Academic journal article ABA Banking Journal

Identity Theft

Academic journal article ABA Banking Journal

Identity Theft

Article excerpt

Reaching out to keep "data snatching" criminals from robbing the bank

In a society where we work so hard to make a name, there's something inherently scary in the thought that the "selves" we've constructed could be compromised.

The idea that any one of us might somehow get duplicated is theatrically creepy. The identity-snatching aliens in Invasion of the Body Snatchers left many moviegoers woozy and inspired a remake. In the theaters this year, scifi fans were grossed out, but fascinated, by the premise of a stolen self in Arnold Schwarzenegger's The 6th Day.

But until very recently, the only loss likely to occur--the financial sort--was a crime without a face, unless you happened to be a hapless, also somewhat invisible, victim. Known as identity theft, it's the practice of taking over another's financial life that's bilking the system out of millions--and it shows no signs of stopping. Last year, there were an estimated 500,000 cases annually at an average cost of $17,000 per victim, according to statistics compiled by the Federal Trade Commission.

Last month saw perhaps the highest profile case of identity theft to date when Tiger Woods had his identity used to fraudulently purchase merchandise, as reported in the American Banker. Meanwhile, the debate rages as to whether we need more laws, or simply more agents and officers dedicated to its pursuit. Gramm-Leach-Bliley, Title V, outlined the privacy obligations banks have to consumers and made it a federal crime to fraudulently obtain private consumer information, a practice known as "pretext calling."

Yet typically, these crimes go unprosecuted or under punished, making them a haven for career criminals who want a decent payoff without the prospect of jailtime. "Compared to equally profitable crimes involving drug or gun trafficking, the sentencing for identity fraud is much lighter--and these folks are tough to catch," says Bruce Townsend, special agent in charge of Financial Crimes Division with the Secret Service. These days, the influence of the internet is making crimes of fraud more Byzantine than ever, forcing the Secret Service to fight back with equal sophistication. "When agents are ready to go on assignment they're given a gun, a badge, and a laptop," Townsend says.

In the midst of all this, bankers are figuring that the best defense is a great offense. The ABA spotlighted the issue, forming a committee to discuss the problem as part of its look at creating responsible privacy policy. ABA first got interested in the problem in 1998, when it was the only major trade organization to support a change in Federal law making it easier to prosecute. And it's a good thing, too. Focus groups on privacy issues show that the real problem for most people isn't that annoying telemarketer, but the fear that information could get into the wrong hands. To help should that happen, the ABA and participating banks developed a response kit that includes a step-by-step plan for victim recovery (see box at right). ABA is urging that all bank employees get educated on the subject.

What it is, why it happens

Identity theft is the usurpation of another's "self" by use of vital, substantiating information that's been stolen.

Law enforcement experts agree that these crimes are committed by a cottage industry of pros who dive in dumpsters; steal mail or wallets; pose as prospective employers and ask for it; or tap into the Net to get the skinny on the unsuspecting. "Many times identity thieves steal preapproved offers from people's garbage cans," explains ABA's Byrne.

As if that weren't enough, there is also the presence of unscrupulous information brokers that sell data to anybody without asking too many meaningful questions.

Since everyone's societal identity is built on pieces of interlocking data that fit together like a puzzle, deft ID con artists can take one element, say, an address, as a starting point and link it fairly rapidly to the rest to get a more complete picture of a person's financial history. …

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