Guest Blogger: Stop Identity Fraud from Undermining Your Financial Institution

While the headline issues in the financial services industry are focused on the economy and related events in Washington, unfavorable trends in identity fraud continue to undermine consumer trust in our financial institutions. Identity protection may not be top of mind among industry CEOs. This could be a costly mistake for the industry that pays the lion’s share of the $48 billion lost annually to identity fraud in America. Allow me to elaborate on a few of the trends that indicate a need for action now.

First, it is well established that a higher unemployment and recessionary environment will drive an increase in crime. Financial crimes, identity related, and just old fashion signature and card fraud – as the crimes of preference in the early 21st Century – will increase this year. And they certainly increased in 2008. On February 9th Javelin Research released their annual Identity Theft and Fraud study (co-sponsored by Intersections), and the results confirmed that identity theft increased by 22 percent in 2008 over 2007. It is important that we all realize ID theft and fraud are not going away.

Second, we are increasingly concerned about two trends that we intuitively feel are on the rise. We believe while several years ago much of the so called “breach” of data was the careless loss of files, often encrypted; the world has changed, and we fear (with some basis) that sophisticated criminals are more prevalently invading the computer systems of our financial community (à la Heartland Payment Systems in January of this year) and the ancillary entities that utilize personal and credit information in commerce. In 2008 we saw increasing evidence of criminal intent “breach” and we fear there will be much more in 2009. Unfortunately, the bad guys have highly skilled and highly paid IT professionals on their side, and with the economic slowdown around the world, expect more movement in that direction.

This brings me to the third point, what a friend calls the perfect storm coming to our industry. Both he and I have a genuine fear that the breadth of data and personal and financial information in the hands of sophisticated criminal groups far exceeds the expectations of fraud fighters – both government and industrial. Additionally, increased keylogging, phishing and social engineering data theft turns millions of unrelated data bits into useful (or harmful) information. Imagine the cost of a massive run to use that personal information in an organized fashion over a brief period. Twenty million records at four thousand dollars per record would cost the system eighty billion dollars. Oh, but it can’t happen. And we can’t be in an economy that needs a two trillion dollar bailout to save our economy, right?

So where do we go? Near term, we continue to believe comprehensive services that provide credit and non-credit monitoring services and substantive victim assistance is the right answer for consumers. Intersections has long been at the forefront of partnering with financial services institutions to bring this level of protection to their customers. We are especially proud of our long standing relationship with ITAC to operate the Identity Theft Assistance Center – the only victim assistance service linked to the fraud prevention units at dozens of our leading financial institutions. We have also partnered with ITAC to create the ITAC Sentinel brand of identity theft protection services, which interested consumers can purchase directly from here.

Longer term, the financial services industry needs continued commitment to the fight against identity theft. This is an industry problem that requires industry solutions such as ITAC to maintain consumer confidence in our financial system.

Michael R. Stanfield
Chairman and Chief Executive Officer
Intersections, Inc.