Identity Fraud: The Need for a Common Lexicon
by Julie Conroy McNelley
The fastest growing crime in the United States according to the FBI, identity fraud is receiving increasing media attention. It is a rare week when one cannot open up a newspaper and find an article detailing the latest identity fraud scam. While the high profile that identity fraud is attaining is good from the perspective of raising awareness among American consumers, the press coverage is also creating a level of confusion because popular media does not adhere to a common identity fraud lexicon. The danger in not adhering to a common vocabulary when referring to these types of fraud is that the different flavors of identity fraud require very different mechanisms to prevent and combat each of them.
"Identity theft" is the most frequently abused buzzword. The media, and therefore the American public, tends to lump many different types of fraud, from credit card fraud to account takeover under the "identity theft" umbrella. The following list illustrates several types of fraud that the general public often tags with the moniker 'identity theft':
- Identity Fraud - Identity fraud takes place when a fraudster creates a fictitious identity, or manipulates an existing identity to evade detection.
- Identity Theft - Identity theft, a subset of identity fraud, occurs when someone wholly takes over another individual's identifying information.
- Account Takeover - Account takeover occurs when a fraudster obtains an individual's personal information (account number and social security number usually suffice), and then uses that information to change that individual's mailing address with the financial institution. Once this is accomplished, the fraudster has a window of opportunity to perform transactions without the victim's knowledge.
- Credit Card Fraud - Credit card fraud takes place when someone uses a credit card account without the intention to pay the bills incurred. This could be performed via identity theft, by using another person's information to open an account, or it could be through theft of credit card numbers through hacking into a database.
- Check Fraud - There are many types of activities including check kiting, counterfeiting, forgery, and writing checks on closed accounts (paperhanging). Frequently, check fraud starts with the theft of a check, although perpetrators of check fraud may also commit identity fraud to set up an account under an assumed identity.
- ACH Fraud - With the introduction of WEB and TEL transaction codes, permitting faceless ACH transactions to be conducted online or over the phone, the banking industry is seeing a proliferation of ACH fraud.
While the first three items listed above are directly related to inappropriate use of identifying information, the latter are all related to transaction fraud. Very different preventative mechanisms are required on the part of businesses to combat each. Identity fraud is most effectively prevented through rigorous front-end screens via identity validation software that detects inconsistencies in data provided by an individual, while simultaneously comparing this data against an aggregate of known fraudulent identities. While on the back end, financial institutions can get an early warning of anomalous transactions through automated systems that provide a positive confirmation regarding the status of the account.
From the consumer's perspective, both identity fraud and transaction fraud can be best prevented by shredding receipts, putting a lock on the mailbox, balancing bank statements upon receipt, and regularly checking credit bureau reports to make sure there are no anomalous transactions and inquiries. It is incumbent upon the banking industry to inform its customer base about its susceptibility to each of these types of fraud. Only through increased care and vigilance on the part of both the banks and consumers, can the rising tide of identity fraud be stemmed.
Primary Payment Systems, Inc. (PPS) offers solutions to detect high-risk identities, deposits, and payments.
- IDENTITY CHEK is a robust 'CIP' solution integrating identity validation, logical verification, OFAC screening, and fraud detection -- including participation in the Anti-Fraud Exchange.
- DEPOSIT CHEK, PRIME CHEK, and DECISION CHEK represent the largest collaborative effort among financial institutions to prevent deposit and payment fraud losses. On a daily basis, financial institutions contribute and share status information on over 200 million draftable accounts, 16 million stop payment records, and 'return' decisions on nearly half of all U.S. checks returned annually.
For additional information on PPS, visit the company web site at www.primarypayments.com or call us toll free at 877-275-7774.
Author:
Julie Conroy-McNelley
Primary Payments Systems (PPS)
707.793.7629
jmcnelley@primarypayments.com
First published on BankersOnline.com 7/14/03
Privacy Policy Disclaimer Recommend This Site ! Contact Us
BankersOnline is a free service made possible by the generous support of our advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all banking professionals. Support our advertisers and sponsors by clicking through to learn more about their products and services.
|
Print Friendly!
Email This Article!
Discuss NOW!