Finding fraud in bankruptcy cases
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Roger W. Stone, CFE
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Identity theft complaints climb again in 2012
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Identity theft remains a scourge. The U.S. Federal Trade Commission’s Consumer Sentinel Network Data Book reports dramatic increases from 2011. Here are the stats you can use as ‘leading indicators’ to help your organizations, clients and communities.
The FBI recently reported that it broke up a credit card gang for allegedly creating thousands of phony identities to steal at least $200 million in one of the largest-ever credit card fraud schemes. The U.S. Department of Justice (DOJ) charged 18 between the ages of 31 and 74 with one count each of bank fraud. Each could be required to pay a $1 million fine and be sentenced up to 30 years in prison if found guilty.According to the FBI, the defendants allegedly made up more than 7,000 false identities by creating fraudulent identification documents and credit profiles with the major credit bureaus, pumping up the credit of the false identities by providing false information to the credit bureaus about the identities’ creditworthiness, running up large loans using the false identities and never paying back the loans. Of course, the higher the fraudulent credit scores, the larger the loans the fraudsters could obtain.
The fraudsters allegedly used sham companies, complicit merchants and black-market businesses to pull off their crimes. They purchased millions in gold, expensive cars, electronics and clothing. They set up bank accounts in Romania, China, Japan, Canada, the United Arab Emirates, India and Pakistan to wire millions of dollars. (See “Eighteen People Charged in International $200 million Credit Card Fraud Scam.”)
This credit card fraud case is representative of the thousands of identity theft cases that victims, law enforcement agencies and other organizations report to the Federal Trade Commission (FTC) and are listed in its annual Consumer Sentinel Network (CSN) Data Book, which it began in 1997.
According to the CSN, it received more than 89,906 additional identity theft complaints in 2012 from 2011 (279,226 to 369,132) — a significant increase. Though the figures have fluctuated yearly, we can conclude (as I’ve done in years past) that identity theft hasn’t abated and will continue to be a major problem for consumers and businesses.
Dr. Joseph T. Wells, CFE, CPA, founder and Chairman of the ACFE, said in his keynote addresses at the last two Annual ACFE Global Fraud Conferences that identity theft and cyber crime are continuing fraud trends.
In 2012, he said that social media sites, tablets and smartphones often contain account information and other personally identifiable information (PII) that can be compromised through hacking and malicious software. “It is a truly dangerous world for your privacy and is bound to get worse,” he said.
In 2013, Dr. Wells said that we all know “that there is really no such thing as a secure computer — one that can’t be eventually hacked. We’ve all read of data thefts of million upon millions of individual records. Most of these are committed by international gangs, which make them exceedingly difficult to prosecute.”
RIPPING OFF THE MILITARY
A new feature in the 2011 CSN report and continued in 2012 is the inclusion of complaint data from military consumers. That data is included in several tables incorporating complaints by consumer military branch, pay grade and status.
Identity theft complaints from military consumers significantly increased from 2011 — 19,814 extra (4,976 to 24,790) or 37 percent of their total complaints in 2012 compared to 27 percent in 2011 (compared to 18 percent and 15 percent for the general population respectively). However, more alarming is that their total complaints have increased about 500 percent from 2011.
Identity theft fraud complaints from enlisted military increased significantly from 30 percent to 41 percent (1,967 to 7,607) of their total complaints. Officer military have increased slightly from 30 percent to 33 percent (390 to 1,133). Compared to the general population, it’s quite obvious that the military consumers are having significantly more problems with identity theft issues. (Note, the total enlisted and officer complaints don’t equal the total identity theft complaints because many respondents didn’t designate their military status.)
CSN FIGURES ARE UNDERSTATED
The CSN figures actually are understated; as I said last year, most identity theft victims still don’t report their experiences to the FTC or any law enforcement agency. Also, many law enforcement agencies don’t share their complaint data with the FTC. Therefore, the identity theft data reported in the CSN is significantly understated for any given year. In fact, the FTC estimates that identity theft claims more than 10 million victims annually.
However, assuming there’s a consistent flow of consumers who report identity theft complaints each year and assuming that the law enforcement agencies that report identity theft do it consistently each year, we can conclude that the CSN identity theft complaint data reported in any given year is representative of the real levels of identity theft. The CSN identity theft data can be considered useful for determining trends not only for aggregate data but for identity theft fraud subtypes. This enables law enforcement agencies to target their efforts to help control specific types of identity theft fraud.
So, I’m going to give you a lot of stats here. Don’t be overwhelmed — you can pick and choose. You can use them as “leading indicators” to help your clients, family members, friends and your communities know the hot areas and how to protect themselves.
To report a complaint, visit www.FTC.gov or call 1-877-ID THEFT (identity theft complaints) and 1-877-FTC-HELP (fraud and other complaints).
Check out the 110-page CSN report.
CSN LAY OF THE LAND
The CSN Data Book includes annual unverified identity theft, fraud and other complaints that are:
- Voluntarily reported by consumers using the FTC web site or one of its toll-free telephone numbers.
- Shared by multiple state and federal agencies.
- Shared by non-governmental entities including the Council of Better Business Bureaus in North America, Catalog Choice and the Center for Democracy and Technology, among others.
- Advance payment for credit services (42,974 complaints).
- Business and job opportunities (32,496).
- Buyers’ clubs (2,125).
- Charitable solicitations (3,599).
- Foreign money offers and counterfeit check scams (46,112).
- Grants (10,257).
- Health care (35,703).
- Imposter scams (83,896).
- Internet auction (29,533).
- Internet services (81,438).
- Investment related complaints (7,117).
- Magazines and book (18,906).
- Mortgage foreclosure relief and debt management (33,791).
- Office supplies and services (24,210).
- Prizes, sweepstakes and lotteries (98,479).
- Shop-at-home and catalog sales (115,184).
- Telephone and mobile services (76,783).
- Travel, vacations and timeshare plans (30,324).
- The “other” area, which the CSN started in 2008, includes complaints relating to deceptive practices pertaining to the following 11 categories:
- Auto related (78,062 complaints).
- Banks and lenders (132,340).
- Clothing, textiles and jewelry (2,468).
- Computer equipment and software (13,386).
- Credit bureaus, information furnishers and report users (29,268).
- Credit cards (51,550).
- Debt collection (199,721).
- Education (3,613).
- Home repair improvement and
- products (13,432).
- Real estate (8,468).
- Television and electronic media (41,664).
Keep with me; we have a lot of numbers, but they’re important. Since 2008 and through 2012 the CSN has reported more than 8 million “identity theft,” “fraud” and “other” complaints. (Also, the CSN reported more than 11 million “Do-Not-Call Registry” complaints.)
In Figures 1, 2 and 3 (below) we see that 2,061,495 complaints for the “identity theft,” “other” and “fraud” categories were reported in 2012 compared to 1,895,012 in 2011 and 1,467,255 in 2010.
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| Figure 1 |
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| Figure 2 | Figure 3 |
(Except for 2012, the data shown in Figures 1 and 2 represent adjusted data, which is more accurate for comparison purposes. Why? Because when the complaint data is reported for any given year it doesn’t include all the complaints for that year because some agencies report their data too late to be posted. The “late” data is used when that year’s data is adjusted in the following year’s report.)
Figure 1 shows a shift from previous years in the percentage of complaints within each of the three main classifications with “identity theft,” “other” and “fraud” accounting for 18 percent, 30 percent and 52 percent respectively. Comparable percentages were 15 percent, 30 percent and 55 percent for 2011 and 17 percent, 27 percent and 56 percent for 2010.
A total of 67,018 military consumer complaints were reported in the total CSN data in 2012 compared to 18,644 in 2011 — a significant increase. This included 27,790 (37 percent), 30,828 (46 percent) and 11,393 (17 percent) complaints for the “identity theft,” “fraud” and “other” categories respectively in 2012 compared to 4,976 (27 percent), 11,186 (60 percent) and 2,424 (13 percent) in 2011.
Compared to the percentages for the three complaint categories for the total CNS complaint data, the military consumer complaint data differs dramatically and significantly. For example, the “identity theft” category complaint percentage for the military consumers was more than double (37 percent versus 18 percent) that of the total CNS reported identity theft complaints. In a similar fashion, the military consumer complaint percentages for the “other” category were significantly less (approximately 17 percent versus 30 percent) of the total CNS reported “other” complaints whereas the percentage of complaints reported for the military for the “fraud” category somewhat less (46 percent versus 52 percent) than the total CNS reported “fraud” complaints.
Figure 3 shows a relatively dramatic increase in identity theft complaints for 2012 with 369,132 reported compared to 279,226 for 2011 (adjusted from 279,156). This places the 2012 complaint data at a record high — beating the previous record high of 314,595 reported in 2008.
COMMON IDENTITY THEFT FRAUDS
How do fraudsters use the PII of identity theft victims to commit fraud? The following analysis should help to answer this question.
The major types of identity theft-related frauds and their complaint percentages in 2011 and 2012, respectively, include “credit card fraud” (14.3 percent and 13.4 percent), “government documents or benefit fraud” (46.4 percent and 27.4 percent), “phone or utilities fraud” (13.4 percent and 9.7 percent), “employment-related fraud” (8.4 percent and 5.4 percent), “bank fraud” (8.7 percent and 6.4 percent), “loan fraud” (3.1 percent and 2.4 percent), “other identity theft fraud” (23.7 percent and 18.5 percent) and “attempted identity theft” (6.8 percent and 6.6 percent). (These percentages don’t add up to 100 percent in either year because some of the complaints included more than one type of identity theft.)
To go a little deeper into the analysis, we need to look at the changes in the percentages noted above.
Credit card fraud
The CSN report shows that the total credit card fraud complaints actually increased from 39,929 to 49,463 — a significant amount — while their percentages of total identity theft complaints decreased from 14.3 to 13.4 percent.
The differences are attributed to the changes in their related subtype categories. For example, the subtype category “new credit card accounts fraud” complaints accounted for the majority of the overall increase as they increased from 23,734 to 32,484 (from 8.5 percent to 8.8 percent of the total identity theft complaints) while “existing credit card account fraud” complaints category increased insignificantly from 16,195 to 16,980 (from 5.8 to 4.6 percent).
The total credit card complaints are up significantly, and it probably would be much worse if it weren’t for the effectiveness of increased public awareness programs sponsored by financial and governmental agencies, which help to educate individuals about the use and protection of credit cards and credit card applications. However, identity theft related to credit card fraud was still a major problem in 2012; it accounted for 13.4 percent of the total reported CSN complaints.
“New credit card accounts fraud,” which accounted for 8.8 percent or 32,484 of the total identity theft complaints, is intolerable; it’s something that can be reduced dramatically very easily.
Entities typically market new credit cards through the mail via “pre-approved” credit card offer applications, many of which are directly stolen from mailboxes and through careless disposal by consumers. Individuals can opt out of the “pre-approved” credit card offers sent through the mail by visiting www.optoutprescreen.com or by calling 1-888-5657-8688. If more people used the service, identity theft related to “new credit card account fraud” would decrease significantly.
CSN showed 3,538 “credit card fraud” complaints for military consumers in 2012, which was approximately 14.3 percent of their total identity theft complaints, compared to 1,317 and 20 percent in 2011. This is similar to “credit card fraud” for the total complaint data for the general population, i.e. 14.3 percent compared to 13.4 percent.
The subtype category “new accounts credit card fraud” accounted for 9.2 percent or 2,290 of total complaints for military consumers in 2,012 (compared to 16.6 percent or 827 in 2011), which is comparable to the 8.8 percent reported for total “new accounts credit card fraud” for the general population. “Existing accounts credit card fraud” for military consumers accounted for 5.1 percent or 1,258 of their total complaints for 2012 (compared to 490 or 9.8 percent in 2011) or slightly more than the 4.6 percent recorded for the general population’s total “existing credit card fraud.”
Military consumers are having difficulty protecting their existing credit cards and handling “pre-approved credit card offer” applications; their credit card complaint numbers have increased more than 300 percent overall compared to 25 percent for the general population. However, the increase in the rate of occurrence in credit card fraud is disturbing for both groups and needs to be curtailed with accelerated educational programs.
Government documents or benefits fraud
In March, the DOJ charged Jason Maclaskey, of Spring, Texas; Heather Dale, of Grant, Ala.; and Omar Butt, of Brooklyn, N.Y., with various counts of conspiracy, theft of government funds and/or aggravated identity theft related to their participation in a scheme to use stolen identities to file fraudulent tax returns. (See “Spring Man Among Three Charged in Stolen Identity Refund Fraud Conspiracy,” DOJ media release.)
According to the indictment, the defendants unlawfully obtained names, dates of birth and Social Security numbers from 371 taxpayers and filed false tax returns in their names in 2009. The defendants allegedly used this information to also set up fraudulent bank accounts at Inter National Bank and through NetSpend debit cards in the taxpayers’ names and then directed the tax refunds to these accounts. According to the Department of Justice, the defendants claimed a total of more than $1.4 million in false tax refunds and succeeded in withdrawing approximately $300,000.
Government documents and benefits fraud rose in dramatic fashion from 27.4 percent in 2011 to a whopping 46.4 percent in 2012 as the number of complaints soared from 76,508 to 171,277. The sub-type category, “tax or wage related fraud,” accounted for most of the change by increasing from 24.3 percent to 43.4 percent or 67,852 and 160,020 complaints respectively.
The other sub-type categories, including “government benefits applied for/received fraud” (1.5 percent to 1.6 percent), “other government documents issued/forged fraud” (.8 percent to .8 percent), and “driver’s license issued/forged fraud” (.8 percent and .8 percent), saw little or no changes in their complaint numbers.
Finding valid reasons for the significant increase in the “tax and wage related fraud” area is relatively difficult. Two different scenarios may help explain. There has been an increase in the income tax-related scams this past year in which fraudsters have stolen the identities of numerous victims to abscond with their tax refunds. Also, many lost their jobs, which probably led to a sharp increase in scams used to steal identities to take their unemployment benefits.
For military consumers, “government documents or benefits fraud” accounted for a huge 52.8 percent or 13,105 of their total complaints in 2012 (compared to 19 percent or 949 complaints in 2011) related to 46.4 percent for the general population. The subtype category “tax or wage related fraud” accounted for the majority of the 13,105 complaints with 49 percent or 12,137 (compared to 15.6 percent or 777 complaints in 2011) related to 43.4 percent for the general population.
The other identity theft fraud subtype categories, namely “government benefits applied for/received fraud,” “other documents issue/forges fraud” and “driver’s license issued or forged fraud” reported minor amounts ranging from .6 percent to 1.6 percent in 2012, which was comparable to the 2011 general population total complaint numbers for the general population and for the military consumers for both years.
Phone or utilities fraud
In October of 2012, the U.K.’s West Yorkshire (County) Police reported that three fraudsters “have today been jailed for defrauding a mobile phone company of hundreds of thousands of pounds.” (See “Sentencing – Mobile Phone Company Fraud Case.”)
According to the West Yorkshire Police site, Andrew Peter Harrison, Stephen Garbutt and Carl Westmoreland during a 10-month period allegedly “hijacked personal customer accounts to obtain and order high value mobile phone handsets.” They then allegedly intercepted or diverted the delivery of the handsets to other addresses linked to them before they sold them.
The percentages for “phone or utilities fraud” decreased significantly from 13.4 percent in 2011 to 9.7 percent to 2012, and the number of complaints slightly decreased from 37,416 to 35,805. The subtype category “utilities – new accounts fraud” decreased slightly from 8.8 percent to 6.2 percent from 24,572 to 22,886.
The subtype category “wireless – new accounts fraud” decreased from 3.1 percent to 2.5 percent, but the total complaints increased from 8,656 to 9,228. The other two subtype categories, “telephone – new accounts fraud” (1 percent to .6 percent) and “unauthorized charges to existing accounts fraud” (.5 percent to .4 percent) saw insignificant changes.
The “phone or utilities fraud” category for military consumers accounted for 9.7 percent of their total complaints for 2012, which is the same as the general population but a significant decrease from 15 percent for 2011. But the number of complaints significantly increased from 749 to 2,404. The subtype category “utilities – new accounts fraud,” accounted for most of the phone or utilities fraud” category complaints with 6.3 percent, which is down significantly from 11.2 percent for 2011 and similar to the 6.2 percent reported for the general population. The other subtype categories “wireless - new accounts fraud” and “unauthorized charges to existing accounts fraud reported minor percentages ranging from .3 percent to 2.5 percent for 2011 and for the general population.
Bank fraud
According to the FBI, Philadelphia Division, Andre Davis, of Andre Davis of Sicklerville, N.J., and Mike Knox, of Philadelphia, Pa., were sentenced to 102 months and 94 months respectively for their participation in an identity theft and bank fraud ring. (See “Identity Thieves Get Long Prison Sentences,” FBI.)
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Figure 1 shows a shift from previous years in the percentage of complaints within each of the three main classifications with “identity theft,” “other” and “fraud” accounting for 18 percent, 30 percent and 52 percent respectively. Comparable percentages were 15 percent, 30 percent and 55 percent for 2011 and 17 percent, 27 percent and 56 percent for 2010.
A total of 67,018 military consumer complaints were reported in the total CSN data in 2012 compared to 18,644 in 2011 — a significant increase. This included 27,790 (37 percent), 30,828 (46 percent) and 11,393 (17 percent) complaints for the “identity theft,” “fraud” and “other” categories respectively in 2012 compared to 4,976 (27 percent), 11,186 (60 percent) and 2,424 (13 percent) in 2011.
Compared to the percentages for the three complaint categories for the total CNS complaint data, the military consumer complaint data differs dramatically and significantly. For example, the “identity theft” category complaint percentage for the military consumers was more than double (37 percent versus 18 percent) that of the total CNS reported identity theft complaints. In a similar fashion, the military consumer complaint percentages for the “other” category were significantly less (approximately 17 percent versus 30 percent) of the total CNS reported “other” complaints whereas the percentage of complaints reported for the military for the “fraud” category somewhat less (46 percent versus 52 percent) than the total CNS reported “fraud” complaints.
Figure 3 shows a relatively dramatic increase in identity theft complaints for 2012 with 369,132 reported compared to 279,226 for 2011 (adjusted from 279,156). This places the 2012 complaint data at a record high — beating the previous record high of 314,595 reported in 2008.
COMMON IDENTITY THEFT FRAUDS
How do fraudsters use the PII of identity theft victims to commit fraud? The following analysis should help to answer this question.
The major types of identity theft-related frauds and their complaint percentages in 2011 and 2012, respectively, include “credit card fraud” (14.3 percent and 13.4 percent), “government documents or benefit fraud” (46.4 percent and 27.4 percent), “phone or utilities fraud” (13.4 percent and 9.7 percent), “employment-related fraud” (8.4 percent and 5.4 percent), “bank fraud” (8.7 percent and 6.4 percent), “loan fraud” (3.1 percent and 2.4 percent), “other identity theft fraud” (23.7 percent and 18.5 percent) and “attempted identity theft” (6.8 percent and 6.6 percent). (These percentages don’t add up to 100 percent in either year because some of the complaints included more than one type of identity theft.)
To go a little deeper into the analysis, we need to look at the changes in the percentages noted above.
Credit card fraud
The CSN report shows that the total credit card fraud complaints actually increased from 39,929 to 49,463 — a significant amount — while their percentages of total identity theft complaints decreased from 14.3 to 13.4 percent.
The differences are attributed to the changes in their related subtype categories. For example, the subtype category “new credit card accounts fraud” complaints accounted for the majority of the overall increase as they increased from 23,734 to 32,484 (from 8.5 percent to 8.8 percent of the total identity theft complaints) while “existing credit card account fraud” complaints category increased insignificantly from 16,195 to 16,980 (from 5.8 to 4.6 percent).
The total credit card complaints are up significantly, and it probably would be much worse if it weren’t for the effectiveness of increased public awareness programs sponsored by financial and governmental agencies, which help to educate individuals about the use and protection of credit cards and credit card applications. However, identity theft related to credit card fraud was still a major problem in 2012; it accounted for 13.4 percent of the total reported CSN complaints.
“New credit card accounts fraud,” which accounted for 8.8 percent or 32,484 of the total identity theft complaints, is intolerable; it’s something that can be reduced dramatically very easily.
Entities typically market new credit cards through the mail via “pre-approved” credit card offer applications, many of which are directly stolen from mailboxes and through careless disposal by consumers. Individuals can opt out of the “pre-approved” credit card offers sent through the mail by visiting www.optoutprescreen.com or by calling 1-888-5657-8688. If more people used the service, identity theft related to “new credit card account fraud” would decrease significantly.
CSN showed 3,538 “credit card fraud” complaints for military consumers in 2012, which was approximately 14.3 percent of their total identity theft complaints, compared to 1,317 and 20 percent in 2011. This is similar to “credit card fraud” for the total complaint data for the general population, i.e. 14.3 percent compared to 13.4 percent.
The subtype category “new accounts credit card fraud” accounted for 9.2 percent or 2,290 of total complaints for military consumers in 2,012 (compared to 16.6 percent or 827 in 2011), which is comparable to the 8.8 percent reported for total “new accounts credit card fraud” for the general population. “Existing accounts credit card fraud” for military consumers accounted for 5.1 percent or 1,258 of their total complaints for 2012 (compared to 490 or 9.8 percent in 2011) or slightly more than the 4.6 percent recorded for the general population’s total “existing credit card fraud.”
Military consumers are having difficulty protecting their existing credit cards and handling “pre-approved credit card offer” applications; their credit card complaint numbers have increased more than 300 percent overall compared to 25 percent for the general population. However, the increase in the rate of occurrence in credit card fraud is disturbing for both groups and needs to be curtailed with accelerated educational programs.
Government documents or benefits fraud
In March, the DOJ charged Jason Maclaskey, of Spring, Texas; Heather Dale, of Grant, Ala.; and Omar Butt, of Brooklyn, N.Y., with various counts of conspiracy, theft of government funds and/or aggravated identity theft related to their participation in a scheme to use stolen identities to file fraudulent tax returns. (See “Spring Man Among Three Charged in Stolen Identity Refund Fraud Conspiracy,” DOJ media release.)
According to the indictment, the defendants unlawfully obtained names, dates of birth and Social Security numbers from 371 taxpayers and filed false tax returns in their names in 2009. The defendants allegedly used this information to also set up fraudulent bank accounts at Inter National Bank and through NetSpend debit cards in the taxpayers’ names and then directed the tax refunds to these accounts. According to the Department of Justice, the defendants claimed a total of more than $1.4 million in false tax refunds and succeeded in withdrawing approximately $300,000.
Government documents and benefits fraud rose in dramatic fashion from 27.4 percent in 2011 to a whopping 46.4 percent in 2012 as the number of complaints soared from 76,508 to 171,277. The sub-type category, “tax or wage related fraud,” accounted for most of the change by increasing from 24.3 percent to 43.4 percent or 67,852 and 160,020 complaints respectively.
The other sub-type categories, including “government benefits applied for/received fraud” (1.5 percent to 1.6 percent), “other government documents issued/forged fraud” (.8 percent to .8 percent), and “driver’s license issued/forged fraud” (.8 percent and .8 percent), saw little or no changes in their complaint numbers.
Finding valid reasons for the significant increase in the “tax and wage related fraud” area is relatively difficult. Two different scenarios may help explain. There has been an increase in the income tax-related scams this past year in which fraudsters have stolen the identities of numerous victims to abscond with their tax refunds. Also, many lost their jobs, which probably led to a sharp increase in scams used to steal identities to take their unemployment benefits.
For military consumers, “government documents or benefits fraud” accounted for a huge 52.8 percent or 13,105 of their total complaints in 2012 (compared to 19 percent or 949 complaints in 2011) related to 46.4 percent for the general population. The subtype category “tax or wage related fraud” accounted for the majority of the 13,105 complaints with 49 percent or 12,137 (compared to 15.6 percent or 777 complaints in 2011) related to 43.4 percent for the general population.
The other identity theft fraud subtype categories, namely “government benefits applied for/received fraud,” “other documents issue/forges fraud” and “driver’s license issued or forged fraud” reported minor amounts ranging from .6 percent to 1.6 percent in 2012, which was comparable to the 2011 general population total complaint numbers for the general population and for the military consumers for both years.
Phone or utilities fraud
In October of 2012, the U.K.’s West Yorkshire (County) Police reported that three fraudsters “have today been jailed for defrauding a mobile phone company of hundreds of thousands of pounds.” (See “Sentencing – Mobile Phone Company Fraud Case.”)
According to the West Yorkshire Police site, Andrew Peter Harrison, Stephen Garbutt and Carl Westmoreland during a 10-month period allegedly “hijacked personal customer accounts to obtain and order high value mobile phone handsets.” They then allegedly intercepted or diverted the delivery of the handsets to other addresses linked to them before they sold them.
The percentages for “phone or utilities fraud” decreased significantly from 13.4 percent in 2011 to 9.7 percent to 2012, and the number of complaints slightly decreased from 37,416 to 35,805. The subtype category “utilities – new accounts fraud” decreased slightly from 8.8 percent to 6.2 percent from 24,572 to 22,886.
The subtype category “wireless – new accounts fraud” decreased from 3.1 percent to 2.5 percent, but the total complaints increased from 8,656 to 9,228. The other two subtype categories, “telephone – new accounts fraud” (1 percent to .6 percent) and “unauthorized charges to existing accounts fraud” (.5 percent to .4 percent) saw insignificant changes.
The “phone or utilities fraud” category for military consumers accounted for 9.7 percent of their total complaints for 2012, which is the same as the general population but a significant decrease from 15 percent for 2011. But the number of complaints significantly increased from 749 to 2,404. The subtype category “utilities – new accounts fraud,” accounted for most of the phone or utilities fraud” category complaints with 6.3 percent, which is down significantly from 11.2 percent for 2011 and similar to the 6.2 percent reported for the general population. The other subtype categories “wireless - new accounts fraud” and “unauthorized charges to existing accounts fraud reported minor percentages ranging from .3 percent to 2.5 percent for 2011 and for the general population.
Bank fraud
According to the FBI, Philadelphia Division, Andre Davis, of Andre Davis of Sicklerville, N.J., and Mike Knox, of Philadelphia, Pa., were sentenced to 102 months and 94 months respectively for their participation in an identity theft and bank fraud ring. (See “Identity Thieves Get Long Prison Sentences,” FBI.)
Davis, Knox and co-defendants Latasha Snead, Talayah Little, and Keith Ennis, stole names, Social Security numbers, addresses, dates of birth and driver’s license numbers of numerous customers of four banks and then used the PII to make cash withdrawals from the bank accounts of those customers. All the defendants pleaded guilty. Snead was sentenced in April to 33 months; Ennis was sentenced in February to 30 months. Little is awaiting sentencing.
U.S. District Court Judge Mary A. McLaughlin also ordered five years of supervised release with 200 hours community service for both Davis and Knox. Davis must also pay a $4,000 special assessment and restitution of $466,301; Knox must pay a $1,500 special assessment and restitution of $278,275, according to the FBI release.
“Bank fraud” identity theft complaint percentages were 8.7 percent for 2011 and 6.4 percent for 2012; the number of complaints decreased from 24,293 to 23,624. The sub-type category “electric fund transfer fraud” accounted for most of the change with the complaints going from 10,610 in 2011 to 11,073 in 2012 or from 3.8 percent to 3.0 percent.
The other two sub-type categories, “new accounts fraud” (from 2.6 percent to 1.9 percent) and “existing accounts fraud” (from 2.3 percent to 1.5 percent), incurred insignificant changes.
For military consumers, “bank fraud” accounted for 7.6 percent of their total complaints in 2012 (versus 11 percent in 2011) compared to 6.4 percent for the general population. The subtype category “electronic fund transfer fraud” accounted for 4.1 percent of their total complaints in 2012 (versus 4.1 percent in 2011) compared to 3.8 percent for same subtype category for the general population. The subtype category “new accounts fraud” and “existing accounts fraud” reported 1.9 percent and 1.6 percent respectively in 2012 (versus 3.3 percent and 3.2 percent in 2011), both of which were similar to the 1.9 and 1.5 percentages reported for the general population.
Employment-related fraud
Candida L. Gutierrez, a 31-year-old Houston elementary school teacher, told how someone had assumed her complete persona over a 10-year period to “get a job, a driver’s license, a mortgage and even medical care for the birth of two children” in the Oct. 23, 2012, article, “Kansas case puts face on ‘total identity theft,’ “ by Roxana Hegeman on YAHOO! Finance.
Benita Cardona-Gonzalez, a 32-year-old illegal immigrant, has been accused of stealing Gutierrez’s identity. “The scheme has been linked to illegal immigrants who use stolen Social Security numbers to get paid at their jobs, and authorities fear the problem could soon grow to ensnare more unsuspecting Americans,” writes Hegeman.
Employment-related fraud decreased from 8.4 percent in 2011 to 5.4 percent in 2012 or from 23,455 to 19,933 complaints, which was somewhat significant. The same category for military consumers registered 3.4 percent of their total complaints (versus 5 percent in 2011), which was significantly less than the 5.4 percent noted above for total complaints for the general population.
Loan fraud
The FBI, Las Vegas Division, reported April 10 that Nicholas Lindsey, 40, of Billings, Mont., was convicted of nine counts of wire fraud and one count of aggravated identity theft for his role in a mortgage fraud scheme.
Lindsey, a former loan officer for Clear Mortgage and Signature Mortgage, recruited straw buyers to participate in what he described as a lucrative real estate investment opportunity by purchasing five homes, the FBI says.
Evidence at the trial showed that Lindsey secured more than $3 million in mortgage loans by causing false information about the buyers’ income, assets and intentions to occupy the homes to be placed in the straw buyers’ mortgage loan applications, according to the FBI.
After the mortgages were approved, Lindsey fraudulently diverted some of the proceeds from escrow to his bank account. He made even more money by living in or renting out properties in the buyers’ names. Lindsey also “stole two buyers’ identities and used their personal information to purchase three additional properties in their names,” according to the FBI. He allowed all eight houses to default in the borrowers’ names. The losses to lenders totaled $1.6 million. (See “Former Loan Officer Convicted of Fraud and Identity Theft Related to Mortgage Fraud Scheme.”)
The complaint percentages for “loan fraud” identity theft decreased from 3.1 percent to 2.4 percent, but the complaints actually increased from 8,656 to 11,443, which is somewhat significant. The percentages and total complaints for the subtypes “business/personal/student loan fraud,” “auto loan/lease fraud” and “real estate loan fraud” changed insignificantly.
For the military consumers, “loan fraud” identity theft accounted for 2.6 percent of their total complaints (versus 4 percent in 2011), which wasn’t significant compared to the 2.4 percent reported above for total identity theft complaints for the general population. Their subtypes for both years reported insignificant percentages, which were comparable to the percentages for the same subtypes for the general population.
Other identity theft fraud
This category of identity theft fraud decreased from 23.7 percent in 2011 to 18.5 percent in 2012 while the complaints increased from 66,177 to 68,289. Their 12 subtypes all changed insignificantly in terms of their percentages and number of complaints. The “data breach fraud” subtype category appears for the first time in the CSN data notebook and accounted for only 1.7 percent of their total complaints.
The “other identity theft fraud” category for military consumers registered 12.8 percent of their total complaints versus 23 percent in 2011 — a significant decrease comparing both years and the 18.5 percent for the general population. Except for the “uncertain fraud” subtype category, which accounted for 4.8 percent of the total identity theft complaints for military consumers, all the other 11 subtype categories reported insignificant numbers.
Identity theft complaints by age
Figures 4 and 5 (below) include identity theft by age. (You probably noticed that the total identity theft complaints by age reported in Figure 4 don’t agree with the total identity theft complaints reported in Figures 1 and 2. This is because not all victims report their age when they file their complaints. In fact, 74 percent of the victims who filed an identity theft complaint in 2012 reported their age compared to 89 percent in 2011.)
The total identity theft complaints by age reported in Figure 4 rose to 273,824 in 2012, which is an increase of about 28,497 from the 248,327 complaints by age reported in 2011.
The bad news is the total for 2012 breaks the old record high of 264,383 complaints by age reported in 2009. Except for the 19-and-under category, which decreased by about 3,500 complaints from 2011, each of the age categories showed increases in their number of complaints from approximately 500 to 7,500 respectively with the 50-59 and 60-69 age categories increasing significantly.
Similar to 2011, the highest percentage of complaints are in the 20 to 29 and 30 to 39 age groups, which account for 41 percent of the total complaints. The 19-and-under group accounts for 6 percent of all the complaints, which decreased by about 3,500 in 2012 from 19,623 to 16,133 complaints, which is fairly significant and supports my prediction when I analyzed the U.S. Credit Card Act of 2009 in my January/February 2010 Fraud Magazine “Taking Back the ID” column, “Will Credit Card Laws Help Reduce ID Theft for Young Consumers?”
I expected a slight decrease for this age group in 2012 because of the act, which went into effect February 2010. The act bans a consumer under the age of 21 from applying for a credit card unless someone over the age of 21 promises to act as a co-signer on the account or provides assurances that the underage applicant has the resources available to pay off the account.
The act has a few weaknesses, but I feel that it has enough strength to gradually reduce identity theft in this important age group. This will only be determined over time, but there will probably be a point when the act will have to be amended to make it stronger.
CSN state ranking for identity theft complaints
The CSN report includes a table that lists the identity theft complaints per 100,000 population and the total identity theft complaints for all 50 American states. The top 10 states include No. 1 Florida — continuing its record from previous years — with a whopping 69,795 complaints (versus 33,595 in 2011) or 361.3 per 100,000 (versus 178.7 in 2011) population followed by Georgia, 193.9; California, 122.7; Michigan, 122.2; New York, 110.1; Nevada, 109.9; Texas, 108.6; Arizona, 107.6; Maryland, 105; and Alabama, 104.9.
The complaint rate for Florida is significantly higher than second-ranked Georgia and the rest of the states. Compared to 2011, New Jersey and Delaware fell out of the top 10 and were replaced with Alabama and Michigan.
Except for Michigan, the top five states — especially Florida — are no surprise because their populations include a significant number of retirees and minorities, both of whom are especially susceptible to identity theft compared to other groups. North Dakota has the best statistics again with only 156 complaints or 23.2 per 100,000.
CSN metropolitan area ranking for identity theft complaints
The CSN report includes a ranking of the 50 largest metropolitan areas for identity theft complaints per 100,000 and total complaints for each reported area. The top 10 metropolitan areas include Miami-Fort Lauderdale-Pompano Beach, Fla., which leads the pack again with a staggering 35,914 complaints (versus 17, 546 in 2011) or 645.4 (versus 324.1in 2011) per 100,000. That’s followed by Naples-Marco Island, Fla., 397.8; Tampa-St. Petersburg-Clearwater, Fla., 352.3; Cape Coral-Fort Meyers, Fla., 292.5; Tallahassee, Fla., 288.5; Lakeland-Winter Haven, Fla., 281; Atlanta-Sandy Springs-Marietta, Ga., 246.6; Port St. Lucie, Fla., 272.2; North Port-Bradenton-Sarasota, Fla., 244; and Orlando-Kissimmee-Sanford, Fla., 233.8.
The complaint rate for the Miami-Fort Lauderdale-Pompano Beach, Fla., area is significantly higher than second-ranked Naples-Marco Island, Fla., and the rest of the cities. Miami-Fort Lauderdale-Pompano Beach, Fla.; Port St. Lucie, Fla.; and Tampa-St. Petersburg-Clearwater, Fla., are repeat offenders in the top 10.
These rankings are no surprise because these cities include relatively more retirees and minorities. Of the 50 reported metropolitan areas, the Phoenix-Mesa-Glendale, Ariz., area has the best results with 149 complaints or 117.6 per 100,000, which is quite a surprise because of its high rate of retirees.
FRAUDSTERS HITTING MILITARY CONSUMERS AND ELDERLY, BUT ALL BEWARE
This is a file cabinet of statistics, but the conclusion is still the same: Identity theft and related fraud schemes aren’t going away and are increasing.
What stands out again is that military consumers and the elderly are having a relatively more difficult time coping with identity theft frauds. I would recommend that U.S. services work with area ACFE chapters to educate constituents, including spouses and retirees, about identity theft — especially credit card fraud.
Also, ACFE chapters can partner with the appropriate organizations (such as elderly and minority groups) and local officials in the top 10 cities identified in this article (and the other 40 listed in the CSN 2012 report) that have high rates of identity theft and reach out to educate community members to help them from becoming victims.
Of course, military consumers and the elderly aren’t alone because all consumers, especially the youth, need to become more involved in identity theft education.
Robert E. Holtfreter, Ph.D., CFE, CICA, is distinguished professor of accounting and research at Central Washington University and is the author of the “Taking Back the ID” column in Fraud Magazine.
U.S. District Court Judge Mary A. McLaughlin also ordered five years of supervised release with 200 hours community service for both Davis and Knox. Davis must also pay a $4,000 special assessment and restitution of $466,301; Knox must pay a $1,500 special assessment and restitution of $278,275, according to the FBI release.
“Bank fraud” identity theft complaint percentages were 8.7 percent for 2011 and 6.4 percent for 2012; the number of complaints decreased from 24,293 to 23,624. The sub-type category “electric fund transfer fraud” accounted for most of the change with the complaints going from 10,610 in 2011 to 11,073 in 2012 or from 3.8 percent to 3.0 percent.
The other two sub-type categories, “new accounts fraud” (from 2.6 percent to 1.9 percent) and “existing accounts fraud” (from 2.3 percent to 1.5 percent), incurred insignificant changes.
For military consumers, “bank fraud” accounted for 7.6 percent of their total complaints in 2012 (versus 11 percent in 2011) compared to 6.4 percent for the general population. The subtype category “electronic fund transfer fraud” accounted for 4.1 percent of their total complaints in 2012 (versus 4.1 percent in 2011) compared to 3.8 percent for same subtype category for the general population. The subtype category “new accounts fraud” and “existing accounts fraud” reported 1.9 percent and 1.6 percent respectively in 2012 (versus 3.3 percent and 3.2 percent in 2011), both of which were similar to the 1.9 and 1.5 percentages reported for the general population.
Employment-related fraud
Candida L. Gutierrez, a 31-year-old Houston elementary school teacher, told how someone had assumed her complete persona over a 10-year period to “get a job, a driver’s license, a mortgage and even medical care for the birth of two children” in the Oct. 23, 2012, article, “Kansas case puts face on ‘total identity theft,’ “ by Roxana Hegeman on YAHOO! Finance.
Benita Cardona-Gonzalez, a 32-year-old illegal immigrant, has been accused of stealing Gutierrez’s identity. “The scheme has been linked to illegal immigrants who use stolen Social Security numbers to get paid at their jobs, and authorities fear the problem could soon grow to ensnare more unsuspecting Americans,” writes Hegeman.
Employment-related fraud decreased from 8.4 percent in 2011 to 5.4 percent in 2012 or from 23,455 to 19,933 complaints, which was somewhat significant. The same category for military consumers registered 3.4 percent of their total complaints (versus 5 percent in 2011), which was significantly less than the 5.4 percent noted above for total complaints for the general population.
Loan fraud
The FBI, Las Vegas Division, reported April 10 that Nicholas Lindsey, 40, of Billings, Mont., was convicted of nine counts of wire fraud and one count of aggravated identity theft for his role in a mortgage fraud scheme.
Lindsey, a former loan officer for Clear Mortgage and Signature Mortgage, recruited straw buyers to participate in what he described as a lucrative real estate investment opportunity by purchasing five homes, the FBI says.
Evidence at the trial showed that Lindsey secured more than $3 million in mortgage loans by causing false information about the buyers’ income, assets and intentions to occupy the homes to be placed in the straw buyers’ mortgage loan applications, according to the FBI.
After the mortgages were approved, Lindsey fraudulently diverted some of the proceeds from escrow to his bank account. He made even more money by living in or renting out properties in the buyers’ names. Lindsey also “stole two buyers’ identities and used their personal information to purchase three additional properties in their names,” according to the FBI. He allowed all eight houses to default in the borrowers’ names. The losses to lenders totaled $1.6 million. (See “Former Loan Officer Convicted of Fraud and Identity Theft Related to Mortgage Fraud Scheme.”)
The complaint percentages for “loan fraud” identity theft decreased from 3.1 percent to 2.4 percent, but the complaints actually increased from 8,656 to 11,443, which is somewhat significant. The percentages and total complaints for the subtypes “business/personal/student loan fraud,” “auto loan/lease fraud” and “real estate loan fraud” changed insignificantly.
For the military consumers, “loan fraud” identity theft accounted for 2.6 percent of their total complaints (versus 4 percent in 2011), which wasn’t significant compared to the 2.4 percent reported above for total identity theft complaints for the general population. Their subtypes for both years reported insignificant percentages, which were comparable to the percentages for the same subtypes for the general population.
Other identity theft fraud
This category of identity theft fraud decreased from 23.7 percent in 2011 to 18.5 percent in 2012 while the complaints increased from 66,177 to 68,289. Their 12 subtypes all changed insignificantly in terms of their percentages and number of complaints. The “data breach fraud” subtype category appears for the first time in the CSN data notebook and accounted for only 1.7 percent of their total complaints.
The “other identity theft fraud” category for military consumers registered 12.8 percent of their total complaints versus 23 percent in 2011 — a significant decrease comparing both years and the 18.5 percent for the general population. Except for the “uncertain fraud” subtype category, which accounted for 4.8 percent of the total identity theft complaints for military consumers, all the other 11 subtype categories reported insignificant numbers.
Identity theft complaints by age
Figures 4 and 5 (below) include identity theft by age. (You probably noticed that the total identity theft complaints by age reported in Figure 4 don’t agree with the total identity theft complaints reported in Figures 1 and 2. This is because not all victims report their age when they file their complaints. In fact, 74 percent of the victims who filed an identity theft complaint in 2012 reported their age compared to 89 percent in 2011.)
 |
 |
| Figure 4 | Figure 5 |
The total identity theft complaints by age reported in Figure 4 rose to 273,824 in 2012, which is an increase of about 28,497 from the 248,327 complaints by age reported in 2011.
The bad news is the total for 2012 breaks the old record high of 264,383 complaints by age reported in 2009. Except for the 19-and-under category, which decreased by about 3,500 complaints from 2011, each of the age categories showed increases in their number of complaints from approximately 500 to 7,500 respectively with the 50-59 and 60-69 age categories increasing significantly.
Similar to 2011, the highest percentage of complaints are in the 20 to 29 and 30 to 39 age groups, which account for 41 percent of the total complaints. The 19-and-under group accounts for 6 percent of all the complaints, which decreased by about 3,500 in 2012 from 19,623 to 16,133 complaints, which is fairly significant and supports my prediction when I analyzed the U.S. Credit Card Act of 2009 in my January/February 2010 Fraud Magazine “Taking Back the ID” column, “Will Credit Card Laws Help Reduce ID Theft for Young Consumers?”
I expected a slight decrease for this age group in 2012 because of the act, which went into effect February 2010. The act bans a consumer under the age of 21 from applying for a credit card unless someone over the age of 21 promises to act as a co-signer on the account or provides assurances that the underage applicant has the resources available to pay off the account.
The act has a few weaknesses, but I feel that it has enough strength to gradually reduce identity theft in this important age group. This will only be determined over time, but there will probably be a point when the act will have to be amended to make it stronger.
CSN state ranking for identity theft complaints
The CSN report includes a table that lists the identity theft complaints per 100,000 population and the total identity theft complaints for all 50 American states. The top 10 states include No. 1 Florida — continuing its record from previous years — with a whopping 69,795 complaints (versus 33,595 in 2011) or 361.3 per 100,000 (versus 178.7 in 2011) population followed by Georgia, 193.9; California, 122.7; Michigan, 122.2; New York, 110.1; Nevada, 109.9; Texas, 108.6; Arizona, 107.6; Maryland, 105; and Alabama, 104.9.
The complaint rate for Florida is significantly higher than second-ranked Georgia and the rest of the states. Compared to 2011, New Jersey and Delaware fell out of the top 10 and were replaced with Alabama and Michigan.
Except for Michigan, the top five states — especially Florida — are no surprise because their populations include a significant number of retirees and minorities, both of whom are especially susceptible to identity theft compared to other groups. North Dakota has the best statistics again with only 156 complaints or 23.2 per 100,000.
CSN metropolitan area ranking for identity theft complaints
The CSN report includes a ranking of the 50 largest metropolitan areas for identity theft complaints per 100,000 and total complaints for each reported area. The top 10 metropolitan areas include Miami-Fort Lauderdale-Pompano Beach, Fla., which leads the pack again with a staggering 35,914 complaints (versus 17, 546 in 2011) or 645.4 (versus 324.1in 2011) per 100,000. That’s followed by Naples-Marco Island, Fla., 397.8; Tampa-St. Petersburg-Clearwater, Fla., 352.3; Cape Coral-Fort Meyers, Fla., 292.5; Tallahassee, Fla., 288.5; Lakeland-Winter Haven, Fla., 281; Atlanta-Sandy Springs-Marietta, Ga., 246.6; Port St. Lucie, Fla., 272.2; North Port-Bradenton-Sarasota, Fla., 244; and Orlando-Kissimmee-Sanford, Fla., 233.8.
The complaint rate for the Miami-Fort Lauderdale-Pompano Beach, Fla., area is significantly higher than second-ranked Naples-Marco Island, Fla., and the rest of the cities. Miami-Fort Lauderdale-Pompano Beach, Fla.; Port St. Lucie, Fla.; and Tampa-St. Petersburg-Clearwater, Fla., are repeat offenders in the top 10.
These rankings are no surprise because these cities include relatively more retirees and minorities. Of the 50 reported metropolitan areas, the Phoenix-Mesa-Glendale, Ariz., area has the best results with 149 complaints or 117.6 per 100,000, which is quite a surprise because of its high rate of retirees.
FRAUDSTERS HITTING MILITARY CONSUMERS AND ELDERLY, BUT ALL BEWARE
This is a file cabinet of statistics, but the conclusion is still the same: Identity theft and related fraud schemes aren’t going away and are increasing.
What stands out again is that military consumers and the elderly are having a relatively more difficult time coping with identity theft frauds. I would recommend that U.S. services work with area ACFE chapters to educate constituents, including spouses and retirees, about identity theft — especially credit card fraud.
Also, ACFE chapters can partner with the appropriate organizations (such as elderly and minority groups) and local officials in the top 10 cities identified in this article (and the other 40 listed in the CSN 2012 report) that have high rates of identity theft and reach out to educate community members to help them from becoming victims.
Of course, military consumers and the elderly aren’t alone because all consumers, especially the youth, need to become more involved in identity theft education.
Robert E. Holtfreter, Ph.D., CFE, CICA, is distinguished professor of accounting and research at Central Washington University and is the author of the “Taking Back the ID” column in Fraud Magazine.
The Association of Certified Fraud Examiners assumes sole copyright of any article published on www.Fraud-Magazine.com or ACFE.com. Permission of the publisher is required before an article can be copied or reproduced.
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