Identity theft complaints drop more than 21 percent in 2013, part 1 of 2

Jeffrey Emil Groover said he was very, very sorry for stealing the identities of several South Floridians — including a former owner of the New York Mets. He even offered helpful suggestions on how to stop people like him when he testified to a U.S. Senate committee while serving a federal prison term in 2004. But apparently Groover just couldn't stop himself. After his release, he again used other people's identities to steal money by claiming the victims had signed over checks to him for pest extermination services. Can't keep a bad man down. (See South Florida ID thief who testified to U.S. Senate strikes again by Paula McMahon, Sun Sentinel, May 30, 2013.)

Groover was a solo operator, but there's strength in numbers. The members of the "Felony Lane Gang," according to the U.S. Immigration and Customs Enforcement (ICE), would steal ("smash and grab") checkbooks and driver's licenses from cars throughout the U.S. Then, they would drive through the "felony lanes" of banks (the lanes furthest from video cameras and tellers) and cash checks using the stolen personally identifiable information (PII). They stole more than $1 million from 250 victims in five years.

On March 18, U.S. District Court in Philadelphia, Pa., sentenced the gang's leader, Travis J. Russ, of Fort Lauderdale, Florida, to 188 months in prison. (See the March 19, 2014, ICE release.)

Whether it's a single fraudster, or an organized gang, these identity theft fraud cases are representative of 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 79,089 fewer identity theft complaints in 2013 from 2012 (369,132 to 290,056) — a significant decrease. However, identity theft complaints still rank as the FTC's No. 1 complaint. Though it appears that identity theft has somewhat abated, it still continues to be a major problem for consumers and businesses.

During a panel discussion on identity theft at the "ID360: The Global Forum on Identity," held April 9 and 10 at the University of Texas at Austin, moderator A.T. Smith, deputy director of the U.S. Secret Service, said that of the most common ID crimes they see, "37 percent is credit card fraud, 23 percent is bank fraud, 13 percent is check fraud, 8 percent is false identification fraud, 7 percent is computer crime and the remaining 12 percent is miscellaneous crimes." (See the "ACFE Insights" blog entry, New Resources to Fight ID Crimes, by Mandy Moody, CFE. Also, see UT's The Center for Identity, the sponsor of the forum.)

CSN figures are understated

While these cases and the forum point to identity theft as a major problem, the number of complaints decreased in 2013. Does this really show a decline in actual identity theft?

As I've said in previous years, the CSN figures actually are understated. 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 also for identity theft fraud subtypes. This enables law enforcement agencies to target their efforts to help control specific types of identity theft fraud.

Assault against military easing 

The inclusion of complaint data from military consumers in the 2011 CSN report continued through 2013. For the first time, 2013 figures showed more optimistic results.

Military consumers reported 2,724 fewer identity theft complaints from 2012 (24,790 to 22,066) or about an 11 percent decrease. The total represented 30 percent of their total complaints in 2013 compared to 37 percent in 2012 (compared to 14 percent and 17 percent for the general population, respectively).

Enlisted military identity theft complaints decreased significantly from 41 percent to 31 percent (7,607 to 6,667) of their total complaints. Similar complaints from officer military decreased slightly from 33 percent to 29 percent (1,133 to 1049). [Note, the total enlisted (6,667) and officer (1,049) identity theft complaints don't equal the total identity theft complaints from military (22,066) because many respondents didn't designate their military status. As a result, the significance of the changes in identity theft complaints from enlisted and officer military is difficult to determine.]

You can use the statistics in this article as "leading indicators" to help others understand 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 PDF of the 103-page CSN report. The CSN Data Book includes annual unverified identity theft, fraud and other complaints that are:

1. Voluntarily reported by consumers using the FTC website or one of its toll-free telephone numbers.
2. Shared by multiple state and federal agencies.
3. Shared by non-governmental entities including the Council of Better Business Bureaus in North America, Catalog Choice (a free service to opt out of mailed catalogs, coupons, credit card offers, etc.) and the Center for Democracy and Technology, among others.

The CSN sorts the complaints into 30 categories including "identity theft" (290,056) complaints), 11 "other" categories and the following 18 "fraud" categories (with number of complaints):

• Advance payment for credit services (50,422 complaints).
• Business and job opportunities (32,939).
• Buyers' clubs (1,847).
• Charitable solicitations (2,477).
• Foreign money offers and counterfeit check scams (24,752).
• Grants (7,969).
• Health care (39,452).
• Impostor scams (121,720).
• Internet auction (21,026).
• Internet services (50,311).
• Investment-related complaints (5,645).
• Magazines and books (14,471).
• Mortgage foreclosure relief and debt management (20,540).
• Office supplies and services (19,584).
• Prizes, sweepstakes and lotteries (89,944).
• Shop-at-home and catalog sales (66,024).
• Telephone and mobile services (116,261).
• Travel, vacations and timeshare plans (30,094).

The "other" area, which the CSN started in 2008, includes complaints relating to deceptive practices pertaining to the following 11 categories:

• Auto-related (82,701 complaints).
• Banks and lenders (152,707).
• Clothing, textiles and jewelry (1,720).
• Computer equipment and software (14,028).
• Credit bureaus, information furnishers and report users (31,810).
• Credit cards (35,086).
• Debt collection (204,644).
• Education (3,569).
• Home repair improvement and products (9,543).
• Real estate (17,798).
• Television and electronic media (53,087).

Let's dig a little deeper

There's a lot of information here, but it's important. Since 2009 and through 2013 the CSN has reported more than 9 million "identity theft," "fraud" and "other" complaints. (Also, the CSN reported more than 13 million "Do-Not-Call Registry" complaints.)

In Figure 1 (at the right), Figure 2 and Figure 3 (below), we see that 2,101,780 complaints for the "identity theft," "other" and "fraud" categories were reported in 2013 compared to 2,110,916 in 2012 and 1,897,252 in 2011.
 (Except for 2013, the data shown in Figures 1 and 2 represent adjusted data, which is more accurate for comparison purposes. 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 14 percent, 31 percent and 55 percent respectively. Comparable percentages were 18 percent, 30 percent and 52 percent for 2012 and 15 percent, 30 percent and 55 percent for 2011.

A total of 72,964 military consumer complaints were reported in the total CSN data in 2013 compared to 67,018 in 2012 — a small increase. This included 22,066 (30 percent), 37,941 (52 percent) and 13,133 (18 percent) complaints for the "identity theft," "fraud" and "other" categories respectively in 2013 compared to 27,790 (37 percent), 30,828 (46 percent) and 11,393 (17 percent) in 2012.

Compared to the percentages for the three complaint categories for the total CNS complaint data for the general population, 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 14 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 18 percent versus 31 percent) of the total CNS-reported "other" complaints whereas the percentage of complaints reported for the military for the "fraud" category was somewhat less (52 percent versus 55 percent) than the total CNS reported "fraud" complaints.

Figure 3 shows a relatively dramatic decrease in identity theft complaints for 2013 with 290,056 reported compared to 369,145 for 2012 (adjusted from 369,132). This still places the 2013 identity theft complaint data at the third highest — behind the record high of 369,145 complaints reported in 2012 and the second highest of 314,595 reported in 2008.

Common types of 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 for 2013 and 2012, respectively, follow:

• Credit card fraud — 16.9 percent and 13.5 percent
• Government documents or benefit fraud — 33.9 percent and 46.4 percent
• Phone or utilities fraud — 13.5 percent and 9.7 percent
• Employment-related fraud — 5.6 percent and 5.4 percent
• Bank fraud — 7.7 percent and 6.4 percent
• Loan fraud — 3.9 percent and 2.4 percent
• Other identity theft fraud — 23.5 percent and 18.5 percent
• Attempted identity theft — 7.2 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 dig a little deeper into the analysis, we need to look at the changes in the percentages noted above.

Credit card fraud

We have to trust postal workers. They handle our checks and important documents. But apparently, the pressure was too much for Alzet Parker, a 20-year U.S. Postal Service carrier.  The Palm Beach County Sheriff's Office arrested Parker Oct. 30, 2013, on charges of mail fraud and credit card fraud. According to investigators, Parker stole eight credit cards in mailings and used them to make purchases totaling $13,981. (See Postal worker arrested on mail, credit card fraud charges, Sun Sentinel.)

The CSN report shows that the total number of credit card fraud complaints for the general population actually decreased from 49,834 in 2012 to 49,019 in 2013 — an insignificant decrease of 815 complaints — while the changes in their percentages of total identity theft complaints increased from 13.5 to 16.9 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 decrease as they dropped from 32,854 to 32,486 (from 8.9 percent to 11.2 percent of the total identity theft complaints) while the "existing credit card account fraud" complaints category decreased insignificantly from 16,980 to 16,533 (from 4.6 to 5.7 percent).

Identity theft related to credit card fraud was still a major problem in 2013; it accounted for 16.9 percent of the total reported CSN identity theft complaints.

"New credit card accounts fraud," which accounted for 11.2 percent or 32,486 of the total identity theft complaints, is intolerable; it's something that can be reduced dramatically.

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 888-5657-8688. If more people used the service, identity theft related to "new credit card account fraud" and overall credit card fraud would decrease significantly.

CSN showed 3,829 "credit card fraud" complaints for military consumers in 2013, which was approximately 17.3 percent of their total identity theft complaints, compared to 3,548 and 14.3 percent in 2012. This is similar to "credit card fraud" for the total complaint data for the general population, i.e. 16.9 percent compared to 13.5 percent.

The subtype category "new accounts credit card fraud" accounted for 11.2 percent or 2,471 of total complaints for military consumers in 2013 (compared to 9.2 percent or 2,290 in 2012), which is comparable to the 11.2 percent reported for total "new accounts credit card fraud" for the general population. "Existing accounts credit card fraud" for military consumers accounted for 6.1 percent or 1,350 of their total complaints for 2013 (compared to 1,258 or 5.1 percent in 2012) or slightly more than the 5.7 percent recorded for the general population's total "existing credit card fraud."

Military consumer credit card complaint numbers have increased again in 2013. The increase in the rate of occurrence in credit card fraud is worrisome once again for both groups and needs to be diminished with accelerated educational programs.

Bank fraud

Javad Zainab Ester Conteh, a young bank teller, apparently had roving eyes. In her spare time, she would gather customers' account information without authorization, order fraudulent checks and steal money. On March 4, in Baltimore, Maryland, she was sentenced to more than five years in prison and ordered to pay more than $36,000 in restitution. (See Bank teller sentenced in fraud, identity theft, The Washington Times, March 4.)

"Bank fraud" identity theft complaint percentages for the general population increased slightly from 6.4 percent in 2012 to 7.7 percent in 2013; the number of complaints decreased from 23,625 to 22,334. The subtype category "electric fund transfer fraud" accounted for most of the change with their complaints going down slightly from 11,073 in 2013 to 10,732 in 2,012; their percentages increased slightly from 3.0 percent to 3.7 percent.

The other two subtype categories, "new accounts fraud" (from 1.9 percent to 2.2 percent) and "existing accounts fraud" (from 1.5 to 1.8 percent), incurred insignificant changes.

For military consumers, "bank fraud" accounted for 8.8 percent of their total complaints in 2013 (versus 7.6 percent in 2012) compared to 7.7 percent for the general population. The subtype category "electronic fund transfer fraud" accounted for 4.8 percent of their total complaints in 2013 (versus 4.1 percent in 2012) compared to 3.7 percent for the general population. The subtype category "new accounts fraud" and "existing accounts fraud" reported percentages of 2.2 and 1.8 respectively in 2013 (versus 1.9 percent and 1.6 percent in 2012), both of which were identical to the percentages reported for the general population in 2013.

In the September/October issue: Part 2 of 2 continues the analysis of the major frauds related to identity theft and their impact on various age groups, cities and U.S. states.

Robert E. Holtfreter, Ph.D., CFE, CICA, is distinguished professor of accounting and research at Central Washington University and the author of the “Taking Back the ID” column in Fraud Magazine. He’s also a member of the ACFE Advisory Committee.