohorts. attorneys under statutes related to identity fraud . Federal government estimates of losses from identity fraud arebillions of dollars each year. (2 2). Victims are often unaware of the crime until they get suspicious bills or apply for a loan . 42 percent of all identity theft involved credit card fraud . There are no comprehensive statistics at the presenttime on the prevalence on identity theft. Martinez settled this case out of court and is now permanently bannedfrom selling false identification documents or templates. What this means is that a boom in e-commerce hascreated fertile ground for fraud. ReferencesAdrianson, A. The Social Security Administration told the GAO(2 2) that it did not have any idea as to what it spent on this particulartype of crime. USA Today, 13 (268 ), 36-39.Lease, M.L., & Burke, T.W. Washington, D.C.: Federal Trade Commission.Johnston, R. Former Director of the Bureau of Consumer Protection, Jodie Bernstein(2 ) told the U.S. Whenever individuals use a credit or debitcard, whether on the Internet, at an Automated Teller Machine (ATM), or ina store using electronic credit card or check information processingsystems, personal financial information enters cyberspace. Wallich (2 2) underscores the significanceof this fast-growing crime by stating that those individuals whose names ornumbers are used may spend years and thousands of dollars trying to clearup their records and resolve financial problems. General Accounting Office (GAO) (2 2) released a report onidentity theft, concluding that the prevalence and cost of the problemappear to be growing. Available at www.ftc.gov/os/2 / 7/idtheft.htm.Bielski, L. Interestingly,72 percent of the identity theft victims that contacted the Clearinghouse(2 ) in 2 gave their ages. The FBI estimated that itspends about $2 , in investigating any white-collar crime. OlderAmericans appear to be particularly vulnerable to credit card fraud. Washington, D .C.: Federal Trade Commission.Fleischer-Black, M. The most comprehensive report to date on identity theft was releasedby the GAO (2 2). Identity Theft Introduction The purpose of this report is to examine the causes, incidence, andeffects of identity fraud or identity theft. (2 2). Somewherebetween 5 , and 7 , have their identity stolen each year, with manymore Americans victimized by the crimes facilitated by identity theft.Ashcroft (2 2) identified these crimes as ranging from bank and creditcard fraud to international terrorism. 5, 2 , the FTC alleged that Martinez maintained Web sites thatsold 45 days of access to fake ID templates for $29.99. At the present time, community banks with assets under$5 million spend less than $1 , per year on this effort, whereas bankswith assets of $5 million to $5 billion are more likely to spend up to$25 , per year. Boulard (1999) maintains that identity theft is not a new crime,having begun to proliferate when credit cards became a way of life for thevast majority of consumers. This may necessitate the useof sophisticated biometrics or other security systems that arecontroversial. (2 2). Less intrusive and expensive authentication techniques such asPKI are seen by Groves (2 2) as offering enhanced consumer protection.Nevertheless, biometrics and PKI are being met with mixed feelings byconsumers. The Clearinghouse (2 1), after twoyears of operation also revealed that on average, it appears that 12.3months tend to lapse between the initial misuse of the consumer'sidentifying information and the time when the victim first discovered thatthey were identity theft victims. The literature reviewed in this report also established that theInternet has become a major locus for various types of identity theft.Eileen Harrington (2 1), a ranking member of the FTC's Bureau of ConsumerProtection, told a Subcommittee of the House of Representatives that theproliferation of Internet access has expanded opportunities for onlinefraud. The ABA has issued a privacy tool box to help banks ensurethe security of customer information. To examine the causation of identity theft, a qualitative review ofrelevant materials and publications was undertaken. These steps include establishing procedures to verify the identity ofindividuals applying for financial products, to prevent fraudulent addresschanges, and to block pretext callers from using personal information toimpersonate account holders and gain access to account information. Just as technology facilitates identity theft, it can also be used toimprove ways of combating it. Georgia 31.7(Consumer Sentinel, 2 2) The Consumer Sentinel (2 2) also reported that 11, 12 (13 percent)of the 86,168 identity theft victims stated that they incurred out-of-pocket expenses. Identity theft and fraud are revealed as "old crimes" that areincreasing in incidence and effect due to the proliferation of newelectronic technologies.Results Given the caveats presented above, this section of the study willoffer an assessment of results. In addition, the GAO (2 2) examined the cost of identity theft tovictims using data obtained from the FTC Clearinghouse. Identity theft, Social Security numbers, and the Web. Snoopware that locales personal data on the Web . Identity crisis in the information age. This certainly hasinhibited the capacity of the government to continue investigations intofraud, embezzlement, and identity theft. Under this rider, policy holders can be reimbursed for up to$15, for expenses they may incur as victims of identity fraud. In fiscal 2 -2 1, CRAs posted 1.2 million initial calls generating 9 -day fraud alerts . Beales (2 2) alsostated that the information obtained from the database managed by the FTCis not comprehensive. A matcher then compares the normalized signature with the set of normalized signatures on the system's database and provides a "similarity score" that compares the individual's normalized signature with each signature in the database (Groves, 2 2). In 2 , roughly 26 percent of all fraud complaints logged onto theFTC database were related to online fraud and deception. Independent corporations and privatesector industry coalitions have been created to address different types ofwhite-collar crime and to bring these crimes to the attention of lawenforcement agencies. Over the Internet, individuals who make purchases shoulddo so only via secure, encrypted platforms. It is estimated that auto lendersworking with Experian have saved hundreds of millions of dollars bydetecting fraud early in the auto loan application process. Scientific American 287(1), 19-21. It is a crime that negatively impacts upon the young and theold, the rich and the poor, and the urban and the rural citizen. Unlike cries where the victim is immediately aware of an assault,identity theft is most often silent and invisible with thieves having nodirect contact with their victims. The kinds of fraud that occur on the Internet were identified byHarrington (2 1) as: Internet auction fraud, Internet service providerscams, Internet Web site design fraud, unauthorized credit card charges,pyramid scams, investment schemes, travel/vacation fraud, health carefraud, and telephone/pay-per-call solicitation fraud. The next section ofthe study will describe the research methodology that was employed in thecompletion of the report, followed by a discussion of results and aconclusion. Washington, D.C.: Federal Trade Commission.Federal Trade Commission. The GAO (2 2)stated that estimates of the extent of identity theft are based on limitedhotline reporting or other available data. In his discussion of efforts to combat all forms of white-collarcrime, Johnson (2 2) reported the following data: . The FBI Law Enforcement Bulletin, 71(6), 1-5.Senate toughens corporate fraud penalties. In the case of embezzlement, Conley (2 ) believes thatcorporate employees turn to crime due to financial problems, the perceivedopportunity to get away with the crime, and the rationalization thatembezzlement is not really a crime since its "victim" is a corporation andnot another human being. Transcript of Attorney General remarks at identity theft press conference. Forexample, shopping venues on the Internet that require credit card paymentsdo not need and should not ask for Social Security or driver's licensenumbers. Pollock and May (2 2) believe that technology is instrumental infacilitating identity theft. Attorney Offices handled 13,72 white-collar crime cases in fiscal year 2 . Based on a total of 86,168 reportsbetween January 1, 2 1 and December 31, 2 1, the Clearinghouse concludedthat: . Groves (2 2) suggested that it will ultimately be up to individualconsumers to ensure that their financial information is used wisely andprotected. Congress that the creation of a hot line and acentralized identity theft data clearinghouse has helped the FTC to useInternet as well as telephone resources to track identity theft andfacilitate bringing identity thieves to justice. Many companies tendto sweep white-collar crime under the rug rather than risk a blemish on thecorporate reputation or brand value. As the size of a bank's assets increase, the GAO (2 2)found that the amount of money spend on the prevention, detection,investigation, and prosecution of fraud also tends to increase, oftenreaching as much as $5 million to $1 million for super-regional or moneycenter banks with assets of $5 billion or more. Groves (2 2) also identified new technologies that are available tobusinesses that can facilitate identity authentication. The FBI's Uniform Crime Reports (UCR) demonstrates that while arrests for most index crimes of violence have declined, arrests for fraud and embezzlement have increased dramatically. The three principle credit bureaus or CRAs(TransUnion, Experian, and Equifax Inc.) keep files on names and accountsthat have been used to commit identity theft. Available at www.consumer.gov/sentinel/trends.htm.Federal Trade Commission. Risk Management, 47(11), 14-18+.Consumer Sentinel. Thus, though the GAO (2 2) report is the most comprehensive data setcurrently available that details the prevalence and cost of identity theft,the report does not offer any truly substantial or extensive data on thisparticular crime. Authentication technology: Identity theft and account takeover. The Identity Theft Data Clearinghouse (2 ) also published a reporton its activities. In discussing the impact of Internet technology on identity privacyand theft, Berghel (2 ) noted that for every utility developed to ensureand protect Internet privacy, utility programs that facilitate identitytheft (or at least privacy invasion) have also been developed. The secondary data usedin the following results section and presented in the appendices isconsequently the framework upon which analysis herein must be built. Just as Beales (2 2) noted that it is difficult to accuratelyassess the extent of identity theft, Henry (2 2) argued that reliablenationwide statistics on auto-related identity theft are difficult toacquire. Consumer Sentinel (2 2) indicated that victim information regardingcomplaints logged in the period from January 1, 2 1 to December 31, 2 1was used in the following manner: Table I How Victim's Information Is UsedFraudulent Conduct Percent of All VictimsCredit card fraud 42Phone or utilities fraud 2 Bank fraud 13Employment-related fraud 9Loan fraud 7Government documents/benefits 6Other identity theft 19Interestingly, Consumer Sentinel (2 2) reported that approximately 2 percent of all victims lodging a complaint experienced more than one typeof identity theft. General Accounting Office.Groves, S. At the same time, the highestconcentration of complaints per 1 , came from, in order, the Districtof Columbia, Nevada, Arizona, California, and Oregon. While victims appear to live in all 5 states, the Clearinghouse(2 ) identified the largest number of complaints emanating fromCalifornia, New York, Florida, and Texas. Reporting is voluntary and many victims of identitytheft are simply uninformed of the existence of the clearinghouse.Gathering accurate data on the actual extent of identity theft is a complexand extremely difficult process. Though face recognition biometrics appear to offer an excellent toolfor preventing identity theft, this sophisticated technology is extremelyexpensive. (2 2). However, despite the wealth of commentary available on identity theftand fraud, the most comprehensive statistical data that is available to theaverage citizen consists of information contained in the GAO (2 2) reportreferenced earlier in this study, testimony given by FTC officials toCongressional committees and subcommittees, and FTC Clearinghouse (2 ,2 1) data. This relatively inexpensiveinsurance can be of great value to identity fraud victims. Department of DefenseCounterdrug Technology Development Program Office, the National Instituteof Justice, and related entities (Groves, 2 2). Congress, identity fraud is alltoo often an unreported crime and a crime that is prosecuted infrequently. Available at www.ftc.gov/os/2 2/ 3/idthefttest.htm.Beales, H. Some limited data on these costs, according to the GAO (2 2),indicated that 15.3 percent of all Clearinghouse complainants had no dollarlosses whereas those reporting dollar losses did so at the levels presentedin Table II below. Just under 25percent of all victims became aware of the crime within a one to six monthperiod following its occurrence while 1 percent did not know of theirvictimization until a period of 25 to 48 months had elapsed. However, so ubiquitous is the useof such numbers that it would take a major restructuring of myriaddatabases and verification systems to eliminate their use. No information regarding anysubsequent police arrests or prosecutions was available. Beales (2 2) believes that only a centralizedand coordinated effort to assemble this type of data will the crime itselfbecome more amenable to prevention and intervention. However, thedifficulty of putting an end to the problem was underscored by Harrington(2 1) who said that between 1994 and mid-2 1, the FTC brought only 182Internet-related cases against over 593 defendants. ABA Banking Journal, 93(1), 27-29.Boulard, G. Taking these steps is vitallyimportant in order to ensure that fraud will be detected and to prevent avictim's credit report or record from being further damaged.Preventing Identity Theft While the primary victims of identity theft are individual consumers,American businesses are also being negatively affected by the problem. Again, in part because the FBIdoes not separate identity theft investigations from other white-collarcrimes contained in the Uniform Crime Report and other departmentalstatistical analyses, gaining a comprehensive picture of the trueinvestigation costs of this crime is difficult. Once incyberspace, it can be accessed by a thief with a relatively low level ofcomputer knowledge or hacking sophistication. At the CRAs, the annual cost of maintaining a staff of fraudassistance specialists is set at several million dollars per year (GAO,2 2). Identity theft: Prevalence and cost appear to be growing. The FTCClearinghouse had no data regarding direct out-of-pocket monetary lossesfor more than 77, or 82 percent of the 94,1 complaints received duringthe period from November 1999 through September 2 1. Additionally, the ConsumerSentinel received numerous complaints for fraudulent offers of health careproducts and services, investments, lotteries and sweepstakes, and businessopportunities or work-at-home schemes. The FTC received 94.1 thousand identity theft complaints between November 1999 and September 2 1 . (1999). The data revealed that the largestpopulation of identity theft victims (28.7 percent) were between 31 and 4 years old, closely followed by victims in the 19 to 3 year old cohort(26.9 percent), and victims in the 41 to 5 year old group (21.2 percent). Federal Reserve Bulletin, 87(6), 412.Harrington, E. Thus, it has become increasingly important to examine the causalantecedents of identity fraud or theft within the context of its incidenceand the response of law enforcement agencies. (2 1). Henry (2 2) asserts that Experian has had an identity theft databasein the United Kingdom for some 12 years. The present study relied upon both Congressional testimony andgovernment reports to provide a profile of identity theft in the UnitedStates. The American BankingAssociation (ABA) has taken a strong position on this topic and ispromulgating a set of policies that member banks can use to help reduceidentity fraud. Perhaps mostsignificantly, says Beales (2 2), the establishment of the FTCClearinghouse for identity theft data has created a unique and importantopportunity to centrally collect and then analyze data regarding identitytheft in the United States. The report willoffer a results section, a conclusion with recommendations, and a series ofcharts, graphs, and figures that illustrate the nature and extent ofidentity fraud or theft. Consumers and businesses can deploy technology and programs againstthese utilities. The average out-of-pocket expenses per victim were $1,173with a total of $12,914,1 5 spent by these victims. Stealthware that monitors client-side user-behavior . The FBI Law Enforcement Bulletin, 69(8), 8-12.Pollock, J., & May, J. Johnson (2 2) charges that the exponential growth of technology andthe use of computers in white-collar crime in general and identity theft inparticular have triggered a purposeful rethinking of the tools needed bylaw enforcement organizations to address white-collar crime. Over time, says Berghel (2 ), these unique identifiers have beenused to establish credit of various types and are now routinely requestedin all forms of credit transactions and other financial procedures. American Lawyer, 24(4), 29-31.General Accounting Office. The battle against white-collar crime. Figure 8 in the Appendix demonstrates that slightly less than 45percent of all identity theft victims discovered that the theft hadoccurred within less than one month after its occurrence. The final section of this report will offerconclusions and recommendations. Some ofthese utilities that are available on the Internet are: . The U.S. It also offered a birth certificate template and aprogram to falsify Social Security numbers. Beales (2 2) told Congress that the ITA has been quite helpful tothe FTC with respect to identity theft. Whereas theprototypical victim of fraud may be an individual consumer or investor whoelects to purchase nonexistent securities or misrepresented securities orproperties, the victim of identity theft usually becomes aware that he orshe has been victimized long after the fact (Conley, 2 ). In1996, identity theft-related losses of this type totaled $79.9 million. Some of thesetechnologies are controversial and have been met with ethical concerns byindividuals worried abut the security and privacy of personal information.The most controversial are the new biometrics, which encompass suchidentifier technologies as face recognition, retina scans, fingerprintauthentication, voice/speech verification, and handwriting analysis.Genetic engineering technologies go even farther, offering tools to analyzethe DNA components of human fluids and cells. Review of LiteratureWhite-Collar Crime Conley (2 ) reported that white-collar crime constitutes a multi-billion dollar problem in the United States. Online retail sales which often involve credit card use totaled $8.69billion in the fourth quarter of 2 , up 67.1 percent from the samequarter of 1999. (2 ).
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