Bernard Hastings | Updated: 6 Jul 2021
Identity theft is one of the most pressing issues as we move further into 2021 which can have drastic adverse impacts on individuals, enterprises, financial institutions, and the Government. According to the US Department of Justice, identity theft has also become a compelling factor for many other severe crimes. With digitalization being the new norm of the modern world, theft, and fraud have also taken a new outlook with many transformed to online means. Sources indicate that among the different types of cybercrimes, online identity theft has become a common issue faced by many people and organizations. This article is an eye-opener with meaningful insights into the gravity of identity theft in modern society.
As the name suggests, identity theft is where a person steals someone else’s identity and utilizes it as their own to commit fraudulent or criminal activities. This could involve using another’s personal information such as the name, images, or financial information like credit card numbers, bank account details, and social security numbers without their knowledge and permission. Globally around 40% of the people have been targets of an identity theft crime at least once.
With the pace of development in the online or the digital landscape, identity theft is becoming more sophisticated each day. As per statistics, there were 4.54 billion internet users in 2020 which is 59% of the world’s population. On average, there is a 7% rise in internet penetration annually. Meanwhile, there is a remarkable rise in online shopping, social media, and app usage. Accordingly, on average, people spend nearly 7 hours on the internet. With a wide online presence, identity theft has become inevitable in modern society. Out of all the countries, the USA has consistently topped the list with 16.7 million Identity theft victims reported in 2017 accounting for an overall loss estimated at more than USD 17 billion.
1 out of every 10 people in the USA falls victim to identity theft each year. Reports show that 21% of these victims have encountered repeated identity theft crimes. Accordingly, although the USA has the most advanced mitigating systems and laws for theft and frauds, at least a 10th of its population has been left vulnerable to identity thefts. According to the findings of the National Crime Victimization Survey (NCVS) in 2016, nearly 50 million US residents have faced at least one identity theft fraud in their lifetime.
An Identity Fraud Study in recent years has also published alarming statistics on identity theft. In the USA, around 14.4 million people become victims of identity theft annually out of which, nearly 23% of the victims had to personally reimburse and settle the liabilities that have been created by the criminals. This figure has been almost increased by thrice compared to 2016. As per a report published in 2021, by the Federal Trade Commission of the USA, at least 29% of the 4.8 million theft and fraud reports received by them were related to identity theft. This is around 1.4 million in numbers which have almost doubled relative to the previous year.
Identity theft can happen in several ways. According to the FTC, there is a staggering increase in the number of credit card frauds in the USA with a nearly 57% increase in 2020 relative to the previous year. The culprits often use the stolen credit card details to make unauthorized purchases leading to significant financial losses to the victims. There are also cases where certain people fraudulently represent themselves as a leading organization or an authority. As per the Consumer Sentinel Network Data Book of 2020, the USA has reported nearly half a million imposter scams.
Others try to mislead people by promising them massive cash rewards and thereby ask them to make a payment. According to statistics, frauds related to lotteries, sweepstakes, and prizes have accounted for more than 1 lakh in the USA. Moreover, scams related to foreign money offers have accounted for over 38000 cases. Some culprits get hold of the login credentials of other peoples’ social media accounts and then post unwanted content. They might even use that account to harass other people in the form of cyberbullying. This way, they can ruin a person’s image and status.
Identity thieves may access this information through various means. Some culprits go through the trash bins in search of bank statements and credit card details. Some others go into the extent of probing the hard drives of stolen or disposed of computers and devices. More advanced methods involve phishing and hacking the databases of companies and networks of financial institutions like banks to steal the information of customers. In 2020, nearly 1 lakh of bank frauds and over 2 lakhs of loan and lease fraud cases were reported in the USA. In more critical cases, identity theft criminals may even break into the systems of the Government and access public records. Overwhelmingly, Government documents and benefits fraud accounts for the majority of identity theft cases reported in the USA. The figure was over 4 lakhs in 2020. Besides, identity theft related to employment or tax and phone and utilities collectively added up to over 2 lakhs of incidents in 2020.
A common scenario in the contemporary identity theft arena is infecting computers using malware. Recent reports have indicated an annual rise in enterprise ransomware by 12%. With nearly 300 to 600 million new variants of malware created each year, the risk of identity theft is intimidating. There are also organized underworld groups that indulge themselves in gathering personal information through browsing social networking sites. Technological advancement has created more avenues for identity fraud criminals. Statistics show an increase in the new account frauds to USD 3.4 billion in 2018 from USD 3 billion in 2017. This is an implication that criminals are finding new ways to commit identity theft.
While millions of people become victimized each year from identity theft, only around 7% of such victims report the incident to police. Hence researchers suggest that the actual incidents should be substantially more than the reported cases. On average the cost per data breach incident in the world is around USD 3.86 million. But in the USA, the figures are daunting. Out of all identity theft victims in the USA, around 66% had to incur a direct financial loss. In 2020, the losses due to credit cards and debit card fraud alone recorded USD 149 million and USD 117 million respectively.
Identity theft could even harm the credit rating of the target or cause a loss of employment. Beyond financial damages, it could also ruin a person’s reputation and affect his/her mental and emotional health. Findings of a recent survey show that around 1/10th of the identity theft victims had undergone serious emotional breakdowns. Also, 8% of victims had to encounter significant problems both at home and at work following an incident of identity theft. Therefore, the aftermath of identity theft is terrifying.
As per the United Nations Office on Drugs and Crime (UNODC), identity theft is most often the initial step of a more serious crime such as drug trafficking, human trafficking, money laundering, or even terrorism. The worst scenario in identity theft is sometimes people do not realize that they have been victims until things have become far more serious.
According to the NCVS, almost half of the identity theft victims found out about the theft only when their bank called them. Another 19% discovered through fraudulent charges on the account and 8% from money missing in the account. Other common ways that victims came into realization were through receipt of unpaid bills, declined credit cards, bounced back cheques, and through problems with applied loans. 35% of the victims were clueless about how their details were stolen while 94% did not know anything related to the offender. Shockingly, only less than 2% of all the victims discovered that their identity has been stolen by being vigilant about suspicious online activities and transactions in accounts. The gravity of identity crime increases day by day with the culprits discovering more sophisticated methods to commit identity theft.
Surprisingly, younger people are at more risk of losing their money to identity thieves. Out of the reported victims in the USA, 14% are between 20 to 29 years of age. Studies also suggest that children have become likely targets of identity theft owing to their clean credit histories. Every year, nearly 1.3 million children have their identities stolen. In the USA, nearly 25000 such cases are reported annually. Concerning gender, females are more likely to experience identity theft than their male counterparts. According to the NCVS, 13.5 million females and 12.5 million males have become identity theft victims in 2016. While the race did not show any significant differences, more whites became victims of identity theft than blacks.
The survey also discovered a positive association between income and the risk of identity theft. In the USA, the highest income category with an annual income of USD 75000, represents 35% of the working population out of which 14% has experienced some sort of identity theft. The risk is even higher for those living in the states of Kansas, Rhode Island, Illinois, Nevada, and Washington, which tops the list for identity theft ranked by the number of reports per population. But, in terms of absolute figures, California has consistently recorded the highest number of identity theft complaints with nearly 50000 cases annually.
According to the Hootsuite Digital Overview Report, there are 3.8 billion active social media users in the world which is almost 50% of the global population. In the USA alone, over 10 million people are active on social media. Sources indicate that possession of a social media account increases the probability of identity theft by 46%. This could be substantiated with the data by FTC. Accordingly, a 36% annual rise in identity theft through social media and emails was observed in the USA in 2020. But what increases the risk of massive financial damage is the growth in e-commerce.
With more people buying online, their credit cards and other financial details have got exposed to third parties. According to statistics, the USA is among the top 10 countries with the highest e-commerce adoption. 65.6% of the US population aged 15 above has a credit card. In 2020, 77.2% of internet users in the USA have bought something online or paid a bill online. While these online shopping trends have a positive impact on the US economy, it has also increased the exposure to frauds. In 2020, identity theft related to online shopping and payment accounts in the USA reported a dramatic increase of 38%.
As per the cybercrime statistics, an increase in identity theft was witnessed immediately following the outbreak of the Covid-19. Accordingly, by May 2020, global identity theft crimes have grown by 35% and it was forecasted that the numbers would continue to increase. According to the United Nations Conference on Trade and Development (UNCTAD), this can be attributed to the sudden increase in online activity with the onset of the pandemic including remote learning, and online entertainment. While stuck at home, people were increasingly purchasing online and enterprises were transforming to digital. As per a recent report by UNCTAD, global e-commerce sales increased to 17% after the pandemic. With remote working being the new normal of the game, more avenues have been opened up for identity theft.
Similar to the USA, Identity theft has come to the forefront of crimes in Australia. Findings suggest that over 75000 people which is around 4 to 5% of Australians become victims of identity theft every year. According to the Australian Criminal Intelligence Commission, identity theft results in an annual loss that exceeds USD 2 billion every year. As per the Australian Institute of Criminology (AIC), 1 out of 4 Australians has fallen victim to identity theft on some occasion over their lifetime. The frequency of data breaches happening in Australia is alarming with approximately 1 incident per week, with a loss of 19000 records, on average. This costs around USD 138 per record and USD 2.16 million per company. Investigations have found that loopholes in the Australian identity infrastructure have been the major enabling factor for the increased vulnerability of identity crimes. This necessitates prompt action by the Government in strengthening the security systems and detection mechanisms.
While identity theft in Canada has persistently displayed an increasing trend over the years, there has been a spike in recent years with 12.46 cases reported per 100000 residents of Canada in 2019 compared to 2.37 cases in 2010. Accordingly, within a decade, figures have almost increased by 5 times. Studies have also revealed that 42% of Canadians have recently observed an upsurge in suspicious messages, emails, and phone calls. On average, identity theft in Canada results in an annual loss of around USD 96 million. A recent survey has put forth the education gap as one of the major causes of the rising identity theft crimes in Canada. Accordingly, it was found that nearly 52% of Canadians were incompetent in recognizing the warning signs of identity fraud. Another study conducted by CPA Canada in 2020, has identified using outdated and unsafe mechanisms to protect one’s personal data as the predominant cause for the increased risk of identity theft in Canada.
A recent survey shows that around 6% of people in the UK have been victims of online identity theft at some point. Sources reveal that over 189000 identity theft cases were reported in the UK in 2018 out of which 65% had a presence in online or social media. In 2019, identity theft hit a record of over 223000 incidents. In the UK, older people above 60 years and youth below 21 years are more vulnerable to identity theft than others. While credit card frauds are the most prevalent identity crimes in the UK, the financial loss of such activities has recorded a 50% increase annually on average. There is also a trend of malware offenses with a staggering rise of 42%. Also, a 53% rise in social media hacking was observed in the UK during the past year. Nevertheless, findings highlight that a majority of cases go unreported owing to the lack of trust that people have concerning the relevant fraud prevention authorities.
Since there is a marked rise in identity theft every year, people should be more vigilant about the potential theft of their personal and financial information. Accordingly, it is highly advisable to safeguard one’s login credentials, create strong passwords and keep the virus guards up to date. It is prudent to constantly monitor your bank accounts for any dubious transactions. Besides, special caution needs to be taken when disposing of financial statements, receipts, and credit card bills. It is best to destroy them safely by shredding them into small pieces or by burning them. In case you detect any sign of identity theft, you must act wisely and urgently. If it is related to your bank account, you can place a credit fraud alert in your account and freeze the funds. If your social media account is under threat you can consider changing the passwords. It is a must that you report to the relevant authorities immediately.
As highlighted by the Center of Victim Research, the best prevention strategy for identity theft is raising awareness among the people through education and intervention programs. Complementary to this, insurance schemes need to be strengthened and appropriate helplines have to be established to restore the emotional stability of the victims. Hence, Government has a pivotal role to play in mitigating identity theft. Nevertheless, it is also your responsibility to remain observant and attentive to what is happening in society.