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The Revealing History of Identity Theft

Thursday, January 24th, 2008

Identity theft is everywhere these days and in many guises - stealing your credit card number to make fraudulent purchases, posing as you to open bank accounts and buying homes in your name, and using your SSN number to gain employment and benefits. According to the Federal Trade Commission (FTC), 8.3 million Americans reported being a victim in 2005.

The history of ID theft

Identity theft began as a “white collar crime,” where scammers would simply assume the identity of an unsuspecting victim. They would become the stolen identity, opening new bank accounts, credits cards, and perhaps even buying a home with the forged identity.

As identity theft became more sophisticated, ID thieves began scamming people over the phone, pretending to be representatives of a sweepstakes house. They would obtain financial information from people who thought they had won a great prize or vacation. These poor unsuspecting victims would never receive any prize, except for the result of destroyed credit and empty bank accounts.

“Dumpster diving,” became fashionable, with theives going into trash cans to recover valuable personal and financial information. Bank account statements, credit card statements, and other valuable documents easily provided identity thieves with the power to destroy someone’s credit. This is still an active part of ID theft strategies.

The advent of the internet sped up the development of ID theft, as financial information filled up servers and databases connected to the internet and computers. Credit cards, social security numbers, addresses, and financial information are now only a mouse click away from the fingers of ID thieves.

Laws enacted to protect consumers

Identity theft can have devastating consequences for the victims, who will face long hours of opening new accounts, closing bad accounts, and repairing their wrecked credit records. It most likely will cause significant out-of-pocket expenses to clear their good names, as it may require months or even years to finalize the identity recovery process. While victims are recouping their losses, they may be denied mortgages, car loans, credit, jobs, housing, and education.

There are a number of federal laws that are applicable to identity theft, some of which assist victims in repairing their credit history and others that are used for prosecution of identity theft offenses. However, before October 30, 1998, only the grantors who had monetary losses would be considered “victims.” People who had their identities stolen were often jailed and ostracized from society, as law enforcement and the general public did not have a concept of identity theft. The “I didn’t do it” exclamation from victims was literally true, and of course nobody believed it! With the “Identity Theft and Assumption Deterrence Act of 1998,” the people whose identities were stolen would be the true victims. It categorized identity theft to be a federal crime, which carries up to 15 years in prison and a maximum fine of $250,000.

This legislation enables the FBI and the Secret Service to combat this type of crime. It allows the victim to seek some restitution, but only if a conviction is made. Since identity theft was identified as a serious crime under the “Identity Theft Act,” many improvements to combat the development of identity theft have been made - however, much work still remains to truly protect the victims of id theft.

Busted cases of ID theft

Several cases prosecuted under the “Identity Theft Act” reveal the devastating extent an identity thief can destroy a person’s financial reputation and credit.

One man had been sentenced to a term of 27 months for stealing bank information of policy holders from an insurance company. He was an employee of the California-based company. After he had stolen their information, he deposited over $764,000 in counterfeit bank drafts that were withdrawn from policy holders’ accounts.
Two identity thieves were sentenced in Delaware for applying online for corporate and personal bank accounts using fraudulent information. The defendants had obtained social security numbers and names from military persons, and they had scammed hundreds of thousand of dollars. Between the two, they had to pay over $286,000 in restitution.
A recent case involves seven illegal entrants to the United States from Mexico, who stole social security numbers to gain employment. They also obtained identification cards in order to get the employment, giving the employers just enough to make an employment verification form complete. Because of tough new anti-immigration laws, the underground trading of stolen SSN and other private information to gain employment is only going to get bigger.

Techniques the criminals use for ID theft

When you think of criminals, you probably imagine shotgun-toting and ski mask wearing robbers trying to steal your personal possessions. ID theft, on the other hand, only involves a click of a mouse and some easily-accessible machines that forge identification cards. Your social security number or a pre-approved credit card application from your trash could be all they need to use your life.

ID thieves have multiple ways to gain access to your private information. Here are just a few:

Business File Theft: ID thieves steal your file information from institutions where you do business, or they employ methods to hack into files on a computer.
Over-The-Shoulder Surfing: An identity thief, even behind you in a grocery check out line, can possibly remember your address and name while you are writing a check.
Dumpster Diving: These credit identity thieves rummage through the trash for personal data. They can retrieve bank and credit card statements, pre-approved credit offers, new checks, or tax information.
Posing as authority figures: ID thieves can pose as employers or landlords that may even have a legal reason to obtain your information. They also fraudulently obtain credit reports by abusing authorized access.
Skimming: Identity thieves steal account information when your credit or debit card is processed in a transaction at restaurant or business location. They use a data collecting device that is called a skimmer.
Corruption and inside sources: It’s sad, but a lot of theft occurs inside the system, either through bribes to people handling sensitive information or disgruntled employees. A lot of skimming techniques are used by retail employees. Really, the temptation is quite high to gain a few extra bucks promised from a shadowy figure if you’re a starving student working a low-paying, dead-end retail job.
Sloppy security: Every day you here of employees handling sensitive data who do not practice safe security measures. Usually it’s a stolen laptop with stored personal information left in a company car, or a company with your data upgrading your computer and forgetting to erase your data stored on a hard drive. A slightly hopeful fact is that, of all the stolen laptops and hard drives with personal information inside, very little is actually used for identity theft purposes - yet.

Techniques to prevent credit identity theft

Preventative steps are the key to minimizing your chances of being a victim of credit identity theft. First of all, never give your personal or financial information out to people or companies. If they truly need your information, they will have privacy policies - barring the incidence of sloppy security, which they are then liable for. Carry only the credit and debit cards that you will actually need when you go out, while keeping all other important documents in a safe place in your home.

There are credit monitoring services that take care of watching your credit reports for you; however, you can also monitor your credit yourself. In your credit reports, be mindful of address changes, new accounts, activities on old accounts, and any other unfamiliar activity. If you see any suspicious activity, you should immediately contact the institution and credit agency to report the problem.

Other good indications of credit identity theft include not receiving mail or bills you expect, receiving bills for things you do not own, or denial of credit for no apparent reason. You can also quickly find out if the police knock on your door after a crime is committed in your name!

With the protective laws and some careful watching, identity theft can be kept to a minimum. If you monitor your credit and take steps to protect your identity, you can take action early and not be an unsuspecting victim of credit identity theft.

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