II. Introduction to Identity Crime:
What Every Investigator Needs to Know
What is Identity Crime
Identity crimes are those in which there is a fraudulent use of another person’s identifying information
with the intent to commit other criminal activities or to obtain credit, goods, or services without the
victim’s consent. No financial loss is necessary.4
A person commits an identity crime if he or she:
• Knowingly possesses or uses the personal identifying information, financial identifying
information, or financial transaction device of another without permission to obtain cash, credit, property, services or any other things of value.
• Falsely makes, completes, or alters a document or financial transaction device containing
any personal identifying information of another person, with the intent to defraud.
• Knowingly uses or possesses the personal identifying information of another without
permission or lawful authority to obtain a government-issued document.
• Attempts, conspires with another, or solicits another to commit any of these acts.
Personal identifying information is defined as information that, alone or in conjunction with other
information, identifies an individual, including but not limited to such individual’s:
• Name, address or birth date.
• Telephone, Social Security, taxpayer identification, driver’s license, identification card,
alien registration, government passport, checking, savings, deposit, credit, debit, or
other payment card account number.
• Biometric data, defined as data, such as fingerprints, voice prints, or retina and iris prints
that capture, represent or enable the reproduction of the unique physical attributes of
an individual.
• Unique electronic identification devices or telecommunication identifying devices, meaning
a number, or magnetic or electronic device that enables the holder to use telecommunica tions technology to access an account, obtain money, goods or services, or transfer funds.
Financial transaction device means any instrument or device whether known as a credit card, banking
card, debit card, electronic funds transfer or stored value card, or account number representing a
financial account or affecting the financial interest, standing or obligation of or to the account holder,
that can be used to obtain cash, goods, property, services or to make financial payments. A person
commits unauthorized use of a financial transaction device or account number if he uses such device
or number for the purpose of obtaining cash, credit, property, services or for making financial payment,
with intent to defraud, and with notice that either the financial transaction device has expired, has been
revoked, or has been cancelled; or for any reason this use of the financial transaction device is unauthorized either by the issuer or by the account holder.
Data is imperfect in helping to determine the frequency of identity crime as well as the total damages
to victims, in part because these crimes often go unreported to law enforcement. Regardless, the rates
are very high (as many as 6.4 million new households are affected annually, according to the Bureau of
Justice Statistics5), and by many estimates, the numbers are rising. The incidence of identity crime via
e-mail or telephone order purchases or transactions alone leapt from 3% in 2006 to 40% in 2007.6 Of
equally urgent concern is that the methods of committing these crimes change quickly – perpetrators
are gaining in sophistication, making it all the more important for law enforcement to stay current on
the trends and techniques in identity crime.
4
It is important to note that this definition is a law enforcement definition; other industries (financial institutions, regulators) may use definitions which include additional elements.It is also useful to note that identity thieves range from opportunists who steal and use a credit card on a single occasion to organized crime operations, sometimes international in nature. The common element is the fraudulent use of the victim’s personal identifying information. 5
Bureau of Justice Statistics Special Report on Identity Theft, 2005 www.ojp.usdoj.gov/bjs/pub/pdf/it05.pdf.
6
2008 Identity Fraud Survey Report, Javelin Strategy & Research, February 2008, pages 2-3.
Page 4
To identity thieves,
everyone is just a number.
Who is Victimized by
Identity Crime
People at every socio-economic
level, regardless of age, race or
gender, engaged in a variety of
activities and employed in any
profession are affected by
identity crime.
Consider this story from Chief
William Berger at the Palm Bay,
Florida Police Department, IACP
Past President.
More victims’ experiences may be
viewed by visiting the Privacy Rights
Clearinghouse at http://www.privacyrights.org/cases/victim.htm.
“In the fall of 1997, I was making my holiday shopping purchases,
as so many other U.S. citizens do, when a cashier encouraged
me to sign up for a store credit card. The incentive to obtain
the card was an immediate 20 % off my purchase, with the
understanding that no other purchases were required. Since
the deal was too good to pass up and the store was one of
national stature, the decision to sign up appeared to be a
no-brainer. Little did I know that my decision would actually
lead me to fund international terrorism.
About a month after my purchase, I received my new credit
card along with a statement that reflected my discount. I paid
the bill, put the card away and never used it again. Two years
later, I was shocked to receive another statement reflecting the
purchase of automobile insurance from a company that I did not
immediately recognize; I have had my auto insurance with the
same company for more than 20 years.
I contacted the credit card company and, to my surprise, found
that between the date my statement was issued and the time
I made the telephone call, more than $6,000 of additional car
insurance from four other companies had been charged to my
account. The credit card company was diligent in investigating
the matter, and after 10 days, they cancelled the card and
adjusted my account to reflect a zero balance. As an investigator for most of my police career and as a police chief of 10
years at the time, my curiosity and training prompted me to ask
questions and demand answers. Credit card company officials
speculated that I was a prime target because the card had
stayed dormant for two years and because South Florida,
where I live, is a prime location for persons to retire. Many
retirees leave active lines of credit open when they die – easy
prey for dishonest persons working in the credit industry.
(In fact, 19,270 identity crime complaints were reported to
the FTC by victims from Florida in 2007, fifth highest among
states reporting identity crime to the FTC. These consumer
complaints do not represent all identity crimes in Florida).7
In my case, the credit card company officials suspected, but
never proved, that some of their employees either gave my
information willingly or sold it to individuals who then used
the information and credit card numbers to purchase the
unauthorized automobile insurance. Later, the credit card
company determined, based on past practices, that these
persons purchased the automobile insurance to set up scam
accidents to generate bogus claims. Authorities determined
that the groups that benefited from these scams at the time
of my incident in 1999 had ties to terrorist organizations
in the Middle East. These groups were using the insurance
settlements to fund terrorist activity like the attacks of
September 11, 2001.”
FTC Consumer Fraud and Complaint Data, January – December 2007
www.ftc.gov/opa/2008/02/fraud.pdf.
7
Page 5
II. Introduction to Identity Crime:
What Every Investigator Needs to Know
What are the Damages to Victims
The damages suffered by victims of identity crime can be devastating. In addition to potential loss of
all of the money in their bank accounts and the good credit rating they need in order to get loans or
mortgages, victims can be subjected to prosecution for crimes perpetrated by another and/or named
as defendants in civil proceedings for activities committed under their name.
Below is an overview of resulting problems for victims of identity crime from the 2006 report by the
Federal Trade Commission (FTC).
100%
80%
60%
48%
42%
40%
37%
25%
20%
24%
19%
14%
5%
11%
4%
10%
5%
0%
New accounts & other frauds
19%
12%
8%
8%
1%
6% 7%
7%
0%
2% 2%
1% 1%
Other existing accounts
2% 1%
3% 0%
2%
Existing credit card only
In addition to the loss of financial security and reputation, identity crime imposes a terrible administrative burden on the victim as he/she works to rectify the damage. In a victim survey conducted by
the Identity Theft Resource Center in 2006, findings showed that victims spend an average of 97 hours,
or more than two business weeks, repairing the damage done and clearing their names and credit
records. Victims spent an average of $1,884 in out-of-pocket expenses as well. For more information,
visit the Identity Theft Resource Center Web site at www.idtheftcenter.org.
Page 6
To identity thieves,
everyone is just a number.
What are the Motives
The Department of Justice has found that there are two primary motives for identity crimes: financial
gain and concealment. Graeme R. Newman created the chart below to show the relationship of these two
motives to different types of identity crimes.8 Additionally, Newman’s chart shows that identity crimes
can also often be categorized as organized or opportunistic.
High commitment
[lots of planning]
Low commitment
[little planning,
opportunistic]
Financial Gain
Concealment
Organized. A fraud ring systematically
steals personal information and uses
it to generate bank accounts, obtain
credit cards, etc.
Organized. Terrorists obtain false
visas and passports to avoid being
traced after committing terrorist
acts.
Individual. The offender sets up a
look-alike Internet Web site for a
major company and spams consumers luring them to the site by saying
their account information is needed
to clear up a serious problem, steals
the personal/financial information the
consumer provides and uses it to commit identity theft.
Individual. The offender assumes
another’s name to cover up past
crimes and avoid capture over
many years.
An apartment manager uses personal
information from rental applications to
open credit card accounts.
The offender uses another’s name
and ID when stopped or arrested
by police.
The Doylestown Township Police Department in Pennsylvania investigated two identity crimes with unique aspects. Both examples show the tangled web of ID crime, the motives and innocent
victims.
The first was a couple who discovered a childhood acquaintance had been living in another state
for 10 years under the husband’s name because he thought he had a bench warrant issued for him. This individual was self-employed running a modest business until he suffered a long-term fatal
illness without the benefit of medical insurance. The out-of-state hospital and associated doctors
have been coming after our resident for several years to recover the hundreds of thousands of
dollars run up in medical fees.
The second case involved another area resident who found out their brother, who had a drug and
alcohol dependency, was living for years under their name. The complication came to light when
the brother was arrested for drug possession and failed to appear for court. The resident, who by
now had moved to another state, was stopped for a routine motor vehicle violation and their local police informed him of an outstanding bench warrant. Although the bench warrant was nolle
prossed, the steps to expunge the criminal record are proving to become more difficult.
Provided by Stephen White, Chief of Police, Doylestown Township (PA) Police Department
Newman, Graeme. “The Problem of Identity Theft.” Identity Theft Guide No. 24(2004) 1. 28 Jul 2008 http://www.popcenter.org/problems/identity_theft/.
8
Page 7
II. Introduction to Identity Crime:
What Every Investigator Needs to Know
Who Commits the Crime
Perpetrators committing identity crime often include those whom victims trust, including family and
friends, and/or those who have access to their information through other legitimate relationships.
Service providers
Those to whom individual victims
or companies who possess their
personal information freely offer
it on false pretenses or during
another transaction
Those who steal information
through use of both low-tech
and high-tech means
• Home health aides
• Auto dealers
• Employees of
financial institutions
• Professionals:
– Doctors
– Accountants
– Lawyers
– Other
• Employers
• Security guards
• Pretext phone scammers
• “Phishing” scammers
• Advance fee scams
• “Work at home” scams
• Waiters, cashiers, desk clerks
• Hijackers of legitimate social
networking or employment
Web sites
• Network intrusions
• Thieves and burglars
• “Dumpster divers”
(usually those who “hit”
business dumpsters, such as
hospitals, mortgage brokers, video rentals, etc.)
• Social engineering
(access to business records)
• “Down streaming”
(intercepting data during
download)
• “Skimming” ATM and
credit cards
Within identity crime organizations, there are some patterns. The “Hub and Spoke” model provided
below will help explain the organization of criminal enterprise in identity crimes (created by Sgt.
Stephen Jensen of the Identity Crime Unit at Suffolk County (NY) Police Department):
Passer
Uses the converted identifiers
Identity Supplier/Collector
Obtains personal identifiers
Converter
Converts stolen identities
into forms for use
Passer
Uses the converted identifiers
Identity Supplier/Collector
Obtains personal identifiers
Page 8
To identity thieves,
everyone is just a number.
In this model, the “suppliers,” “converters” and “passers” have unique and connected roles:
Who?
Suppliers: Gather
stolen personal
information [S]
Converters: Create new forms
for using stolen identities [C]
Passers: Use the converted
data to obtain goods, services
or cash [P]
• Theft of personal identifiers
– Mail
– Trash
– Employee files
– Burglaries
• “Skimming” credit/ debit cards
• “Phishing”
•
•
•
•Use cloned credit/debit cards for purchases and withdrawals
• Open new accounts, such
as wireless and credit
card accounts
• Purchases
• Forged passports, licenses etc., for criminal concealment/
terrorism
• Use of forged identities as
straw buyers and sellers in
home or vehicle purchases
• Use for obtaining medical
insurance or government
benefits
Cloned credit/debit cards
Forged Social Security cards
Forged driver licenses or
other government-issued IDs
Characteristics of Criminal Enterprises
Often in organizations depending on several individuals, the actors will erect “Chinese walls” or a division
of labor which separates the perpetrators and cloaks the various parts of the enterprise in anonymity, usually designed to protect the larger whole in case one “spoke” is compromised by law enforcement.
Anonymity may be set up through:
• Internet communications and data transfers.
• Continuous employment of new recruits in “spoke” operations that have little
knowledge as to organization or members and are usually paid for work in cash.
• Sub-contracting part of the enterprise to smaller informal organizations.
• Use of mail drops and merchandise drops.
Page 9
II. Introduction to Identity Crime:
What Every Investigator Needs to Know
Various Sizes of Criminal Organizations
Single individual
Involved in every facet of the enterprise, he/she has obtained the
personal identifiers, plans the use of the identifiers and acquires
goods, services or cash, etc.
•Usually involves an opportunistic access to personal data:
– Family
– Friends
– Home health aides
– In-home service contractors
– Finders of lost wallets, purses, etc.
•May involve a more organized individual who places himself in a
position to gain access to personal identifiers:
– Security guards
– Employees of merchants
– Waiters
– Gas station attendants
A small group of actors
•Division of labor based on “hub” and “spoke” may be shared
by members
•Organizational leader
•Formal
•Informal
Highly sophisticated and/
or complex organization
(many individuals)
•May be based on a division of labor
•Often used in money laundering
Organized identity crimes may be instrumental to or involve other crimes including:
Government/Vital Document Fraud
Federal raids in 2006 at meat-processing plants owned by Swift & Co., in six states resulted in the arrests
of 1,282 people for immigration violation with 65 also charged with identify theft or other criminal charges.
Drug Trafficking
The National Association of Counties reports that methamphetamine-related identity crimes increased
from 27% to 31% between 2005 and 2006.9
Weapons Trafficking
Identity crime is a serious problem for those working to stop illegal gun trafficking. “Lying and buying,”
schemes make identity theft a critical element in weapons trafficking. Firearm purchases made under a
false identity (either fictitious or stolen) enable traffickers to completely escape detection when the gun
is used or sold in commission of a crime.
Wire Fraud
In March, 2008 Luis Uribe pleaded guilty to single counts of wire fraud and aggravated identity theft in
what prosecutors are calling a mortgage scheme that resulted in more than $6 million in fraudulent loans.
Uribe faces up to 30 years in prison and a $1 million fine.
9
The Meth Epidemic: The Changing Demographics of Methamphetamine, August 2007. Page 10
To identity thieves,
everyone is just a number.
He was one of the principals behind Bay General Contracting Services LLC, a non-licensed contracting
service firm where Uribe reportedly used his mortgage broker license to obtain 32 loans under false
pretenses. He then disbursed the proceeds of those loans into bank accounts in his control.
Although “numerous” notices of commencement were filed with clerks in Hillsborough, Pinellas, Pasco
and Citrus counties, no construction work was actually done. Bay General never hired any employees
and brought in no one to work on the projects it had obtained loans for.
Prosecutors said that Bay General was used to improperly inflate the value of properties being bought,
to strip actual and fraudulently created equity out of properties and to serve as a vehicle for “siphoning
the proceeds” from fraudulently obtained loans http://tampabay.bizjournals.com/tampabay/stories/
2008/03/24/daily46.html.
The case was investigated by the Tampa Police Department and the FBI.
Terrorism
The 9/11 Commission Report highlights the urgency of preventing and responding to identity crimes as a
crucial instrument in combating terrorism. “Travel documents are as important as weapons,” the report
says. “Fraud is no longer just a problem of theft. At many entry points to vulnerable facilities, including
gates for boarding aircraft, sources of identification are the last opportunity to ensure that people are
who they say they are.”10
In addition to using false identities to facilitate travel, terrorists are often financing operations through
stolen credit. A global terrorist cell based in the United Kingdom used credit card information stolen via
phishing attacks and laundered money through online gambling sites to finance Web sites “promoting martyrdom through terrorist violence,” according to British press reports.
Credit card information was put on the black market, which the terrorist cell eventually used to establish
a network of Web sites that enabled communications among terrorists. The sites also provided information
on such topics as computer hacking and bomb-making and hosted videos of beheadings and suicide bombings in Iraq. In 2007, three men – Waseem Mughal, Younis Tsouli and Tariq al-Daour – were sentenced to
jail terms for encouraging others to commit acts of terrorism.11
Why Identity Crime is a Challenge for Investigators
There are several common elements in identity crime that present significant challenges to investigators.
As described above, many of these crimes are quite complex, and their nature often means that they
share some of the following characteristics:
• The investigation requires involvement from a wide range of entities of many types, e.g., financial institutions, credit card companies, debt collectors, medical records companies, etc.
• The crime is generally multi-jurisdictional.
• The evidence is often “virtual,” and therefore hard to gather. Cases will rely upon a digital
“paper trail” and digital security video necessitating speed in recovery to preclude overwriting
as businesses struggle to maintain data storage in today’s growing e-business environment.
• Gathering evidence may require special knowledge and skills such as specialized forensic knowledge for securing digital evidence, etc.
• The cases are difficult to prosecute.
These elements pose significant challenges for law enforcement and point to the need for investigators to
build new partnerships and acquire new skills in order to address these crimes.
10
11
http://www.msnbc.msn.com/id/5594385.
http://www.creditcards.com/credit-card-news/credit-cards-terrorism-1282.php. Page 11