ID Theft: It’s in the family

A lot of time has been spent in this blog discussing spam and false or misleading identities associated with spam, but I have yet to tackle the subject of identity theft until today. It came to a few days ago while reading the morning news.

Did you know that 47% of all identity theft cases are traced to family members, relatives, friends, and neighbors? Similarly, 36% of all Identity theft victims know the person who misused their information?

It’s my opinion that most people think that most identity theft occurs online then anywhere else, but a study in 2006 reveled that 90% of all identity theft takes place offline. The primary sources of theft are through lost or stolen wallets, checkbooks, and credit cards. Garbage cans and refuse are decreasing as sources of theft as nearly 70% of all consumers shred their documents before throwing them out, so the trash is now responsible for less than 1% of identity theft sources.

ID Theft Trends by Age Group

• The 65+ age group has the smallest number of victims (2.3%)
• The 35-44 demographic age group has the highest average fraud amount ($9,435). No connection was found between the age group and Internet usage. Most fraud cases arose from offline areas such as lost cards, checkbooks, wallets, and carelessness in leaving personal information in an accessible area.

Four Misperceptions Surrounding Identity Fraud

Misperception #1: “Consumers are helpless to protect themselves”

• In 63% of fraud cases, the point of compromise was either theft by close associates of the consumer (friends, family, neighbors, etc.), lost or stolen wallets, cards and checkbooks, breached home computers or stolen mail or trash.
• Consumers detect almost half (47%) of identity fraud cases. Self-detection is faster (averages 67 days vs. 101 days), results in smaller average fraud amounts ($4,431 vs. $8,466) and smaller consumer costs ($347 vs. $538).
• A key way to detect fraudulent accounts is through credit monitoring / reports. Eleven percent of fraud cases were caught via this means.

Misperception #2: “Consumers bear the brunt of the financial losses from identity fraud”

• Average out-of-pocket cost for identity fraud victims is $422.

Misperception #3: “Internet use increases the risks of identity fraud”

• Less than 10% of identity theft cases occured online.
• Internet use can lead to lower damages from identity fraud.
• Electronic account monitoring is the fastest way to detect fraud and leads to lower losses - (22 days and $3,806).

Misperception #4: ” Seniors are most frequent targets of fraud operators”

• Generation X (ages 25-34) has the highest rate of identity fraud at 5.4 percent. The average fraud amount for this demographic is $6,270 as compared to the average fraud amount for the 65+ segment which is $2,665.

Identity Safety Tips That Can Protect Consumers

from the Better Business Bureau

PREVENT access to your personal information

• Do not release Social Security or account numbers in response to e-mail, phone or in-person requests. When responding to e-mail, ignore any Internet links provided and type the full address instead.
• Keep all sensitive documents, checkbooks and credit cards securely locked away at home and at work.
• Carry only those credit cards that you need in your wallet.
• Before discarding, shred all private documents.
• Retrieve paper mail promptly and place outgoing checks or other sensitive documents in a U.S. Postal Service mailbox.
• Sign up for automatic payroll deposits.
• Replace paper bills, statements and checks with online (paperless) versions.
• Keep passwords hidden (even in your own home) and change them frequently.
• Use and regularly update firewall and anti-virus software.
• Do not respond to suspicious e-mails. Delete them, and if there is any doubt contact the company to determine if the e-mail is real.
• Don’t discard a computer without completely destroying the data on the hard drive.

DETECT unauthorized activity

• Review bank, credit card and biller statements weekly - available through online account access.
• Contact your financial provider if you fail to receive statements in a timely manner.
• Review your credit information regularly (free annual reports are available at www.annualcreditreport.com or call 1-877-322-8228).
• Use e-mail-based account “alerts” to monitor transfers, payments, low balances, withdrawals, or detect any out-of-pattern activity.
• Visit your bank’s, credit card issuer’s or biller’s web site(s) frequently to monitor regular account activity.

RESOLVE fraud promptly, minimizing losses and protecting your credit record

• Ask your financial provider about zero-liability guarantees against fraud and dedicated resources to help you resolve and recover from any potential losses.
• Victims of theft: notify your financial providers, begin monitoring your accounts more frequently, and place an “alert” at all three credit bureaus (Equifax, Experian or TransUnion).
• Alert federal and local law enforcement if you suspect or detect identity fraud.

More Online Resources

• ID Theft State by State
• How Safe Are You? Take an Identity Safety Quiz at www.idsafety.net
• Better Business Bureau: www.bbb.org/idtheft
• Checkfree: www.checkfree.com/idprotect
• Federal Trade Commission: www.consumer.gov/idtheft/
• VISA: www.visa.com/security
• Wells Fargo: www.wellsfargo.com/privacy_security/fraud_prevention/

Statistics by Javelin Strategy and Research:

About Javelin Strategy and Research
Javelin provides research-based strategic direction for financial services, payments, e-commerce, and identity fraud. Javelin rigorously researches technology issues, industry trends, attitudes and activities of consumers, small businesses, institutions, processors, merchants, billers, and other organizations in order to deliver relevant, high-impact strategic guidance. Javelin can be found on the Web at www.javelinstrategy.com. For more information on this project or other Javelin studies, visit www.idsafety.net or www.javelinstrategy.com/reports/

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Justice Department Charges 11 in ID Theft Scheme

The US Department of Justice filed charges against 11 individuals in what is believed to be one of the largest Identity Theft cases ever prosecuted in the United States. (US DoJ Press Release) The crimes involve the theft and sale of over 40 million credit card and debit card numbers from 9 major retailers and other smaller outlets between 2003 and 2008.

Three are U.S. citizens, five are from eastern Europe (Estonia, Belarus, and the Ukraine), and two from China. The final member of the ring is known only by an alias, Delpiero, and their country of origin is unknown.

Of the three U.S. citizens — Albert “Segvec” Gonzalez, Christopher Scott, and Damon Patrick Toey, all from Miami — Gonzalez faces a possible life sentence in prison due to an earlier arrest in 2003 on similar charges. Gonzalez has been in held in a New York prison since May 2008 on related charges.  Another member of the ring has been held in Turkey since June 2007.

Three Seperate Cases Combine

The case began as three seperate investigations in California, New York, and Massachusetts, but eventually it was coordinated once it became apparent that the same people were involved in all three cases.

The current indictment alleges the thieves hacked wireless retail networks of TJX Companies, BJ’s Wholesale Club, OfficeMax, Boston Market, Barnes & Noble, Sports Authority, and DSW, among others.  Once in, they would install software to capture account information and passwords.  All told they gained access to over 40 million credit and debit card numbers from 2003 to 2008.  They stored the information in servers in the US and Europe, and sold some account information to other criminals.

Lax Security Measures

Investigators from the FTC have charged many retailers for lax security measures for protecting consumer information.  BJ’s Wholesale Club settled charges in 2005 that it failed to take appropiate measures to protect customer account information.

Shoe discounter, DSW, also settled similar charges in 2005 after a reported security breach in 2004.

The T.J. Maxx and Marshalls stores reported their data theft of over 45 million credit and debit card numbers in January 2007.

The retailer, which offers designer-label clothes and home goods at discounted prices, in March settled a complaint with the Federal Trade Commission. Under the agreement, TJX must start an information-security program and undergo an external audit every other year for 20 years.

TJX also settled related claims by Visa Inc. and MasterCard Inc. In April. The retailer agreed to pay as much as $24 million to cover costs incurred by banks that issue MasterCards.

“We have worked very closely with law enforcement authorities as they conducted an extensive international investigation into this complex crime,” TJX spokeswoman Sherry Lang said in an e-mailed statement. “The sheer number of retailers attacked by these cyber-criminals demonstrates the much broader challenges in protecting sensitive consumer data from this increasing threat.”

—Bloomberg.com

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