Key Takeaways
1. Identity theft is a growing threat to individuals, banks, and businesses globally.
2. Find the examples, types, and real-world cases of how identity theft occurs.
3. Discover the most important ways to prevent identity theft for individuals and financial institutions.
4. Learn what to do if you’re a victim of identity theft and how to safely recover.
Introduction
One of the most prevailing and notable forms of financial crime is identity theft. The digitalization of businesses and convenience of conducting financial transactions online also come at a cost, as they have contributed to the influx of identity theft. Identity theft in banks, identity theft in financial institutions, and identity theft in businesses are major concerns affecting individuals and organizations globally.
In this article, we will discuss what identity theft is, the major examples and types of identity theft, how to prevent identity theft, and the best identity theft protection tips for individuals and financial institutions.
What is Identity Theft?
Identity theft is a situation where a second party or person uses another individual’s personal information and credentials without their knowledge with the intent to commit fraud or other crimes. These data could be their bank account or credit card details, social security number, login credentials, driver’s license, etc.
A case of identity theft, for instance, is when a person’s stolen identity is used to make purchases, open dubious accounts, or apply for benefits in the name of the victim.
Most often, identity theft results in huge financial losses as well as long-term sociological damages to its victims. According to the FTC Identity theft report (Consumer Sentinel Network Data Book 2024), the complaints on identity theft have accounted for a significant part of all consumer fraud cases, with an increase from the previous year.
What are the Examples of Identity Theft?
As we have discussed the meaning of identity theft, let us look at the real-world methods criminals use to carry out identity theft in businesses and financial institutions:
1. Phishing and Spear Phishing: This occurs when attackers impersonate trusted sources to log in with stolen data. They use fake texts, emails, or phone calls impersonating someone from a trusted institution to trick the recipient into providing credentials or personal information.
2. Data Breach / System Hacks: Attackers unlawfully access or break into corporate or institutional databases to extract large amounts of their users’ data. Then those data sets are sold or used as a data point for future attacks.
3. Skimming / ATM / POS devices: Criminals attach small devices, “skimmers,” on ATM machines or on a card reader at the point-of-sale. This way they capture card data and PIN numbers, which presents a significant risk for identity theft in banks. Knowing how to protect yourself from identity theft and employing identity theft protection services is essential.
4. Credential Stuffing/Brute Force Attacks: Combining username/password pairs leaked from past data breaches in an attempt to gain access to a website. Once an account is breached and compromised, then fraud can proliferate to other sites.
5. Mail Theft / Dumpster Diving: This involves physically stealing mail or going through discarded documents like bills and bank statements to collect personal identifying information.
6. Account Takeover: Once an account is compromised, the fraudster is able to change the info associated with the account. They immediately lock the real user out and begin transacting or opening additional accounts. Account takeovers are associated directly with phishing and breaches.
What are the Major Types of Identity Theft?
Below are some major types of identity theft that everyone must be aware of. Each category comes with its own respective risks and implications for individuals, banks, and businesses.
1. Financial Identity Theft: Criminals use stolen financial information in order to access credit cards, bank accounts, or, in some cases, open new lines of credit. This is the most common type of identity theft and one of the legitimate concerns surrounding identity theft in financial institutions.
2. Government/Tax Identity Theft: This is using an identity to claim benefits, file fraudulent tax returns, or alter government records in the name of another person.
3. Synthetic Identity Theft: Synthetic identity theft occurs when a fraudster uses a combination of legitimate and false personal data to establish a new identity. For example, using a valid Social Security number and made-up details to take out loans or be issued credit.
4. Criminal Identity Theft: Criminal identity theft occurs when a person provides another person's information to law enforcement when they are arrested or undergoing an investigation. The real person then finds themself in a position of facing false charges or warrants. This is typically how people fall victim to criminal offenses they didn't commit; hence, it is necessary to be cautious and protect yourself from identity theft and fraud.
5. Social Security (SSN) Identity Theft: If your Social Security number is stolen, a fraudster can use that detail to defraud your taxes or steal benefits.
6. Digital/Online Identity Theft: This is another common type of identity theft in the world of digital transactions today. Several forms of hacking, phishing, credential stuffing, and taking over online accounts are growing concerns for identity theft in businesses.
Read more on Ways to prevent synthetic Identity Theft
How can you prevent Identity Theft?
Identity theft prevention begins with strong digital awareness.
Here are some of the best identity theft prevention tips for individuals and banks/financial institutions, which explore how to protect yourself from identity theft and steps organizations can take.
For individuals: 7 ways to protect your identity
1. Create strong, unique passwords and use a password manager.
2. Turn on multi-factor authentication (MFA).
3. Check credit reports and statements regularly, and consider a freeze if one is breached or compromised.
4. Find identity theft monitoring or identity protection services that offer alerts, dark web scans, and assistance if stuck in identity theft and identity fraud. Some of the best identity theft protections combine monitoring, insurance, and restoration of fraud.
5. Be careful of unsolicited requests of calls/emails.
6. Shred anything sensitive before you throw it away.
7. Be cautious about what you post on social media platforms.
Also check guide on Method of protecting yourself from identity theft
For banks and businesses: Ways to reduce identity theft in financial institutions
Identity theft prevention should be approached with layered security at each step of onboarding and transaction sessions. Here are other precautions to note:
1. Have strong “Know Your Customer” (KYC) and Anti-Money Laundering (AML) processes in place for account opening, liveness detection/person verification, and documentation verification.
2. Building robust KYC and AML systems is essential for identity theft prevention.
3. Utilize transaction monitoring and behavioral analytics to identify anomalies.
4. Implement device/IP scoring to stop unauthorized logins to block identity fraud and identity theft.
5. Educate customers on how to prevent identity theft and how to protect my identity.
6. Support customers by encouraging and facilitating prompt reporting of identity theft incidents using official channels such as the FTC Identity theft report site in the U.S.
7. Provide enhanced identity theft monitoring and alert programs. Such as credit file monitoring and dark web monitoring so there are alerts to suspicious activity or data breaches both for the bank and for customers.
8. Create a thorough written Identity Theft Prevention Program following the requirements of the FTC’s Red Flags Rule. This includes procedures for detecting identity theft, responding to incidents of identity theft, and periodically updating procedures to account for identity theft emerging as a threat.
INTERESTING READ: Combating identity theft strategies and technologies for businesses today
FAQs
Q1: What to do if someone has your Social Security Number (SSN)
If someone has stolen your Social Security number, contact the Social Security Administration (SSA) as soon as possible and also contact the credit bureaus to place a fraud alert or credit freeze. You should also check your bank and credit accounts for suspicious activity and file an FTC Identity Theft Report.
Q2: How to file a police report for identity theft
Collect proof, such as documented account statements or account records, and go to your local police department or file online if possible. Give them all of the information you have and get a copy of the report to show you are a victim of identity theft.
Q3: How to report identity theft
First, inform your bank and local authorities, then utilize official government tools for recovery.
Q4: How to protect yourself from identity theft?
Enable MFA, lock or monitor your credit, turn on alerts for your bank accounts, have a password manager, secure your devices, and consider using monitoring services.
Final thoughts
Identity theft keeps being one of the largest threats to individuals, banks, and businesses worldwide. Every victim of identity theft experiences not just financial loss but emotional stress, and as it is widely said, prevention is way better than recovery.
The impact can be mind-boggling if ignored, and that's why taking action through some proactive measures, such as enabling multi-factor authentication, utilizing the best identity theft protection services, and being alert to scams, can make a huge impact.
In order to truly protect your identity and your organization against new fraud tactics, you need more than basic protections.
Partnering with a trusted solution provider like Youverify, you gain a competitive advantage through advanced transaction monitoring, fraud detection, and compliance solutions. Our technology empowers financial institutions and businesses to stay one step ahead of criminals while ensuring regulatory compliance. To get started, book a demo today.