2018 FTC numbers paint worsening fraud picture

Three million fraud complaints in 2018. That’s what the Federal Trade Commission received — many of them for identity theft.  When we look at the stats since 2001, we see the fraud problem is worsening.

You start receiving collection calls for a loan you never opened — much less defaulted on. Your grandson’s lawyer calls from another nation, saying that the grandson will go to jail unless you wire $15,000 immediately. Later you find out the grandson hadn’t left the country in years. You click on a link in an email, later to find malware that’s hijacked your files unless you pay thousands of dollars. The IRS calls to threaten legal action on incorrect returns unless you wire money that same day.

As I’ve written in previous columns, these are common identity theft schemes. And the latest data indicates the fraud is worsening. Since 1997, the Federal Trade Commission (FTC) has accumulated tens of millions of complaint data from consumers and law enforcement agencies pertaining to “fraud,” “identity theft” and “other” consumer protection problems. In 2018, close to 3 million complaints were reported to the FTC. The data are stored in the Consumer Sentinel Network Data Book (CSNDB).

Forty data contributors — including the Consumer Financial Protection Bureau, the U.S. Internal Revenue Service, more than 20 state attorneys general and all North American Better Business Bureaus — contribute reports to the CSNDB. If your law enforcement agency isn’t currently contributing data to the CSNDB, you’re strongly encouraged to become members.

Consumer data are unverified and classified into 29 different categories. Consumers can file a complaint report online or through the FTC’s call/response center at 877-FTC-HELP (877-382-4537).

More, more, more

Except for minor decreases in 2017 and 2018, the total complaint reports have shown a marked increase from 325,519 in 2001 to 2,994,483 in 2018. (See Table 1 below.)

Table 1: Complaints from 2001 through 2018

The number of complaint reports for the “identity theft” type increased from 86,250 to 444,622 over the 18-year period but we see no discernable trend because of erratic increases and decreases from year to year, especially from 2006 through 2018.

Identity theft ranked third with 444,602 reported complaints and accounted for 14.85% of the total complaints reported in the 2018 CSNDB. What’s more revealing is how fraudsters use the identities of victims to benefit themselves and commit fraudulent activity. (See Table 2 below.)

Table 2: Identity theft types and related subtypes (The data in this table don’t add up to the total identity theft complaints for 2018 because, according to the FTC, consumers can report multiple types of identity theft. In 2018, 17% of identity theft reports included more than one type of identity theft.)

In Table 2, in the “credit card fraud” type, the most alarming statistics are in the “new accounts” subtype category, which ranks first and has increased 24% in 2018 compared to 2017. This indicates that fraudsters have become more successful in stealing identities and using them to obtain new credit cards in the victims’ names.

You can protect yourself from becoming a new accounts identity theft victim by quickly collecting from your mailbox credit card solicitations — containing pre-approved applications — that fraudsters can steal and apply for new cards in your name.

Also, learn to avoid phishing schemes because they account for 80% of the malicious malware that victims inadvertently download on personal computers, which thieves use to extract personally identifiable information (PII) for criminal purposes like (again) applying for a credit card in the victim’s name.

What you can’t control, of course, is theft of your PII via internal or external data breaches. For example, if you use your credit card when shopping at a retail store, and the store experiences a data breach, then the fraudster can use your credit card PII (once again) to apply for a new card.

In the “employment or tax-related fraud” type, the “tax fraud” subtype decreased 38% while the “employment or wage related” subtype increased 44%. Tax fraud probably decreased because of the IRS’s recent efforts to curb income tax refund fraud by vetting the validity of those requesting refunds. Employment or wage-related identity theft fraud could’ve increased because fraudsters might have used more victims’ names as ghost employees, among other crimes.

The “mobile telephone new accounts” subtype (ranked fourth in the “phone or utilities fraud” type) and “landline telephone new accounts” subtype (ranked 17th in the same category) both increased 28%, which mirrors the 24% increase in the credit card “new accounts” subtype. Based on the significant increases in all the “new accounts” subtypes, it’s obvious that fraudsters are increasing their efforts to target industries with weaker defenses. The “landline telephone - existing accounts” increased 25%, and the “utilities – existing accounts” increased 20%.

The only significant issue in the “bank fraud” category is with the subtype, “new accounts,” which ranked tenth and increased 12%. A fraudster might open a bank account in a victim’s name to launder money, among other reasons. They typically use a wire transfer to move the money out of the account.

All the subtypes of “loan or lease fraud” have increased significantly. Fraudsters use victims’ identities to borrow money for auto, business, personal or student loans.

In the “government documents or benefits fraud” category, the “driver licenses issued/forged” and “passport issued/forged” subtypes are ranked relatively low — 24th and 29th respectively — but they’ve increased significantly at 19% and 25%.

Under the “other identity theft” type, all the subtypes except “evading the law” have increased significantly. Fraudsters are using the identities of others to obtain “medical services” (up a whopping 103%), “insurance” (up 24%), “online shopping or payment account” (up 18%) and for “email or social media” purposes (up 23%).

Table 3: Identity theft by age

As shown in Table 3 above, the 30 to 39 age group reported the highest number of complaints, but we shouldn’t conclude that this age group is having relatively more problems with identity theft than the others. Older-age groups commonly are more susceptible to identity theft and other frauds, but the data in Table 3 don’t reflect that. The FTC would’ve more accurately shed light on the group that’s experiencing the most problems if it had determined the number of complaints per 100,000 individuals in each age group.

Share, share, share!

Please share this information with your business associates, family, friends and clients and include it in your outreach programs. An important takeaway from this column is that the number of identity theft complaints reported to the FTC has been on a study upward climb for the past 18 years, and there’s reason to believe that the trend will continue unless we educate the public about phishing and identity theft schemes. Many of the identity theft subtypes have increased significantly from 2017. You’ve been forewarned, so tread with care!

Please contact me if you have any identity theft or cyber-related issues that you’d like me to research and possibly include in future columns or as feature articles, or if you have any questions. I don’t have all the answers, but I’ll do my best to help. Stay tuned!

Robert E. Holtfreter, Ph.D., CFE, is distinguished professor of accounting and research at Central Washington University in Ellensburg, Wash. He’s also on the ACFE’s Advisory Council and the Editorial Advisory Committee. Holtfreter was the recipient of the Hubbard Award for the best Fraud Magazine feature article in 2016. Contact him at doctorh007@gmail.com.