What Is Identity Theft: Definition, Its Types and Prevention

Nowadays companies generate and manage vast amounts of customer-related data. This surge in data has led to meaningful security threats that companies must address. In this case, identity thread is one of the major security risks.

Identity theft influences a great amount of organizations, public institutions, and large financial agencies. 

Let’s discover what identity theft is, define its types, and learn what can be done to make your business more fraud-resistant.

What Is Identity Theft?

Identity theft is the illegal use of someone’s financial and personal information (their name, birth date, Social Security Number, address, driver’s license details, or credit card number) for any gain, usually monetary. Therefore identity thieves pretend to be someone for their own benefit while dealing with organizations. 

Identity theft affects the people whose identities are stolen and the businesses that are affected by these activities. As it’s hard to discover identity theft at early stages, the consequences of the crime can be extensive.

Types of Identity Theft

Criminal minds are pretty creative when it comes to scams and fraud ploys. Let’s review several common types of identity theft.

Financial Identity Theft

Financial identity theft occurs when somebody’s private details are stolen for financial gain. Usually, payment details are used to make online purchases or conduct unauthorized transactions in the victim’s bank accounts.

Medical Identity Theft

Scammers get stolen information through medical data leaks, phishing emails, messages, calls, or improperly discarded medical documents and health insurance cards. Then they use the stolen ID data to fund some expensive medical treatment.

As a result, medical identity theft victims may discover unfamiliar medical histories in their records or even incur unexpected medical debts. 

Child Identity Theft

Child identity theft occurs when a juvenile’s stolen data is used by other people to open bank accounts, apply for loans, or claim government benefits for financial gain. 

The issue often surfaces years later, like when the victim applies for a college loan. Monitoring these fraudulent activities typically falls on the parents, who may not realize the threat, making child identity theft particularly attractive to criminals.

Social Security Identity Theft

It happens that a Social Security Number (SSN) is stolen. SSN data can be used by other people to commit any kind of fraud. It is called social security identity theft. Usually, scammers do it to gain financially. They can open bank accounts, apply for social security benefits, etc. 

Synthetic Identity Theft

A case where identity theft involves using a mixture of real and fake personal information is called synthetic identity theft. Scammers use stolen identities to gain financial advantage. They can open bank accounts or apply for loans. 

In most cases, synthetic identity theft stays unnoticed for a long period of time as it combines both fake and real information. 

Tax Identity Theft

Tax Identity Theft is a way to use stolen personal details to claim a tax refund. Usually, scammers do it before a real person files his actual tax return. 

As a result, a real person can’t get his tax return as it appears that the tax return has been already filed. 

Criminal Identity Theft

Identity thieves can use stolen personal information to hide criminal activities. This is known as criminal identity theft. For example, criminals may provide a stolen ID or driver’s license to avoid prosecution for infractions like speeding or accidents.

Employment Identity Theft

When a scammer wants to get employed and uses fake personal details, it’s called employment identity theft. The thief may be trying to obtain a job, pass a background check, or meet work eligibility requirements, often to avoid paying taxes or working illegally in the country.

Business Identity Theft

Business identity theft is a type of fraud when thieves assume the identity of an established company in order to conduct illegal operations, usually with the intention of making money. This can entail engaging in fraudulent activities and scams using the company name, tax identification number, or other sensitive information.

Identity Theft Prevention for Businesses

Identity theft continues to be a serious security risk for numerous companies. Organizations must, therefore, create and implement written identity theft prevention programs. These programs describe warning signs and red flags employees need to know when conducting their day-to-day operations. 

Besides that, there are more global regulations that help mitigate security risks connected to identity theft and fraud. Here are some that are worth checking:

• International Civil Aviation Organization (ICAO) standards 
• General Data Protection Regulation (GDPR)
• Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations
• Know Your Customer (KYC) regulations
• Electronic Identification, Authentication, and Trust Services (eIDAS) regulation
• Financial Action Task Force (FATF) Recommendations
• Payment Card Industry Data Security Standard (PCI DSS)
• Consumer Privacy Acts
• Electronic Signatures in Global and National Commerce Act (ESIGN), etc.

These publications state identity verification as an essential component between a business and its customers.  

Let’s discover the steps to take to strengthen your company against fraud and stop identity theft:

1. Establish Robust Identity Verification Processes: Before allowing access to important accounts or data, use multi-factor authentication and safe techniques to authenticate customers’ identities.
2. Monitor and Update Security Protocols: Periodically examine and update your security measures to stay ahead of new threats and ensure the reliability of your identity verification procedures.
3. Educate Staff: Every company member should be aware of how to recognize an identity theft attempt and know what steps to take to address it. It’s very important to instruct your staff members as they should know how to recognize and deal with identity theft attempts. 
4. Use Advanced Fraud Detection Tools: Equip the company with the latest fraud detection technologies to identify suspicious activity in time and prevent it. Use the latest fraud detection tools to quickly identify suspicious activities in real-time to take appropriate action.
5. Save Client Details: Ensure the safety of your clients’ personal details by using encryption, restricting access to personal information, and properly disposing of documents containing sensitive information.
6. Be Open with Clients: Provide your clients with the information and resources they need to save their own identities. Encourage them to report any questionable activity.

As identity theft remains one of the most serious security risks for any business, it is important to protect your company and follow an identity theft protection policy.

This ought to involve following industry rules, creating stringent security and data access guidelines, and improving all financial and data-related procedures in terms of due diligence. By implementing these procedures, your business may greatly strengthen its defenses against identity theft and lower the risk of fraud.