IDENTITY FRAUD.   Term Paper ID:29174 Click to get this paper

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Paper Abstract: Defines the term. Background and prevalence of identity theft or fraud. Materials used for fraud including social security, PIN, and bank account numbers. Types of identity fraud including credit card, bank and government benefits. Relation to white-collar crime. Response of law enforcement. Costs of identity fraud. Internet and e-commerce and identity fraud. Paper Introduction: IDENTITY FRAUD: STEALING A GOOD NAME 1. What is Identity Fraud? A. Definition A Social Security Administration website defines "identity theft" -- a term synonymous with identity fraud -- as occuring when "a criminal uses another person's personal information to take on that person's identity" (Social Security Administration, no date). Lest this be thought to apply only to Social Security numbers, the definition adds that "it can also include credit card and mail fraud." A U.S. Department of Justice website expands on this definition, noting the circumstances that make identity fraud relatively simple: Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. In response, identity theft was definedas a federal crime in 1998 (Rusch, 2 1).5. Indeed, the person whoseidentification is misused may not be a direct victim of the resulting fraud-- though, as we shall see below, he or she usually becomes an indirectvictim. Terminals from which one could access, say, a bank'scustomer records, were located only inside the back offices of banks, whereonly employees in particular offices had ready access to them. Most people, even well-to-do businesspeople, conducted nearly all of their banking at a local bank or branch,where they were likely to be personally known to bank tellers. The successive personal-computerand Internet revolutions have also disseminated technical knowledge ofcomputer procedures to a far larger population. They also rendered identity fraud aless distinct crime. Identity Fraud. B. Relatively few documents wouldcontain all three, and obtaining one with fraudulent intent did not provideready access to the others. Their only hope ofrecovering is a civil suit against the suspect, a difficult proposition andone unlikely to lead to full recovery even if a judgment is won. While the Internet has come to the fore, aswill be discussed below, impersonal transactions also leave a paper trail -- from restaurant or store receipts to credit-card solicitations -- that isfrequently ignored and discarded. percent of all reported identity frauds involved openingnew credit card accounts -- by far the largest single specified category.This was followed by frauds involving existing credit card accounts (1 .2percent), and new cell-phone accounts (9.7 percent). This covers onlyone class of identity thefts, those involving financial institutions, anddoes not count frauds involving (for example) false cell phone or otherutility accounts. Out-of-town checks might not beaccepted at all, even after showing identification such as a driver'slicense; "traveller's cheques" were developed precisely due to the highbarriers to transactions involving unfamiliar persons. Identity fraud may (and often does) involve a third-party victim,typically a business, in addition to the person whose personalidentification is stolen and misused. Moreover, the Internet has led to a great standardization of computerprotocols, and thus to the rise of hacking. The consequence for thevictim is often a bad credit rating or other negative information in theirfinancial records, leading to denial of loans, mortages, or other financialservices for which they would otherwise qualify, and a costly effort toclean their records.7. The othertypes of frauds reported ranged from traditional frauds such as fakesweepstakes to the new (and largest non-identity fraud category),fraudulent Internet auctions (Federal Trade Commission, "ConsumerSentinel," 2 2). Undoubtedly, however, financial frauds are the mostcostly to their victims. The prevalence of credit card frauds is not surprising, since a falsecredit card can be used for a wide variety of purchases, including quitelarge ones. Data comparing identity fraud to white collar crimes other than fraud(e.g., embezzlement) are not available. http://news.com.com/21 2-1 23-245173.html Department of Justice (no date). In most cases, the victims are in fact protected against the directlosses due to identity fraud. Traditional forgery, however, tended to be difficult, relativelyhazardous to the forger, and limited in its potential scope. This is precisely whysignatures acquired their legal standing; they are difficult to forge, andextremely difficult to forge well enough to pass close scrutiny. Thus thenumber of people who were in a position to obtain the information neededfor identity fraud -- was relatively limited. Other webfirms peddle their willingness to obtain and provide information about anyperson, apparently with no questions asked of the inquirer (O'Brien, 2 ). Today, however, any number of genealogydatabases, developed and posted with innocent intent by genealogy buffs,make it readily available online regarding millions of people. The relative rarity of impersonaltransactions, besides leading to greater scrutiny of such transactions,also meant that the source materials for identity fraud were difficult toobtain. B. With its large,urbanized, and mobile population, California might be expected to be at ornear the top in reported cases of identity fraud. These barriers, direct and indirect, did not prevent identity fraud,but they rendered it more difficult. The Role of Technology The rise of identity fraud, as suggested earlier, was due primarilyto the greatly increased number and variety of impersonal transactions.This in turn was driven by mobility and the demand for convenience on thepart of both individuals and businesses. The Internet, in contrast, operates using standard protocols. A. Bythe 197 s, improved access systems and private networks were making thisinformation easily available from terminals, perhaps across the countryfrom the actual storage location. Were archeologists to unearththe police blotters of ancient Sumeria, they would undoubtedly findincidents in which a duplicate of a signet ring was made and used as theequivalent of a forged signature in order to perpetrate a fraud. Law Enforcement Response to Identity Fraud: Nearly two-thirds (62 percent) of victims who contacted the FederalTrade Commission to report identity frauds said that they had not contactedany police department. Department of Justice website expands on this definition,noting the circumstances that make identity fraud relatively simple: Unlike your fingerprints, which are unique to you and cannot begiven to someone else for their use, your personal data, especiallyyour Social Security number, your bank account or credit card number, yourtelephone calling card number, and other valuable identifying data canbe used, if they fall into the wrong hands, to personally profit at yourexpense (Department of Justice, no date). In the pre-Internet era, a person's mother's maiden name was not somethinga stranger could readily obtain. Impact A 1998 report to Congress by the General Accounting Office reportedanecdotal evidence of Internet use for identity frauds, but was unable tolocate any specific trend data. The benefit to credit bureaus' business customers is greaterconfidence in lending. So long as data was storedonly on individual mainframe computers, or local networks within anorganization, not only was physical access to terminals more difficult; theaccess formats and data encoding were likely to be peculiar to theorganization. A. These providethe raw material of identity fraud, but until recently they were few innumber and did not circulate widely. B. On the otherhand, credit bureaus inevitably get cast as the villain when a person isdenied credit due to identity fraud using that person's identification.Failure to correct errors may also subject credit bureaus to lawsuits.Thus, in general, identity fraud creates a signficant new cost for thisindustry. It isnot clear whether victims lacked confidence in the police, or believed thatfederal authorities were the appropriate agency to investigate a complexwhite collar crime. Computers allowed records that had been previously been kept inendless rows of file cabinets to be converted into databases, allowing muchfaster access. If, for example, a person steals your credit card number to make apurchase on your account, you are a direct victim. However, the FTC reported thatidentity theft complaints accounted for 42 percent of all Consumer Sentinelcomplaints during 2 1 (Federal Trade Commission, "Consumer Sentinel,"2 2). Tenth-ranked Michigan has arate of 17.5 suspects per 1 , people, less than a quarter of the DCrate and a little more than half the Nevada rate. If, however, a personuses your identifiers to open a credit-card account, you may not evenbecome aware of it -- however, when the account goes delinquent, it willmar your credit rating. Credit Bureaus The function of credit bureaus is compile information on the creditrecords of individuals, determining whether they are good or poor creditrisks. D. Until 1998, in fact, many identity frauds fell through the cracks oflaw enforcement. The enormous, uncontrolled flow of personal information across theInternet has thus become the most powerful single tool available toperpetrators of identity fraud. "Identity Theft and Fraud."http://www.usdoj.gov/criminal/fraud/idtheft.html Federal Trade Commission (2 2). Definition A Social Security Administration website defines "identity theft" --a term synonymous with identity fraud -- as occuring when "a criminal usesanother person's personal information to take on that person's identity"(Social Security Administration, no date). Computerized databases could easily be cross-correlated,for example cross-linking Social Security numbers and bank account numbers. As the specific identifiers and their use varies, so does the meansof obtaining the information. Background Identity fraud, in a broad sense and in a rudimentary form, is as oldas the crime of forgery. IDENTITY FRAUD: STEALING A GOOD NAME1. She was in effect protecting herself fromidentity fraud through impersonation. The largeproportion of victims who did not file a police report is notable. 12.9 percent of totalidentity frauds were in an "other" catagory not further specified (FederalTrade Commission, "Identity Theft," 2 2). However, the indirect costs to victims inboth money and aggravation may be very considerable. This type of identity fraud has been possible ever since signaturesor similar markers of identity were in use. Credit bureaus are seldom if ever directvictims of identity fraud (since they do not make loans themselves), butthe service they provide is seriously undermined by the prevalence ofidentity fraud. Few Americans can have escaped inundation by a flood of "pre-approved" credit card applications in the mail. It isfollowed by Nevada, with 3 .5 suspects per 1 , people, and then byFlorida, California, New York, and Georgia. "Internet Fueling Boost in Fraud and IdentityTheft." ComputerUser.com (May 2 ).http://www.computeruser.com/news/ / 5/2 /news3.html O'Brien, Timothy L. The intent ofidentity fraud is after all generally to obtain money or services in someother person's name, without paying for them. "Aided by Internet, Identity TheftSoars." New York Times (April 3).www.nytimes.com/library/tech/ / 4/biztech/articles/ 3theft.html Rusch, Jonathan J. Thus recordscontaining impersonal identifiers became much more widely distributed. Identity Fraud and the Internet A. Today, in any large highschool, you might find dozens of students who have in-depth knowledge ofcomputer and Internet procedures -- sufficient knowledge to hack throughostensible security barriers. Finally, what might be called "impersonal identifiers" -- the arrayof codes such as Social Security numbers, "PIN" numbers, account numbers,and so forth -- that are used to identify us in impersonal transactions,were limited in extent, interconnection, and availability. References Associated Press (2 2). Of those who did report the identity fraud to thepolice, 8 percent said that the police had taken a report; 18 percent saidthat the police had not (for two percent of cases this information was notavailable) (Federal Trade Commission, "Identity Theft," 2 2). The ultimate benefit to individual consumers ismore convenient access to credit. C. By far the largest relative concentration of identity-theft suspectsis the District of Columbia, with 72.9 suspects per 1 , people. Costs of Identity Fraud: According to an estimate from the General Accounting office, the costof credit card fraud alone exceeded a billion dollars in 2 , up from anestimated $7 million in 1998 -- an increase of nearly 5 percent(Associated Press, 2 2). Making a Federal Case of Identity Theft.Department of Justice.http://www.usdoj.gov/criminal/fraud/fedcase_idtheft.html Social Security Administration (No date). "Consumer Sentenal ComplaintStatistics and Trends for California." ________ (2 2). Forging asignature accurately enough to pass even casual scrutiny is a fairlydemanding skill, and moreover requires the forger to have access to anactual copy of the signature being forged. The wording suggests that this is the amount obtained by known suspects.It is thus certainly less than the total cost of such frauds, since not allare discovered. "Internet Contributes to Rise of IdentityTheft, FTC Says." CNET News.com (August 3 ). As Willie Dutton famously saidwhen asked why he robbed banks, that is where the money is. Even at alarge and busy bank, a forger ran significant risk of encountering someonewho would recognize the imposture directly. Even with the relativelycrude technology of the 196 s, copying a database onto magnetic tape(which, along with blinking lights, connotes "computer" in old movies) andsending the tape by courier to be read by another computer, wasimmeasurably easier than the laborious process of copying and sendingwritten lists of information. Even a skilled programmer would have difficulty reading thematerial unless he or she also had the organization's data-processingmanuals. "Victim Information." Identity Theft DataClearinghouse. Lest this be thought to applyonly to Social Security numbers, the definition adds that "it can alsoinclude credit card and mail fraud." A U.S. Prevalence of Identity Fraud: As was noted earlier, reported identity frauds already outnumber allother reported frauds combined, at least in California. Equallyold, no doubt, is identity fraud through direct impersonation of anindividual. Existing laws dealt with taking money from anotherperson's bank account, but not with opening a bank account in anotherperson's name. A great many peopleare now routinely providing their credit card numbers and other informationto "e-tailers" known only from a website. It is perfectly feasible for aperpetrator to establish a shell e-commerce business in order to troll forpersonal information, or to obtain such information from unscrupulous ormerely careless e-commerce businesses. It may be less than the amount known or suspected to havebeen taken, if cases of identity theft are suspected but a particularsuspect not identified; this would account for the large discrepancy withthe General Accounting Office estimate cited earlier (Associated Press,2 2). 26. "It's both high tech and low tech," aFederal Trade Commission attorney is quoted as saying of identity fraudtechniques. Moreover, until quite recently, impersonal transactions -- thosedepending on tokens of identity (such as signatures or identificationnumbers) rather than direct personal acquaintance between the parties --were relatively few in number. In Homer's Odyssey, Queen Penelope carefully tests herhusband, arrived home after twenty years, to make sure he is in fact herhusband and not an impostor. A forger whoproduces, say, a bogus letter by Abraham Lincoln and sells it as a real oneis not committing identity fraud as such -- he is not claiming to beLincoln, but attempting to pass off a false object as a real (and valuable)one. Since the law generally protects individuals from identity fraudsperpetrated in their names, financial institutions and other businessesusually end up taking the losses due to identity fraud. This covers all levels of government, andpresumably includes fraudulently obtained driver's licenses, which are notgenerally used in frauds against the issuing government itself.Nevertheless, it is probable that the federal government is the singlelargest victim of identity frauds, due to the sheer scale of itsdisbursements to individuals. The predominance of new-account frauds over existing-accountfrauds is striking, however, and points up the distinction betweencontemporary identity fraud and simply stealing a credit card or accountnumber. On the one hand, their product is made less reliable if a fraud takesadvantage of a good credit record, or indeed if a creditworthy individualis denied credit due to a fraud-induced poor credit record. "GAO: Reports of ID Theft on the Rise."http://www.msnbc.com/news/72 936.asp?cp1=1 Barnes, Cecily (2 ). Forging a signature on a check, however, is essentially identityfraud: in effect claiming the identity of the person whose name is signedon the check. (2 1). To take oneexample, banks still often use "mother's maiden name" as an identity check. "Identity Theft."http://www.ssa.gov/pubs/idtheft.htm----------------------- 1 Traditional forgery might take a variety offorms, not all of which could be regarded as identity fraud. Most people had only, perhaps, a Social Security number, a driver'slicense number, and a bank account number. The credit card industry must bear some responsibility for thissituation. Federal and State Government Government documents or benefits fraud accounted for only six percentof all reported identity frauds in 2 1 (Federal Trade Commission,"Identity Theft," 2 1). (2 ). This distribution follows no obvious pattern. Moreover, databases could be easily copied. Identity Fraud in the White-Collar Crime Landscape: A Federal Trade Commission report detailing white-collar crimecomplaints in California during 2 1 indicated that identity fraud was moreprevalent than all other types of frauds combined, with 15,115 identityfraud complaints, as compared to 14,428 other fraud complaints. According tothe Federal Trade Commission, the total amount that identity fraud suspectsobtained from financial institutions in 2 2 was nearly $1 million -- tobe precise, $98,253,576 (Federal Trade Commission, "Identity Theft," 2 2). A bank teller might scarcelyglance at the signature of a known customer, but might look more closely atthe signature of an unfamiliar person, especially for a transactioninvolving significant sums of money. Briefing Reportto Congressional Requestors, GAO/GGD-98-1 BR. "We have people who are dumpster diving and people usingskimmers to collect encryption numbers from people's cell phones" (Barnes,2 ).3. Individuals The average amount that victims of identity fraud involving financialinstitutions report to have been obtained is $6,767 -- with the cautionarynote that victims may not always know how much money was obtained in theirnames (Federal Trade Commission, "Identity Theft," 2 2). Identity fraud was also renderedmore feasible by the increased use of computers in business, startingaround the 196 s -- well before either the personal computer or theInternet existed. Any personalcomputer with Internet access can, at least in principle, access anenormous number of identifier databases in all parts of the world. Thirty years ago, thisknowledge was largely confined to professionals. Business The class of businesses most often victimized by identity fraud is,unsurprisingly, financial institutions. In addition, the relative rarity of impersonal transactions meantthat they were more closely scrutinized. Given the desperation ofthe industry to sign up new cardholders, security measures are undoubtedlylax, and identity fraud correspondingly easy to perpetrate. In one notorious case a perpetrator ran up over $1 , incredit card debt, and secured numerous other loans, but could be convictedonly on an incidental charge of making a false statement to buy a gun(Department of Justice, no date). Information on thedistribution of victims is not available, but Federal Trade Commissioninformation on the distribution of suspects shows that California in factranks only fourth, with 27.3 suspects per 1 , people (Federal TradeCommission, "Identity Theft," 2 2). By 2 , news reports (albeit stillanecdotal) suggested that the Internet was "fast becoming the primary tool"for perpetrators of identity fraud (Krebs, 2 ), and the Federal TradeCommission reported that calls to its identity-theft hotline had increasedfrom 4 per week to 1 per week between March and July of 2 (Barnes,2 ). Finally, the rapid expansion of e-commerce in the last two or threeyears has added new opportunities for identity fraud. Firms soon discovered that they could make money by selling databaseinformation (such as customer lists) to other firms. Forgery, for example, was seen simply as thefraudulent use of a false signature, not as a type of identity fraud --because there was scarcely any other type.2. The spread of the Internet, however, has caused both a furtherenormous increase in the number of databases, and an equally enormousincrease in locations from which they could be accessed. Krebs, Brian (2 ). It israther more surprising that Georgia, with only one large metropolitan area,should rank in 6th place.6. Moreover, whilelarge organizations may still encode information using specializedproprietary formats, vast databases are accessible to smaller organizationsthat use standard commercial products. It is clear that identity fraud is not only the fastest-growingcomponent of white collar crime, but that it now features very prominentlyin the overall white-collar crime picture, at least with regard to numberof victims.4. Types of Identity Fraud: A report by the Federal Trade Commission Identity Fraud DataClearinghouse, covering the year 2 1, reported 86,168 known victims ofidentity fraud that year, and gave a percentage breakdown by type: * Credit Card Fraud 42 percent * Bank Fraud 2 percent ** Employment-Related Fraud 9 percent * Loan Fraud 7 percent * Government Documents/Benefits Fraud 6 percent * Other Identity Theft Fraud 19 percent The breakdown also noted that "approximately 2 percent of victimsexperienced more than one type of identity theft." A more detailedbreakdown into sub-types provided a further picture of identity fraudpatterns. The District ofColumbia is entirely urban, and perhaps has a large mobile population,ranging from congressional staffers to military personnel; this may accountfor its extraordinarily high concentration of identity-fraud suspects.Nevada, Florida, California, and New York also have highly mobilepopulations -- offering both anonymity for suspects and a concentration of"anonymous" victims accustomed to largely impersonal transactions. Oncelearned, they can be used to navigate the entire network. In addition to specific "impersonal identifiers," which usually areprotected in some way -- though often not effectively -- these databasesinclude other information of use in committing identity fraud. However, the information was stillavailable, for the most part, only within fairly large bureaucraticorganizations. What is Identity Fraud? General Accounting Office (1998). 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