Don’t take the threat of identity theft lightly; it’s a crime that can inflict costly harm on its victims

Like most people, you may have heard of identity theft but aren’t quite sure what it is, how it occurs, or how to prevent it. Identity theft isn’t just a trendy phrase; it’s a crime that can inflict costly and, in a few cases, irreparable harm to its victims.

Identity theft and identity fraud 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.

Unlike your fingerprints, which are unique to you and cannot be given to someone else for their use, your personal data – e.g., your Social Security, bank account, credit card and telephone calling card numbers and other valuable identifying data – can personally benefit the thief at your expense. While identity theft isn’t rampant, it’s not uncommon for perpetrators to make bank withdrawals or, in the worst cases, assume their victims’ identities altogether, running up debts and committing crimes while posing as someone else.

How identify theft occurs. It isn’t hard for identity thieves to obtain your personal data without having to pick your pocket or break into your home. In public places, for example, criminals may engage in “shoulder surfing,” watching you from a nearby location as you punch in your telephone calling card number or credit card number, or listening in as you give your credit card number over the telephone.

If you receive applications for “pre-approved” credit cards in the mail but discard them without tearing up the enclosed materials, criminals may retrieve them and try to activate the cards for their use without your knowledge.

In recent years, the Internet has become an appealing place for criminals to obtain identifying data, such as passwords or even banking information. Fortunately, many financial institutions insure credit card accounts against online theft, but that is not a panacea. In their haste to explore the Internet, many people’s responses to “spam” – unsolicited email – include sharing sensitive data that can be abused by identity thieves.

Prevention. To reduce the risk of becoming a victim of identity theft or fraud, here are some basic steps you can take.

• Don’t give financial information to callers or other people whom you don’t know and trust.
• If a caller claiming to be from your bank or credit card company asks you for information that the institution should already have on file, don’t give it to them.
• Keep your Social Security card in a safe place; don’t carry it with your credit cards, driver’s license and other identifying information.
• Instruct your bank to exclude your phone number from the information imprinted on your checks.
• If someone you don’t know calls to offer you a credit card, prize or other valuable item and asks you for personal data, ask that they send you a written application form. If they refuse, hang up. If they comply, make sure you’re dealing with a legitimate, well-known company.
• If you ever have to give someone personal financial information by phone in a public place, don’t make the call in a place where passersby can overhear your conversation.
• When you go out of town for any length of time, have your mail held at your local post office, or ask a friend or trusted neighbor to pick it up while you’re away.
• If you want to discard a document that includes your Social Security number or other sensitive information, don’t just throw it away; identity thieves spend a lot of time sorting through people’s trash. Buy shredders for your home and office.
• Periodically ask for your credit report (see contact information below). Your credit report should list all bank and financial accounts under your name and will provide other indications of whether someone has wrongfully opened or used any accounts in your name.

IRS form scam. In 1992, the Office of the Comptroller of the Currency (OCC) issued a fraud alert regarding the latest identity theft scheme. It concerned bank customers who received a bogus letter instructing the recipient to complete an enclosed IRS Form W-9095 and return it by fax in order to prevent unnecessary withholding on interest paid to them. A fax number was provided for returning the form. Of course, the IRS form was bogus and an attempt at identity theft. While IRS Form W-9 requests from financial institutions are legitimate, the OCC warns that responses should be sent only to recognized addresses of institutions with which you have accounts, and only to fax numbers that you have verified as those of the requesting institution.

Protect your credit rating. When someone is a victim of identity theft, his or her credit rating typically suffers. If you suspect that you have been victimized, contact the Social Security Fraud Hotline at 1-800-269-0271 and notify the major credit bureaus and ask them to place a fraud alert on your records. Major credit bureaus include:

• Equifax (1-800-525-6285),
• TransUnion (1-800-680-7289), and
• Experian (1-888-397-3742).

If you would like to learn more about identity theft and fraud, visit the Social Security website at www.ssa.gov/pubs/idtheft.htm.

Joseph R. Barbagallo, CPA, CVA, CFFA, CFD, CFS, CFI, ABV has over thirty years of experience providing forensic accounting and litigation support services. Joe can be reached at jbarbagallo@marg.com.