Lately our office has been investigating matters of embezzlement involving identity theft and identity fraud. With everything that has been reported about embezzlement, it should come as no surprise that in every case the perpetrators were trusted individuals. What is new is how trusted business insiders are not only stealing the business’ money and other assets, they may be also stealing the identities of business customers and vendors.
Identity theft is a crime. Identity theft and identity fraud refer to all types of crime in which someone improperly obtains and uses another person’s personal data typically for economic gain.
Unlike your fingerprints, which are unique to you and cannot be given to someone else for their use, your personal data can be used by identity thieves to personally profit at your expense. Many people in the United States and Canada have reported the unauthorized removal of funds from their bank or financial accounts. In worse cases, criminals take over identities completely, running up vast debts and committing crimes while using victims’ names. Victim losses may include not only out-of-pocket financial losses, but the substantial additional costs of restoring a reputation in the community and correcting erroneous information for which the criminal is responsible.
It is surprising to many people how easily criminals can obtain their personal data without breaking into their homes. Actions in public places as innocuous seeming as “shoulder surfing” in which someone watches from a nearby location as you punch in your telephone calling card number or credit card number or listens to a telephone conversation in which you supply your credit-card number to a hotel or rental car company can lead to identity theft. The area near your home or office may not be secure from criminals who engage in “dumpster diving” – going through your garbage cans or a communal dumpster or trash bin – to obtain copies of your checks, credit card or bank statements, or other records that typically bear your name, address, and even your telephone number. These types of records make it easier for criminals to get control over accounts in your name and assume your identity.
While some credit card companies have adopted security measures that allow a card recipient to activate the card only from his or her home telephone number, this is not yet a universal practice. So, receiving applications for “preapproved” credit cards through the mail and but discarding them without first destroying the enclosed materials is risky. Crooks may retrieve them and try to activate the cards for their use without your knowledge. Likewise, if your mail is delivered to a place where others have ready access to it, it can be easily intercepted and redirected to another location.
More recently, the Internet has become an attractive place for criminals to obtain identifying data, such as passwords and banking information. In a growing number of cases, criminals have used computer technology to obtain and misuse large amounts of personal data.
With adequate information, a criminal can take over an individual’s identity to conduct a wide range of crimes such as false applications for loans and credit cards, fraudulent withdrawals from bank accounts, fraudulent use of telephone calling cards, or obtaining other goods or privileges that the criminal might be denied if he were to use his real name. If the criminal takes steps to ensure that bills for the falsely obtained credit cards or bank statements showing the unauthorized withdrawals, are sent to an address other than the victim’s, the victim may not become aware of what is happening until the criminal has already inflicted substantial damage on the victim’s assets, credit, and reputation.
The U.S. Department of Justice prosecutes cases of identity theft and fraud under a variety of federal statutes. In 1998, Congress passed the Identity Theft and Assumption Deterrence Act creating a new offense of identity theft. The law prohibits “knowingly transferring or using, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law.” (18 U.S.C. § 1028(a)(7)). This offense, carries a maximum term of 15 years’ imprisonment, a fine, and criminal forfeiture of any personal property used or intended to be used to commit the offense. Schemes to commit identity theft or fraud may also involve violations of other statutes such as identification fraud (18 U.S.C. § 1028), credit card fraud (18 U.S.C. § 1029), computer fraud (18 U.S.C. § 1030), mail fraud (18 U.S.C. § 1341), wire fraud (18 U.S.C. § 1343), or financial institution fraud (18 U.S.C. § 1344). All of these federal offenses are felonies that carry penalties as high as 30 years of imprisonment, fines, and criminal forfeiture.
The damage done by criminals when stealing another person’s identity frequently takes far longer to undo than it took the criminal to commit the crimes. Victims of identity theft and fraud may find the task of correcting incorrect information about their financial or personal status and trying to restore their good names and reputations as formidable as trying to solve a puzzle with missing pieces.
Some of the lessons learned for the business owners were that if the business wants to avoid being victimized and protect its customers and vendors from victimization, it has to be tightfisted about sharing its own and its client’s information with employees without having a preexisting reason to trust them.
For individuals, adopt a “need to know” approach to your personal data. Use the Better Business Bureau to obtain information about businesses that have been the subject of complaints. When traveling, have your mail held at your local post office, or ask someone you know well and trust to collect and hold your mail while you’re away. Check your financial information regularly for discrepancies. Ask periodically for a copy of your credit report. Finally, maintain vigilant records of your financial accounts.
A number of government and private organizations have information about various aspects of identity theft and fraud. Don’t be bashful – use their services.
Stanley I. Foodman is CEO of Foodman CPAs & Advisors and a recognized forensic accountant and litigation support practitioner. Specializing in complex domestic and international tax matters, Foodman has served as an expert witness and forensic accountant for some of the nation’s most challenging, high-profile economic crime cases. Foodman and his team of accountants also assist clients with a full range of accounting matters including compliance, voluntary disclosure, corporate and individual taxation, family law litigation, estate and trust tax and wealth planning. Consistently ranked as one of the top accounting firms in South Florida, Foodman CPAs & Advisors assists clients locally, nationally and internationally.
South Florida Legal Guide Midyear 2014 Edition