ID Theft Tops Fraud Complaints

A Federal Trade Commission report shows that credit card fraud is the most common means of identity theft and that e-mail is the fraudsters' preferred communications method.

Among the many ways Americans see themselves getting swindled these days, identity theft ranks first.

Of nearly 700,000 grievances lodged with the Federal Trade Commission last year, 37 percent concerned ID theft, the agency disclosed Jan. 25.

The most common means of stealing identities is credit card fraud, according to the complaints filed with the agency. Identity thieves also took advantage of phone, utility, employment and bank records, particularly electronic funds transfers.

People in and around Phoenix, Las Vegas and Riverside, Calif., sent the highest number of complaints to Washington about identity theft last year, which is not surprising given the high levels of development in those regions, anti-fraud experts said.

"If you look at the top 50 places where fraud is happening, it correlates nicely to population size and population growth," said Steven Gal, co-founder and vice president of corporate development for ID Analytics, in San Diego. "Its easier to get lost in the shuffle if youre in an environment with a lot of growth."

The Internet is becoming an ever-growing scam trap for Americans, with nearly half of the fraud-related complaints filed with the FTC last year having to do with online activities and accounting for $335 million in losses to consumers. Major traps include auctions, shop-at-home offers, sweepstakes and lotteries, and the foreign money offers that plague nearly every e-mail in-box.

E-mail, according to the complaints, is the communications medium of choice for fraudsters. Last year, 35 percent of the complaints stemmed from contact made initially through e-mail, up from 26 percent in 2003. The percentage of complaints stemming from phone calls remained at 17 percent over the past three years.

However, for industry, the focus of action is not so much on stopping the theft of personal information via e-mail or any other medium but on preventing crimes resulting from that theft.

"The theft of personal information does not result directly in identity theft," Gal said. "We think the real opportunity is in preventing the conversion of that data into cash by criminals. This isnt a hobby. Theyre not stealing this data because its fun. Theyre stealing it because they can make money."

From the viewpoint of anti-fraud technology vendors, there is good news in the FTCs annual report. Stolen identities are being used less frequently to commit crimes in sectors where anti-fraud technologies have been put in place, namely in opening new accounts with credit card companies, banks and wireless companies. Stolen information was used in 15.6 percent of credit card new account fraud last year, compared with 19.3 percent in 2003. With new wireless accounts, the percentage dropped to 9 percent from 10.5 percent over those three years.

The industries in which weve seen a big investment are seeing improvement," Gal said. "We expect that the numbers will continue to go down in those areas and will balloon in other areas. Fraudsters tend not to give up and get honest jobs. They just go to other areas."


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