ID theft driving identity fraud
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ID theft driving identity fraud

1 month ago · 3 min read

Despite public education and awareness campaigns this past year, the Federal Trade Commission’s (FTC) latest fraud report pointed out that 1.4 million people in the United States were victims of identity theft and fraud in 2021. This was similar to the number of those victimized in 2020 except that the number of victims being “re-victimized” increased noticeably. The findings also point to an expected increase in the dollar amount of financial fraud being perpetrated in 2022 as criminals use increasingly sophisticated methods to monetize an individual’s stolen identity.

ID thefts often lead to the creation of fake government credentials (Drivers Licenses, Passports, Social Security and Health insurance cards) which are utilized to perpetrate criminal activity and financial fraud including fake unemployment and medical claims. This creates significant hardship on identity theft victims who have the sole responsibility to prove that they did not commit those crimes or that they are not liable for financial transactions.

One study conducted by the SANS Institute found that on average it took six months and between 100 to 200 hours of dedicated effort to address and wipe away such fraudulent activity. Individuals not having adequate time or resources to address the problem often face years of repercussions impacting their ability to get credit, insurance, and in fighting fraudulent claims against them.

The stress caused by being a victim of identity theft significantly impacts the productivity of any of your employees if they or a family member have had their identity compromised. Accordingly, firms can proactively address this threat by first providing educational resources to help personnel minimize the risk of becoming a victim, and second, providing tools to help them actively resolve the fraud.

The FTC provides regular announcements on current scams which can be utilized to educate firm personnel and to direct them on how to respond if they unexpectedly receive notification of a past-due loan balance, unemployment benefits, unrecognized credit card charges, or even notification they have a warrant out for their arrest due to crimes committed in their name. The FTC noted that there has also been a significant increase in medical procedures being performed using stolen identities, so it is important to verify any medical claims reports when received, in addition to bank and credit card statements. Below is a listing of high-level steps that individuals can take to protect their identity as well as become aware if their personal information has been compromised. A comprehensive listing can be found at the FTC’s IdentityTheft.gov/Steps website.

  • Review bank and credit card statements monthly and research any unrecognized charges or withdrawals. Dispute any unauthorized transactions immediately with the fraud department of that financial institution.

  • If you become aware of suspicious activity on any of your accounts, immediately change the username, password, and pin with a unique password. Never reuse passwords and consider using a password manager which creates complex passwords for each login.

  • Everyone should review their credit reports at least once per year which can be obtained directly from the three major providers (Experian, TransUnion, Equifax) as well as a consolidator site such as AnnualCreditReport.com. All credit inquiries should be reviewed and if a fraudulent account has been opened in your name, it should be closed immediately by contacting the fraud department.

  • After verifying any fraudulent entries, immediately place a one-year initial fraud alert with one of the credit bureaus, who are also legally obligated to inform the other credit bureaus of the freeze. This will minimize the ability of thieves to open additional accounts in your name.

  • When confirmed that your identity was stolen, you can extend the fraud alert or place a credit freeze on your credit accounts, but this must be done directly with each of the three major providers. Unfortunately, if you want to be extended credit on an existing or new credit card or to apply for a loan, this process will have to be reversed before applying.

  • Identity theft should be reported to the FTC, which can be done online by creating an account at IdentityTheft.gov/Assistant or by calling 1-877-438-4338. An identity theft report will be provided to help you prove to businesses that your identity was stolen and guarantees certain rights. This report can also be filed with local police and sent to credit bureaus to facilitate the recovery. The FTC will also provide account holders a step-by-step recovery plan as well as help pre-fill forms and letters.

  • Consider utilizing a credit/fraud monitoring service such as Aura, Norton LifeLock, IdentityGuard, PrivacyGuard, or IdentityForce which proactively provide alerts on fraudulent activity as well as identity theft insurance for a monthly fee.

With so much personal information being compromised via cyber breaches, phishing and social engineering scams, it is inevitable that some of those individuals will become victims of identity theft. Proactively taking steps to minimize your own exposure and to monitor activity will go a long way in minimizing the risk of being a victim of identity theft and fraud.

Roman H. Kepczyk, CPA.CITP, PAFM

Roman H. Kepczyk, CPA.CITP, CGMA is Director of Firm Technology Strategy for Right Networks and partners exclusively with accounting firms on production automation, application optimization and practice transformation. He has been consistently listed as one of INSIDE Public Accounting’s Most Recommended Consultants, Accounting Today’s Top 100 Most Influential People, and CPA Practice Advisor’s Top Thought Leaders.

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