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

Oh, the ways fraudsters can steal identities. A middle school food service worker swiped personally identifiable information (PII) of at least 400 students. A mail carrier snatched tax documents out of mailboxes. And a jail guard stole inmates' PII. In an April South Florida sweep, federal authorities arrested 25 people accused of using stolen identities to claim $36 million in fraudulent tax refunds. (See US Charges 25 in Miami in ID Theft, Tax Fraud Case, NBC Miami, April 4, 2014.)

In part 2, we discuss even more creative ways ID thieves can rip you off, and analyze more statistics from the Federal Trade Commission's (FTC) 2013 Consumer Sentinel Data Book. The goal? To equip you with some practical anti-identity theft ammunition in this ongoing fight.

Government documents or benefits fraud

On March 20 in Richmond, Virginia, Virginia Parks-Bert, 41, of Parkville, Maryland, was sentenced to 42 months in prison and required to pay $135,835.09 in restitution to the Internal Revenue Service for conspiracy to defraud the government and aggravated identity theft by participating in a scheme to file fraudulent tax returns. (See Woman Sentenced to 42 Months for Fraudulent Tax Scheme, March 20, U.S. Attorney's Office, Eastern District of Virginia release.)

Government documents and benefits fraud complaints for the general population dropped drastically from 46.4 percent of the total identity theft complaints in 2012 to 33.9 percent in 2013 with the total number of complaints declining from 171,283 to 98,329 or an overall decrease of 72,954 complaints. The subtype category, "tax or wage related fraud," accounted for most of the change with the percentages decreasing from 43.4 percent to 30 percent and the complaints declining from 160,209 to 87,016, or a decrease of 73,193 complaints. A major portion of this type of fraud is linked to identity theft tax refund fraud, which accounted for $5.8 billion in 2013. [For a comprehensive analysis of the issues relating to this fraud, see the author's articles "Identity theft tax refund fraud: A growing epidemic," parts 1 and 2 in the March/April and May/June issues of Fraud Magazine.]

The "government benefits applied for/received fraud" subtype saw its percentages increase from 1.6 percent to 2.3 percent, which accounted for an increase in the number of complaints of 765. The other subtype categories, including  "other government documents issued/forged fraud" (.8 percent to 1.0 percent) and "driver's license issued/forged fraud" (.6 percent and .6 percent), saw little or no changes in the complaint data.

There are valid reasons for the significant level of complaints for the "tax and wage related fraud" area, and these two scenarios explain them. First, there has been an increase in identity theft tax refund fraud over the past four years and it cost U.S. taxpayers $5.8 billion in 2013.

Secondly, many individuals have lost their jobs during the past few years, which has probably led to a sharp increase in scams used to steal their identities to rob them of their unemployment benefits.

For military consumers, "government documents or benefits fraud" accounted for a large portion of their total identity theft complaints, i.e. 40.8 percent or 8,978 complaints in 2013 (compared to 52.8 percent or 13,105 complaints in 2012), which is significantly more than the 33.9 percent reported for the general population in 2013. The subtype category "tax or wage related fraud" accounted for the majority of the total identity theft complaints with 34.7 percent or 7,654 complaints in 2013 (versus 49 percent or 12,137 complaints in 2012), which exceeds the 30 percent reported for the general population in 2013.

The "other government documents or benefits fraud" identity theft subtype categories for the military, namely "government benefits applied for/received fraud," "other documents issued/forged fraud" and "driver's license issued or forged fraud" reported insignificant percentages ranging from .6 percent to 3.9 percent in 2013, which was comparable to their data for 2012 and the general population data for both years.

Phone or utilities fraud

The phone rings and the caller ID says that it's your energy company. The person on the line says he's a customer service representative, and if you don't pay your bill, he'll shut off your electricity. It sounds suspicious, but many have fallen for it because they don't want to take the chance of losing their power, according to New scam targets utility customers, by Herb Weisbaum, CNBC, Oct. 9, 2013. In one example, the co-owner of Randy's Pizza in Durham, North Carolina, said that a caller, purportedly from Duke Power, told him that he'd quickly lose his electricity unless he bought a specific prepaid debit card from a nearby store and gave them access to the money. He bought the card, called the scammers back and promptly lost $890.

The complaint percentages for "phone or utilities fraud" category for the overall population increased significantly from 9.7 percent of the total complaints in 2012 to 14.5 percent in 2013, and the number of related complaints increased from 35,807 to 39,157. The subtype category "utilities – new accounts fraud" accounted for most of the change because its percentages increased from 6.2 percent to 8.8 percent while its total complaints increased slightly from 22,887 to 25,524 or an increase of 2,637 complaints.

The subtype category "wireless – new accounts fraud" increased from 2.5 percent to 3.5 percent while its total complaints increased marginally from 9,228 to 10,152. The other two subtype categories, "telephone – new accounts fraud" and "unauthorized charges to existing accounts fraud," stayed the same at .6 percent and increased slightly from .4 percent to .6 percent, respectively.

The "phone or utilities fraud" category for military consumers accounted for 14.5 percent of its total complaints for 2013, which was a notable increase from 9.7 percent in 2012 and outmatched the 13.5 percent for the general population for 2013. The number of complaints followed suit and increased from 2,404 to 3,200. The subtype category "utilities – new accounts fraud" accounted for most of the "phone or utilities fraud" category complaints in 2013 with 10.1 percent, which is up significantly from 6.3 percent for 2012 and exceeded the 8.8 percent reported for the general population. The other subtype categories "wireless - new accounts fraud" and "unauthorized charges to existing accounts fraud" reported minor percentages of .6 percent for 2013 matching that for 2012 and the general population for 2013.

Employee-related fraud

Ruth Rosa-Rios, 43, preempted prosecutors with a guilty plea, but they were ready to prove that this longtime benefits claim specialist at the Rhode Island Department of Labor and Training had used her computer and colleagues' computers to fraudulently authorize weekly unemployment insurance benefits for her and her husband. (See Former DLT Employee Pleads to Unemployment Insurance Fraud, January 1.) Rosa-Rios was sentenced to 10 years — with one year of home confinement and the remainder suspended with probation — and ordered to pay full restitution of $25,472.

Employment-related fraud for the general population increased to 5.6 percent in 2013 from 5.4 percent in 2012, or to 19,934 from 16,243 complaints. The same category for military consumers registered 3.4 percent of the total complaints in 2013 (unchanged from 3.4 percent in 2012), which was significantly less than the 5.6 percent noted above for total complaints for the general population.

Loan fraud

Eric Ray Hernandez, of Bakersfield, California, was in a great position to make some easy money. As an employee of mortgage brokerages, he and some cronies submitted false loan applications and fraudulent documentation to lenders, which caused the lenders to fund mortgage loans based on false and misleading information. On Sept. 16, 2013, after his guilty plea, Hernandez was sentenced to 130 months in prison and ordered to pay $6,087,541 in restitution and to forfeit $6,037,541 to the U.S.

The complaint percentages for "loan fraud" identity theft increased from 2.4 percent to 3.9 percent in 2013, while the complaints increased slightly from 8,859 to 11,312, or an increase of 2,453 complaints. 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 military consumers, "loan fraud" identity theft accounted for 4.3 percent of the total complaints in 2013 (versus 2.6 percent in 2012), which wasn't significant compared to the 3.9 percent reported above for total identity theft complaints for the general population. Their subtypes for both years were the same as the percentages for the same subtypes for the general population.

Other identity theft fraud

This category of identity theft fraud for the general population increased from 18.5 percent in 2012 to 23.5 percent in 2013 while the complaints decreased from 68,292 to 68,163 with the "miscellaneous" and "uncertain" subtypes accounting for most of the change in the percentages. Each of the other 10 subtypes all changed insignificantly in percentages. The "data breach fraud" subtype category appears for the third time in the CSN data notebook and accounted for only 1.7 percent of their total complaints, which indicates that most of the identity theft resulting from data breaches isn't reported to the FTC.

The "other identity theft fraud" category for military consumers registered 8.4 percent of their total complaints in 2013 versus 12.8 percent in 2012 — a significant decrease comparing both years and the 23.5 percent for the general population in 2013. Except for the "uncertain fraud" subtype category, which accounted for 6.3 percent of the total identity theft complaints for military consumers, all of the other 11 subtype categories reported insignificant numbers.

IDENTITY THEFT COMPLAINTS BY AGE

Figures 4 and 5 below include identity theft by age. (Note that the total identity theft complaints by age reported in Figure 4 don't coincide with the total identity theft complaints reported in Figures 1 and 2 in part one of this article in the July/August issue. This is because not all victims report their age when they file their complaints. In fact, 69 percent of the victims who filed an identity theft complaint in 2013 reported their age compared to 74 percent in 2012.)

The total identity theft complaints by age reported in Figure 4 dropped to 200,393 in 2013, which is a decrease of about 71,929 from the 272,322 complaints by age reported in 2012.

The good news is the complaints for all the age groups decreased from 2012  — ranging from about a low of 4,000 complaints for the 19 and under category up to a high of about 18,000 complaints for the 20 to 29 category.

Similar to 2012, the highest percentage of complaints in 2013 are in the 20 to 29 and 30 to 39 age groups, which account for 39 percent of the total complaints. The 19-and-under group accounts for 6 percent of all the complaints, which decreased by about 4,000 in 2013 from 16,072 to 11,967 complaints and by about 7,600 complaints from 2011.

I expected a decrease for this age group because of the U.S. Credit Card 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.

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 — which experienced a significant drop in complaints from last year — with 37,720 complaints (versus 69,795 in 2012) or 192.9 per 100,000 (versus 363.3 in 2012) population, followed by:

• Georgia, 134.1.
• California, 105.4.
• Michigan, 97.1.
• Nevada, 97.1.
• Maryland, 95.5.
• Arizona, 91.2.
• Texas, 88.
• New York, 86.9.
• Illinois, 85.9.

The complaint rate for Florida is significantly higher than second-ranked Georgia and the rest of the states. Compared to 2012, Alabama fell out of the top 10 and was replaced with Illinois.

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 once again has the best statistics with only 232 complaints, or 32.1 per 100,000.

CSN METROPOLITAN AREA RANKING FOR IDENTITY THEFT COMPLAINTS

The CSN report also 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 in 2013 include the Miami-Fort Lauderdale-West Palm Beach, Florida, area, which leads the pack again but with a significant drop to 18,941 complaints (versus 35,914 in 2012) or 340.1 (versus 645.4 in 2012) per 100,000. That's followed by Columbus, Georgia-Alabama, 214.7; Naples-Marco Island, Florida, 214; Jonesboro, Arkansas, 190.9; Tallahassee, Florida, 179.4; Cape Coral–Fort Meyers, Florida, 174.9; Atlanta-Sandy Springs–Roswell, Georgia area, 170.7; Port St. Lucie, Florida, 163.9; Beckley, West Virginia, 160.9; and Tampa-St. Petersburg-Clearwater, Florida, area, 155.5.

The complaint rate for the Miami-Fort Lauderdale-West Palm Beach, Florida, area is significantly higher than second-ranked Columbus, Georgia, and the rest of the cities. Except for the Columbus, Georgia-Alabama area, Jonesboro, Arkansas, and Beckley, West Virginia, the other large metropolitan areas 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 largest metropolitan areas, the Killeen–Temple, Texas, area has the best results with 403 complaints or 99.4 per 100,000.

FRAUDSTERS HITTING THE TAXPAYERS, MILITARY CONSUMERS AND ELDERLY, BUT ALL BEWARE

Among this pile of statistics, this fact remains: Identity theft complaints and related fraud schemes are still running at high levels, even though their overall complaints decreased by 79,079 or 21 percent in 2013. Does this call for a parade? No, because a closer look reveals a different story. A majority of the overall decrease in identity theft complaints is accounted for by one identity theft subtype — "tax or wage related fraud" — whose complaints decreased by 73,192. Of the 30 identity theft subtypes, all of their percentages actually increased except tax or wage related fraud. Thus, excluding this subtype, the aggregate effect for the other 29 subtypes was a decrease of approximately 6,000 complaints. If the IRS continues to improve its filtering of fraudulent tax refund returns and develops better policies when making refunds, then the effect on identity theft will be substantial.

Military consumers and the elderly are still struggling to cope with identity theft frauds. ACFE chapters can consider working with U.S. services to educate constituents, including spouses and retirees, about identity theft — especially credit card fraud.

ACFE chapters also can partner with organizations — such as those that represent the elderly and minorities, and local officials in the top 10 cities identified in this article (and the other 40 listed in the CSN 2013 report) that have high rates of identity theft — to educate community members.

All consumers should become involved in identity theft education. If military consumers, the elderly and the youth work to decrease the amount of identity theft, then we will continue to see a reduction in complaints that truly reflects the current situation.

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.