Identity Theft and Identity Fraud - Essay Example

 Identity theft The last decade of the twentieth century has witnessed a dramatic increase in the crimes related to identity theft. Identity theft can be divided in to four categories; criminal identity theft (posing as another person when arrested for a crime), financial identity theft (using the name of somebody to acquire goods and services), identity cloning (using the person’s information to assume his/her identity) and commercial identify theft (making use of another person’s business name to obtain credit). Identify theft means exploitation of a person’s identity for an unlawful purpose. The term ‘identity theft’ focuses on the act of obtaining personal information and personal identifiers required for perpetrating impersonation. It may be defined in the following manner: “Identity theft and identity fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for economic gain. (Identity theft and identity fraud 2007). Unlike a person’s finger prints, his/her personal data such as social security number, credit card number, bank account, telephone calling card number and other valuable data can be misused, if these reach into wrong hands. Many people often report that unauthorized persons have withdrawn money from their accounts. Moreover, in identity theft case, the victims not only suffer from financial losses but also are forced to incur further expenses for correcting erroneous information and restoring his/her reputation in the community. Osborn-Parnes Model The Osborn Parnes Creative Problem Solving Programme, which is developed by Alex Osborn, involves six stages. The stages are objective finding, fact finding, problem finding, solution finding and acceptance finding. Objective finding Sometimes it is possible that a given problem may not always the real problem which needs to be addressed. So objective finding involves taking a step back from the problem and to determine what the main focus of attention should be. Fact finding: Second stage involves identification of relevant data relating to the problem in hand and filling any gaps existing therein. Problem finding: In the problem finding stage, possible solutions are broken in to a series of sub problems chosen for further study. Idea finding: In the idea finding stage, possible solutions are looked for, using different idea generation techniques, and to see what the possible solutions are that could be practically implemented to resolve the issue. Solution finding: In the solution finding stage partakers select and weight evaluation criteria and the evaluate solution. Acceptance finding: In the last stage, the chosen solution gets accepted and a plan is devised for its implementation. Objective finding: Credit card fraud falls under the category identity theft. Credit card fraud means a fraud or theft committed, using a credit card or any similar payment mechanism. The intention of such a fraud is to obtain unauthorized funds from an account or receive goods without paying. It is estimated that the cost of credit frauds runs in to billions of dollars annually. Credit card fraud begins with either compromise of the account information or theft of the physical card. The drastic increase of credit cards has made data base security lapses very costly. If a credit card is stolen, it can be reported quickly by the owner, but a compromised account can be concealed by a thief for weeks or months. In most cases the owner or the credit card holder may not be able to discover the fraudulent use till he receives the billing statement which is delivered only once per month. When a credit card is stolen or lost, it remains unknown to the bank till the owner informs them that the card is lost. So it is possible for a stealer to make purchases till the card is cancelled. Signature panel is the only common security measures on all cards, but signatures are relatively easy to counterfeit. In some cases, credit cards bear the holder’s photograph. However, self serve payment system such as kiosks, gas station, which are used by the thieves, have no way to verify the card holders’ identity. Nowadays many websites which contain card information such as name of the card holder, account number, expiration date and verification code etc are getting compromised and theft of credit card data has become a major concern for banks. Account takeover fraud: It involves a credit card criminal making an attempt to take over another person’s account. This process involves collecting information about the intended victim, then contacting the bank and pretending as the genuine cardholder and asking the bank to redirect mail to a new address. In the last stage, the criminal reports the bank that the card is lost and request for a replacement to be sent. The replacement card is then used fraudulently. Application fraud: It happens when criminals use fake or stolen documents to open an account in the name of another person. Criminals use sealed documents such as bank statement or utility bills to construct useful personal information. Sometimes, they may use counterfeit documents for identification purpose. Skimming: It is the theft of credit card information by an employee of a legitimate merchant. The dishonest employee copy credit card information either manually or using magnetic stripe readers on pocket sized electronic devices. Skimming is very difficult for a card holder to detect but a bank can easily detect it. Now comes the objective finding stage. The objectives are the following: a. How to prevent theft of credit card? b. How to reduce pilfering of credit card information from a website? c. How to avert application fraud? d. How to thwart account takeover? e. How to prevent skimming? Fact finding: According to the wall street journal, the credit card industry generated US $500 million in 2003 alone. Credit card associations like Master Card and Visa and their banks receive profit from transaction fees which is known as discount rate. So credit card associations follow a policy which increases the money transferred by their system. Many credit card owners feel that this pursuit of revenue generation decreases the incentive for credit card banks to implement policies to reduce credit card theft. Especially since the cost of investigation of credit card fraud is usually higher than the cost of a write off. But credit card associations pass on this credit card fraud cost to merchants. Credit card owners and merchants demand change in the Law but the credit industry opposes many of the requested laws. Moreover, the merchants have little capacity to fight fraud and have to accept a certain percentage of fraud as a cost of doing business. Problem finding: In America, persons associated with credit card crime generally go unpunished and they repeatedly victimize businesses and consumers. Moreover, the secret service which handles the credit card crimes, has laid a limit of $1, 50,000 before starting the investigation into each crime. Most of the credit card thieves know this and they limit their purchases from one business to below $1, 50,000. Idea finding: There are a few basic steps which one can take to minimize the chances of becoming a victim of identity fraud or theft. First of all one should be very stingy while giving out his/her personal information to others. As far as personal data is concerned a person should follow a ‘need to know approach.’ When a person makes a call to his credit card company, they need to know the name of the person’s mother so that it can act as a verification of the person’s identity. If a person calls another person and says ‘he is from a bank, he doesn’t need to know that information as it is already on file with the bank. The main purpose of such a call is to obtain personal information from others. In some other cases, credit card criminals may call a person up and offer him a chance to receive a valuable item, prize or major credit card and asks for personal information such as credit card numbers, social security number and mother’s maiden name etc. The person concerned should ask the caller to send him a written application from. If they don’t send such a written application form, the person concerned should tell them that he is not interested in the offer. If they do send an application, the person should review it carefully and make sure that the application is going to a financial institution or company which is well known. On travel: When a person travels, he should have the mail held in the post office itself or ask someone he knows well to collect and keep the mail while he is away. If he has to telephone and is required to pass on personal financial information, he should use a telephone booth where he can close the door and check financial information regularly. If a person has credit card accounts, he will be getting monthly statements which contain transactions for the recent month. If he is not getting monthly statements inform credit card companies he should immediately ask about it. If the statements are mailed to another address which a person has not authorized, inform the financial institutions that he did not authorize the change of address and someone is improperly using it. If someone has opened a credit card in another person’s name and was able to take funds from his bank account, the financial institution should be contacted immediately. One should also maintain careful records of his financial and banking accounts. Some other useful measures which are very helpful in preventing credit card fraud are as follows: “Run a credit report on one’s self to see if there are any unknown credit inquiries or unauthorized accounts Reconcile and check regularly the credit card statements in a timely fashion and challenge any purchases that the a person concerned did not make Limit the number of credit cards one has, to reduce exposure, and cancel any inactive accounts Destroy all unused pre-approved credit card and loan applications. The mailbox thief only has to fill them out and redirect the return address to start using the credit Safeguard credit, debit, and ATM card receipts and shred them before disposing of them Shred bank statements and any tax documents before disposing them off Before disposal, shred pay cheque stubs and W-2 forms that contain social security number and often the name and address of the account holder. This is a common way for dumpster divers to obtain important identification Scrutinize utility and subscription bills to make sure the charges are genuine and bona fide usages of the consumer. Destroy all cheques immediately when closing an account that has cheque facility. Destroy or keep in a secure place, any courtesy checks that the bank or credit card company may mail to the account holder. Memorize your passwords and personal identification (PIN) numbers. Keep your PIN numbers somewhere that only you know Don’t give out your PIN or write them on your credit cards or ATM cards” (Mcgoey, 2007). Solution Finding: Credit card criminals use a number of ways to get access to personal information. So the owner has to be very alert and there are several methods to prevent credit card theft. Credit card owners should not divulge information such as date of birth, credit card number, driving license, bank account, and social security number to anyone he/she does not over telephone. Moreover, he has to limit the number of credit cards to reduce exposure and invalidate any accounts which are not active. Even after taking all the above mentioned safeguards, credit card fraud still takes place. As the credit card fraud is rampant, the need for highly secure personal verification and identification technologies is must. Biometric technologies can be used to create an extensive array of highly secure personal verification for preventing credit card misuse. “Biometrics are automated methods of recognizing a person based on a physiological or behavioral characteristic.  Among the features measured are; face, fingerprints, hand geometry, handwriting, iris, retinal, vein, and voice” ( An introduction to Biometrics) It can be used to prevent credit card fraud by identifying users by iris, hand, fingerprint, voice, face, retina, earlobe, lips, signature and voice. One of the best biometrics methods is to use thumb print to approve financial transaction. Recently researchers have developed a devise called ThumbPod. Even if this device is stolen, it cannot recognize the thief’s thumb print. Customers can enroll in ThumbPod at a local bank and receive a customized unit. “ThumbPod takes a picture of a user’s fingerprint and looks for minute, distinct characteristics in the image. The fingerprint is then encrypted on the ThumbPod unit so it cannot be accessed by thieves.” (Lee, 2004) It can also be used for other purposes, for example, authentication applications such as entering your car, in addition to preventing credit card fraud. Acceptance Finding: If someone falls a victim to credit card theft, he should report it immediately to credit bureaus and establish fraud alerts and request for free copy of the credit report. “Once you have received your three credit reports, examine each one carefully. Report fraudulent accounts and erroneous information in writing to both the credit bureaus and the credit issuers following the instructions provided with the credit reports.” (Identity theft: What to do if it happens to you 2007). In order to prevent another credit card fraud, it is better to rely upon ssolutions based on biometrics because Token or Smart Cards can be duplicated, stolen, forgotten and lost. Password can be forgotten, stolen, broken and shared. Moreover, biometric solutions are able to provide for better personal data privacy and confidential financial transactions. Works Cited An introduction to biometrics. [online]. Biometric consortium. Last accessed 13 August 2007 at: http://www.biometrics.org/html/introduction.html Identity theft and identity fraud. (2007). [online]. United States Department of Justice. Last accessed 12 August 2007 at: http://www.usdoj.gov/criminal/fraud/websites/idtheft.html Identity theft: What to do if it happens to you. (2007). Identity Theft Victim Guide. [online]. Privacy Right Clearinghouse. Last accessed 12 August 2007 at: http://www.privacyrights.org/fs/fs17a.htm Lee, Harold. (2004). New security device a handy way to stop credit card fraud. [online]. Daily bruin. Last accessed 13 August 2007 at: http://www.dailybruin.ucla.edu/news/2004/apr/08/new-security-device-a-handy-wa/ MCGOEY, Chris E (2007). Identity theft facts. [online]. Crime doctor. Last accessed 12 August 2007 at: http://www.crimedoctor.com/identity.htm Read More