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The Resource Center Identity Theft & Protection | post

A Perfect Storm Wrapped in a Vicious Circle

by Neal O'Farrell on

We're losing the battle against identity theft - in 2009 there were more than 11 million victims in the US alone, the highest on record. It's not an understatement to call it an epidemic and one only likely to get much worse.

To put those numbers in perspective, there were more victims of identity theft last year than there were reported burglaries, attempted burglaries, petty thefts, purse snatchings, pickpocketings, arsons, and auto thefts nationwide, combined!

But here's the important difference. If someone were to break into your home or your car, or steal your purse or wallet, there's a very good chance that a police officer will show up (even if it's just eventually), take a report, gather any evidence and witness statements, and start an investigation.

The same thing is likely to happen if a thief were to steal just $20 from you. But if a thief were to steal your home from under your nose, or take out a loan on your home without your permission, chances are a police officer won't come. If a thief steals your identity and makes you liable to hundreds of thousands of dollars in debt, chances are a police officer won't come. And if you end up arrested and sitting in jail, for weeks or even months, all because a criminal used your identity to avoid arrest, chances are a police officer won't come to your home afterwards to take a report or start an investigation.

That's one of the major differences with this crime epidemic. Never in the history of this country has such a major crime spree gone so unchecked, which explains why so many criminals love identity theft.

Someone once described identity theft as a "perfect storm wrapped in a vicious circle". On the one side, identity theft is ticking constantly upwards, with more incidents and victims, and more criminals turning to identity theft. The bad economy hasn't helped, forcing many to turn to identity theft in a desperate move to save a job or a home.

And as if picking the perfect moment, organized crime has started flooding the world with the most sophisticated malware ever, capable of fooling everything from bank security measures to desktop security and anti-virus software.

On the other side, there is growing apathy amongst consumers towards identity theft. Maybe it's headline fatigue, and consumer are just so tired of all the warnings about identity theft they're starting to tune them out. Or maybe it's that zero liability has given consumers a false sense of security — that they really don't need to worry about becoming a victim because their bank or credit card company will clean up the mess and that zero liability really means zero loss, zero impact, and therefore zero responsibility.

And just at the time that sophisticated banking Trojans like Zeus and Clampi started to run rings around financial institutions, instead of investing more heavily in a security response many of these financial institutions are actually cutting back on security investments as they fight just to survive.

On the law enforcement side, most police departments have almost completely stopped investigating identity theft. Some cite budget and manpower challenges, but many in law enforcement still don't regard identity theft as a "real" crime, but more of a personal inconvenience for the victim, or a contractual issue between consumers and financial institutions. Whatever their reasons, most police departments are investigating less than 1% of identity theft reports, the lowest for any crime in history.

And there's the vicious circle. Criminals know that if cops aren't investigating identity theft and making arrests, and prosecutors aren't prosecuting, not only is identity theft one of the easiest and most lucrative crimes even for a novice, the risks of getting caught and punished are remote. Which attracts even more criminals and fuels that vicious circle.

It's hard to know where or how to fix any of these. If we have to pick the battles we can win, my focus would be on consumer education. That's a fix that doesn't require any investment, so we can't use that excuse. The challenge is getting this message to consumers — that we're not winning the battle, that zero liability doesn't mean identity theft won't hurt you, and that you shouldn't rely on your bank or law enforcement to clean up the mess. That will be left up to you, probably alone. Unless of course you have an Identity Theft Council in your neighborhood.

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