Online fraud, ID theft soars
By Kevin Poulsen
Date: January 26, 2004
American consumers filed more that half-a-million fraud reports last year adding up to over $437 million in losses, with Internet fraud for the first time accounting for more than half of the complaints, according to a report released by the Federal Trade Commission this week.
Identity theft was the most prevalent form of fraud reported, representing 42 percent of all complaints. In 19 percent of those cases, thieves used the stolen identities to apply for credit cards under the victim's name. In 12 percent, they settled for using the victim's existing credit card accounts. Unspecified employment-related motives accounted for 11 percent of I.D. theft cases, and a little over 10 percent of the time the thieves were just after a free cell phone in the victim's name. In eight percent of the cases, the culprits plundered the victim's bank accounts.
The Internet played a prominent role in 55 percent of all the fraud reports, up from 45 percent in 2002, and accounting for approximately $200 million in losses. The most popular Internet scams reported were online auction rip-offs -- 15 percent of the cases -- and spammy quit-your-job-and-work-at-home-for-big-bucks swindles, which made up nine percent of the complaints.
The stats were harvested from an FTC-run database called "Consumer Sentinel" that pools fraud reports from a variety of official sources, including the FBI's Internet Crime Complaint Center, the U.S. Postal Inspection Service, the National Consumers League's National Fraud Information Center, Canada's "Phonebusters," and the Better Business Bureau.
"More than 900 law enforcement agencies in the U.S., Canada, and Australia are using Consumer Sentinel, accessing one-and-a-half million consumer complaints through the Sentinel network," said Howard Beales, Director of the FTC's consumer protection bureau. "They can coordinate actions, track down leads, and research other law enforcement tools."
The report does not attempt to identify how thieves obtained the data needed to steal more than 200,000 consumers' identities, but security holes and data leaks remained a grim e-commerce reality in 2003. A California law intended to combat I.D. theft took effect July 1st, and obligates companies doing business online to warn their California customers in "the most expedient time possible" about any cyber security breach that exposes customers' names in association with their social security number, drivers license number, or a credit card or bank account number. The law has yet to see any enforcement action. A similar federal bill is under consideration in Congress.
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