Feeds

ID theft: a $1bn a year crime

Consumers and banks suffer the pain

  • alert
  • submit to reddit

Internet Security Threat Report 2014

Identity theft, reportedly America's fastest rising crime, cost US lenders at least $1 billion last year.

That's according to an estimate by analysts TowerGroup, which published a report on the problem, titled Identify Theft: Lenders Are Victims, Too, earlier this week.

Precise figures on the exact loss due to identity theft are hard to pinpoint, but there is little doubt about the seriousness of the problem.

In 2002, 161,819 individuals in the US reported to the Federal Trade Commission that their identity had been stolen - bringing the number of reported US incidences of identity theft to nearly 300,000 since the launch of a database clearinghouse in 2000.

TowerGroup believes stronger action by lenders is needed in order to combat the problem. It points to a certain level of complacency within the industry regarding the issue.

"Lenders have always been willing to accept a certain amount of risk," said Christine Pratt, a senior analyst in the TowerGroup Consumer Credit practice and author of the research, "and fraud losses, if they're not actively rising, have been an area of complacency. Periodically, though, it's critical that lenders revisit their assumptions on the fraud issue - and given the current potential economic and geopolitical impact on their bottom line, now is the time."

Lenders are the most vulnerable to identity theft fraud at new account opening, where even the most sophisticated forms of identification (biometrics for example) are of no value.

Almost 10,000 victims had fraudulent home loans, totalling a thumping, $300 million taken out in their name last year, while another 68,000 were the victims of credit card-related ID fraud, Pratt told MSNBC.

The best way for lenders to put a dent in this type of loss is to prevent the stolen identity from being used in the initial loan application process.

The problem with this approach, according to TowerGroup, is that technology to authenticate a person's identity at the point of sale is not mature and the loss associated with identity theft "so random and unpredictable" that financial services institutions (unless they have been involved in substantial losses of this type) have been unable to justify the IT expenditures.

Even with the rise in exposure through compromised internal databases, identity theft is an unquantifiable risk for most lenders, according to TowerGroup

Pratt noted that emerging products using less costly Web services can be packaged with existing fraud or compliance tools to help make return on investment less elusive for lenders.

"Financial services institutions should take a strategic, enterprise-wide approach to implementing technology solutions to deal with fraud, and identity theft in particular. Ultimately, the emergence of an industry initiative or consortium that could link key information databases, perhaps in partnership with one or all of the U.S. credit bureau, could produce the greatest payback for the lending community," she said.

TowerGroup believes the Internet is both fuelling (by increasing the risk of credit card fraud) and helping to unravel (through the ability to pass information between partners more quickly) the identity theft problem.

Its report investigates regulatory issues, and looks at whether there is a viable market and return-on-investment for technology that prevents a loan account being opened by a person who has stolen another's identity. ®

Related Stories

Police recover disk at centre of ID theft flap
Feds break massive identity fraud
Trainee dishwasher pleads guilty to $80m identity fraud
Identity Thefts from the Rich and Famous
Stomp the identity thieves

Remote control for virtualized desktops

More from The Register

next story
You really need to do some tech support for Aunty Agnes
Free anti-virus software, expires, stops updating and p0wns the world
Privacy bods offer GOV SPY VICTIMS a FREE SPYWARE SNIFFER
Looks for gov malware that evades most antivirus
Patch NOW! Microsoft slings emergency bug fix at Windows admins
Vulnerability promotes lusers to domain overlords ... oops
HACKERS can DELETE SURVEILLANCE DVRS remotely – report
Hikvision devices wide open to hacking, claim securobods
Astro-boffins start opening universe simulation data
Got a supercomputer? Want to simulate a universe? Here you go
State Dept shuts off unclassified email after hack. Classified mail? That's CLASSIFIED
Classified systems 'not affected' - but, is this reconnaissance?
prev story

Whitepapers

Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
A strategic approach to identity relationship management
ForgeRock commissioned Forrester to evaluate companies’ IAM practices and requirements when it comes to customer-facing scenarios versus employee-facing ones.
How to determine if cloud backup is right for your servers
Two key factors, technical feasibility and TCO economics, that backup and IT operations managers should consider when assessing cloud backup.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Protecting against web application threats using SSL
SSL encryption can protect server‐to‐server communications, client devices, cloud resources, and other endpoints in order to help prevent the risk of data loss and losing customer trust.