I recently attended a conference that explored improvements in identifying and authenticating individuals. Many of the sessions focused on identity theft. While the conference primarily targeted law enforcement, immigration control, and the military, many of the lessons can easily apply to the public sector. A recent industry report validated the conference's focus, noting that in 2016, 15.4 million Americans were victims of identity theft, an increase of 18 percent from the previous year.
Identity theft (also called identity fraud) covers a wide range of crimes in which the criminal obtains and illegally uses another person's personal information in a fraudulent or deceptive manner, typically for economic benefit. In most cases, the criminals get personal information through a data breach, but malware on a computer or mobile phone or email phishing are other sources. Sometimes criminals can get enough personal information from public data—such as property and voter records, as well as social media accounts—to create a false identity and commit a crime.
Social Security numbers appear to be the most valuable information element in creating false identities. For this reason, legislation was passed in 2015 mandating that the Centers for Medicare and Medicaid Services (CMS) remove Social Security numbers from Medicaid cards. CMS recently announced that it will reissue Medicaid cards in April 2018 with a new beneficiary identification scheme.
The criminal actions of identity theft include using account numbers to obtain merchandise that can be monetized, filing fraudulent tax refund returns, and applying for credit to buy cars, lease homes, or even get home equity lines of credit. Outside the financial services arena, identity theft crimes include obtaining medical services, social program benefits, and false identification documents.
The Identity Theft Resource Center is a nonprofit organization established in 1999 to help identity theft victims resolve their cases and to broaden public education and awareness of identity theft, data breaches, cybersecurity, scams and fraud, and privacy issues. The center also tracks the number of data breaches across five industry sectors. As this chart shows, businesses remain the number one target for data breaches, and the number of attacks targeting businesses increased 4.4 percent during the first half of 2017 compared to that same period in 2016.
The increased use of chip cards at merchant terminals has made it more difficult for the criminal element to commit point-of-sale card fraud. Meanwhile, however, overall identity theft fraud is on the rise. So how do we combat this growing threat? We will look at some threat mitigation tactics and tools in a future post.
By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed