What is Financial Identity Theft? From Christopher Shearer

 Christopher Shearer 

 Financial identity theft

By: http://en.wikipedia.org/wiki/Identity_theft

There are two basic versions of financial identity theft:

1. Victim Established Accounts Accessed The perpetrator pretends to be an existing account holder in order to obtain funds from the legitimate bank account of the victim. This involves obtaining one or more identity token (plastic card, paper check, deposit slip, PIN code, card number, identifying personal data, etc.) then using the ID token to access funds via one or more delivery system (branch teller, ATM, retail casher, telephone banking, etc.). If debits (withdrawals, purchases, or checks) are made against the impersonated person's real accounts, that person will need to notify the bank that the debits are not legitimate and request reversal. At the extreme, the perpetrator may take over control of the account by rerouting statements to a new address. This is known as "account takeover" and opens the account to rapid abuse.

2. Perpetrator Established Accounts The perpetrator establishes new accounts using someone else's identity or a made-up identity. Typically the intent is to utilize someone else's good credit history to obtain funds (credit cards or loans) or a checking account which can be overdrafted.

A classic example of credit-dependent financial crime (bank fraud) occurs when a criminal obtains a loan from a financial institution by impersonating someone else. The criminal pretends to be the victim by presenting an accurate name, address, birth date, or other information that the lender requires as a means of establishing identity. Even if this information is checked against the data at a national consumer reporting agency, the lender will encounter no concerns, as all of the victim's information matches the records. The lender has no easy way to discover that the person is pretending to be the victim, especially if an original, government-issued id can't be verified (as is the case in online, mail, telephone, and fax-based transactions). This kind of crime is considered non-self-revealing, although authorities may be able to track down the criminal if the funds for the loan were mailed to them. The criminal keeps the money from the loan, the financial institution is never repaid, and the victim is wrongly blamed for defaulting on a loan he/she never authorized.

An account established by a perpetrator can be abused by passing bad checks, and "busting out" a checking or credit account with bad checks, counterfeit money orders, or empty ATM envelope deposits. If checks are written against fraudulently opened checking accounts, the person receiving the checks will suffer the financial loss. However, the recipient might attempt to retrieve money from the impersonated person by using a collection agency. This action would appear in the victim's credit history until it was shown to be fraud.

In most cases the financial identity theft will be reported to the national Consumer credit reporting agency or Credit bureaus (U.S.) as a collection or bad loan under the impersonated person's record. The victim may discover the incident by being denied a loan, by seeing the accounts or complaints when they view their own credit history, or by being contacted by creditors or collection agencies. The victim's credit score, which affects one's ability to acquire new loans or credit lines, will be adversely affected until they are able to successfully dispute the fraudulent accounts and have them removed from their record.

Identity cloning and concealment

In this situation, a criminal acquires personal identifiers, and then impersonates someone for the purpose of concealment from authorities. This may be done by a person who wants to avoid arrest for crimes, by a person who is working illegally in a foreign country, or by a person who is hiding from creditors or other individuals. Unlike credit-dependent financial crimes, concealment can continue for an indeterminate amount of time without ever being detected. Additionally, the criminal might attempt to obtained fraudulent documents or IDs consistent with the cloned identity to make the impersonation even more convincing and concealed.

Criminal identity theft

When a criminal identifies himself to police as another individual it is sometimes referred to as "Criminal Identity Theft." In some cases the criminal will obtain a state issued ID using stolen documents or personal information belonging to another person, or they might simply use a fake ID. When the criminal is arrested for a crime, they present the ID to authorities, who place charges under the identity theft victim's name and release the criminal. When the criminal fails to appear for his court hearing, a warrant would be issued under the assumed name. The victim might learn of the incident if the state suspends their own drivers license, or through a background check performed for employment or other purposes, or in rare cases could be arrested when stopped for a minor traffic violation.

It can be difficult for a criminal identity theft victim to clear their record. The steps required to clear the victim's incorrect criminal record depend on what jurisdiction the crime occurred in and whether the true identity of the criminal can be determined. The victim might need to locate the original arresting officers, or be fingerprinted to prove their own identity, and may need to go to a court hearing to be cleared of the charges. Obtaining an expungement of court records may also be required. Authorities might permanently maintain the victim's name as an alias for the criminal's true identity in their criminal records databases. One problem that victims of criminal identity theft may encounter is that various data aggregators might still have the incorrect criminal records in their databases even after court and police records are corrected. Thus it is possible that a future background check will return the incorrect criminal records.^[4]

Synthetic identity theft

A variation of identity theft which has recently become more common is synthetic identity theft, in which identities are completely or partially fabricated. The most common technique is combining a real social security number with a name and birthdate other than the ones associated with the number. Synthetic identity theft is more difficult to track, as it doesn't show on either person's credit report directly, but may appear as an entirely new file in the credit bureau or as a subfile on one of the victim's credit reports. Synthetic identity theft primarily harms the creditors that unwittingly grant the fraudsters credit. Consumers can be affected if their names become confused with the synthetic identities, or if negative information in their subfiles impacts their credit.^[5]

Medical identity theft

Medical identity theft occurs when someone uses a person's name and sometimes other parts of their identity -- such as insurance information -- without the person's knowledge or consent to obtain medical services or goods, or uses the person's identity information to make false claims for medical services or goods. Medical identity theft frequently results in erroneous entries being put into existing medical records, and can involve the creation of fictitious medical records in the victim's name. ^[6]

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