A new study of identity theft cases filed by depository institutions revealed a shift among identity thieves away from credit card fraud toward consumer loan fraud. However, the data also showed that identity thieves are having a difficult time with auto and mortgage loans and now have their sights on student loans.
The study, conducted by the Financial Crimes Enforcement Network (FinCEN) — an agency operating under the U.S. Treasury Department — showed that while cases of identity theft are on the rise, financial institutions are becoming more vigilant in identifying suspicious activity before loans are funded.
According to the study, suspicious activity reports (SAR) characterized as identity theft rose 123 percent between 2004 and 2009. Reports filed by depository institutions, however, increased 89 percent.
Credit card fraud was the most frequently reported suspicious activity, appearing in more than 45.5 percent of filings reviewed. Thirty percent of the filings were made up of a variety of consumer loans, with student loans making characterized in 56.5 percent of those filings.
Until 2009, filings related to auto loans were about twice as high as other loan types. And after increasing rapidly between 2004 and 2006, the rate of filings identified as auto-related identity theft slowed before falling in 2009. In that year, about 10.5 percent of the identity-theft associated sample SARs reported successful or attempted auto loan fraud.
“The data suggest that filers making auto loans have had significant success in identifying such fraudulent loans before they are funded,” read the report. “Overall, slightly less than 50 percent of the fraudulent auto loans reported in the sample data were rejected prior to funding.”
The trend in auto follows the trend seen in other categories reviewed by the study, which analyzed SARs filed between January 2003 and December 2009. It attributes the high reports of identity theft during the first year to identify theft becoming a characterization on the SAR filings in 2003. Filings rebounded in 2008 after falling in 2007, which the study attributed to identity thieves attempting to beat the Red Flags Rule’s Nov. 1 effective date that year. Filing dropped off in 2009.
Still, problems in the auto segment persist, as highlighted in the special notes section of the report.
In one case, a bank reported that an auto dealership employee allegedly used a customer’s identifying information to forge an auto loan application to purchase a vehicle on which a customer had already secured a legitimate loan. When the loan was funded, the employee allegedly stole the proceeds.
In another filing, a filer that makes student loans reported the operation of a student loan fraud ring that it had tied to dozens of fraudulent loans totaling several million dollars. The filer determined that all the victims listed on the student loan applications had purchased vehicles at the same auto dealership.
Overall, 12 sample filings analyzed in the study were reported breaches of employee or customer databases. Filers reported that in four of those filings, a current employee was found responsible for intentional breaches in order to sell identifying information to identity thieves. In 16 sample reports, filers said their own employees set up unauthorized accounts using customer identifiers so the employees could meet sales or incentive goals.
“Filers reported mortgage loan professionals in six sample filings, auto dealer employees in three and tax preparers in two,” read the report. “These individuals apparently abused customer-supplied identifiers to set up unauthorized credit, loan or depository accounts.”