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Chapter 1 – Scary Statistics: Is the Internet Really Safe?

In 2007, United States consumers lost an estimated $3.2 billion in online credit card fraud, according to a study done by Celent Communications. $3.2 billion.

The Federal Trade Commission estimates that ten million Americans have their identity stolen or misused every year. 10 million every year.

One of the major U.S.-based consumer research firms estimated that one of the most common online scams, phishing, alone costs consumers $929 million in 2005. Did you get that? $929 million.

The statistics are scary, and as the Internet gets more and more popular, these statistics are only going to rise — unless consumers everywhere begin to work together to take a stand against online identity theft. The best way to make the journey to a more secure future is with a guide, and this online identity theft prevention kit is your map, so to speak. It may sound a bit cliché, but knowledge really is power. Until you understand the threats out there on the never-ending World Wide Web, you cannot stop the criminals that want to take advantage of you and your personal information, and until we can stop these crooks, consumers everywhere will lose a ton of money every single year.

How much money? Billions. Let us look at some more statistics:

• Americans spend $1.7 trillion in the medical industry every year. Fraud accounts for up to 10 percent of that money — billions and billions of dollars.

• Crime cost banks and other financial institutions in the United States $33 billion in 1998. That statistic has only risen over this past decade.

• The average consumer loses over $2,400 in an identity theft. That is not counting the damage it does to your credit and reputation.

• The average business loses over $10,000 in an identity theft.

• In 2005, almost 50 people lost over $1 million during their identity theft problems.

A stolen identity can be sold for some quick cash or used for any number of things, such as getting a job, running from the cops, or opening credit card accounts. Some people do not have a day job; they just steal identities. Others are able to work part-time or seemingly live beyond their means. Still others can enter this country illegally with a stolen identity or commit crimes in your name. Anyone you meet, from your son’s new girlfriend to your gardener to the guy in the online forums who private messaged you, is a potential threat. Paranoia will get you nowhere. Instead, you have to think fast and act faster, all while continually protecting yourself and your information.

Learning about Prevention is Prevention: Be the Fast Zebra

There is some good news in all this: Identity thieves do not like hard targets. The whole goal of stealing identities is to collect information as fast as possible to make as much money as possible. If you remember even half of the identity theft prevention tips listed in this book, you will be a much harder target, and the amateur identity criminals, which constitute at least 50 percent of all thieves out there, will pass you by. Therefore, the first step of prevention is to learn about prevention.

Did you buy this book online? As silly as it sounds, that in and of itself may have already helped fend off an attacker. On the chance that an identity thief tried to access your account wherever you bought this book, seeing that you are interested in catching people just like him or her is a natural deterrent. With millions of Internet users, why would you go after someone who is taking an active interest in putting you behind bars? There are plenty of fish in the sea.

Statistically, it simply makes the most sense to go after the easy targets. Think of yourself as a zebra and the identity thief as a hungry lion. Now, a lion does not just run to the group of zebras and attack. No, the lion plans carefully and watches all the animals, looking for the weaker links. When zebras sense that a lion is in the area, they begin to run, and the lion will pick off the slowest and weakest. There is no sense in struggling to kill a larger, faster, stronger animal, in the lion’s mind, and he is right. If a lion goes after a fast zebra, he may miss his target, resulting in no meal at all. The weaker zebra is obviously the better choice. Prevention tips are like speed to zebras. Every tip you learn will make you a little faster and a little stronger. If you are at the head of the pack, most identity thieves will pass you up and go after the other, more weakly protected identities instead.

And if that does not make sense to you, think about it this way: If nothing else, prevention tips will make you a savvy consumer. You will be able to spot identity theft sooner, contact the right people more quickly, and bring the culprits to justice. Every identity thief behind bars is one less criminal crippling the Internet for the rest of us.

While this book is a good start for identity theft, keep in mind that the world of thievery on the Internet is changing constantly. Therefore, you need to keep up the defense at all times. You are a fast zebra now – do not get out of shape!

How we got Here: A Brief History of Identity Theft

Identity theft is nothing new. One can almost imagine cave men pretending to be one another to get a mate or sleep in the best cave dwellings. In fact, there are cases of identity theft in very early religious texts, such as the Old Testament of the Bible. In the book of Genesis, which is one of the oldest in the entire Bible, Jacob pretends to be his brother, Esau, and tricks his near-blind father into granting him a handsome birthright. This was probably not the first case of one person pretending to be another, but it does illustrate a good point – identity theft is usually about money or rights. Today, things are no different, although someone does not have to be physically blind to be blind to a destructive identity theft.

Identity theft really exploded, however, with the use of the credit card. Credit cards were first proposed in the late 1800s, with the first working models being used in the 1930s. However, at this time, credit card usage was very, very limited, so using them for a means of identity theft was next to impossible. However, in the 1950s, the Diner’s Club became the first mainstream credit card used by the general public, followed shortly by original first versions of the Visa. Less than a decade later, MasterCard joined the scene, and soon, many credit card options were available.

However, until the 1980s, using a credit card was cumbersome. The clerk had to verify that you were allowed to use the card by searching through a large book of numbers to make sure you were in good standing or by calling the card company and verifying your number. Credit cards were impractical, and prone to identity theft, as huge books of names and numbers were published for use in most of the major stores in the country. Identity thieves simply had to be smart about it to steal a credit card number. Unfortunately, once they had it, they could be easily and quickly caught, since there really weren’t many credit cards in use.

The swipe machine with instant verification made identity theft more lucrative, but also a bit harder. The use of credit cards rose considerably, and by 1995, over half of all American households owned a credit card. With the mainstream popularity of the Internet, these figures have been on the rise even more, since purchasing items on the Internet is most often done through using a credit card. Between one half and three quarters of all identity theft cases in general include the misuse of a credit card. Millions of people have become victims of identity theft since they were first put to use over half a century ago.

And it is not only about credit cards. The history of identity theft spans multiple tracks, with people using a number of methods to steal your identity online. Stealing your credit card information is just the start. Savvy Internet thieves learn how to steal all sorts of private information about you, including the mother of all private identification numbers, your social security number.

Who is Stealing Identities?

Identities stolen online often bring to mind the picture of a computer nerd spending hours late into the night creating complex computer programs. In reality, most computer nerds would rather be leveling up on Final Fantasy or worshipping their copy of Halo 3. Most online identity thieves are not the stereotypical computer brains with no friends and no lives. With a faceless crime such as this, there really is no norm. You just cannot assume that identity thieves are lurking in dark corners. White-collar criminals come in all shapes and sizes, and most are not nearly as sinister-looking as your mind wants you to believe.

Victim information shows that over 25 percent of all identity theft victims know their attacker. That means if your identity is stolen, there is a one in four chance that an acquaintance, friend, or family member did it. Yes, I said family member. Thousands of relatives actually steal the identities of their children, parents, siblings, cousins, and grandparents every year. You may think you know your spouse well, but they are not immune to becoming identity thieves either. However, most of these cases do not involve online actions. If a family member wants to steal your identity, it is most likely that he or she will do so the old-fashioned way — by actually taking your credit card, your social security card, or other piece of vital information. Regardless of how it is done, identity theft within the family is a big problem.

Beyond your family, trusting others should be even more difficult for you, especially when your personal information is involved. Studies on identity theft have proven that about 70 percent of all cases are insider jobs, meaning that the employee of a company with your information is the person who wants to steal your identity most. Want an even scarier statistic? Many of these insider jobs were done by the CEO, president, or business owner. Your information just is not safe.

Check out the following descriptions. Can you tell which of the following ten descriptions are of people who committed identity theft in the past? Take this quiz and see how you do. Be sure to check Appendix 2 for the answers.

1. Mark and Nancy Shae are a fun couple, running an adult business online. They built up online friendships over the course of a few years, participating in a number of online forums and message boards. Suddenly, Nancy announces that Mark has passed away. She has to shut down her online sites to prepare for the funeral and pay her other expenses. A few of the other people on the forums suggest that a group of you band together to help. After all, Mark and Nancy have been good friends and have great sites. They set up a memorial fund of sorts where members can donate to help Nancy pay for funeral expenses, and they ask anyone with Web design experience to donate time to help keep the sites operating. Do you help out?

2. You are a leader in the computer industry, and a young man from Seattle calls you to tell you that he is working on a whole new networking system for your products. He makes promises that this could change the world and wants you to hire him, giving him access to your products. This self-proclaimed computer genius is a college student with no real course of study, but does have a background in technology and amazing SAT scores. Do you agree to meet for a product demo and possible sponsorship?

3. Scott, 45, from Boca Raton, Florida owns a company that specializes in online advertising. He works with clients from around the world and contacts your company to see if you are interested in this innovative new product. According to Scott, the company has already compiled a list of people who are potentially interested in your product. Do you decide to work with Scott?

4. You decide to get a new job and apply at one of the world’s largest retail stores. After a lengthy application process, you are denied on the grounds that they already had your social security number on file. You have never worked there before, but they assure you that there has probably been a mistake, and they will look into the matter as soon as possible to correct the faulty employee number in their records. In the meantime, they recommend that you apply to other stores, but they will call you if you become eligible after the mistake is cleared. What do you do?

5. You log online and join a Christian dating site, where you meet a number of nice men. One in particular stands out, and you begin exchanging e-mails back and forth to get to know one another. The conversation gets more and more passionate, and you look forward to reading his e-mails every day. You decide to plan a face-to-face meeting. However, the man is a construction worker and in another country at the moment building a sports stadium, so he asks you to wait for him. You agree, and in the next few months you receive multiple gifts from your suitor, including a bouquet of balloons that says “I love you” sent to your office. He is set to come home in a few weeks, and you cannot wait to meet your soul mate. Suddenly, there is a problem. He is having a hard time cashing his checks for the return trip home since he is in Africa and asks if you could do him a favor. Would you cash the check and wire him the money? You are hesitant, but you agree. In a few days, you feel duped because you have sent him the money but the bank has called and there was a problem with the check. You confront him about it and he feels horrible. He will be home in a few days, though, and will straighten this out. You talk about moving in together and how great it will be to finally sort out the money mess and get to know one another. Do you continue to trust him, even after the problem?

6. You have tried the bar scene and, although you have met plenty of women, cannot seem to find that special one. While it is a bit embarrassing and you do not tell any of your friends, you sign up on some online dating Web sites and begin to browse the other profiles. After a few weeks, you meet a very cute girl online, and after some e-mails back and forth for a little less than a month, she wants to meet up with you. Do you trust her and go on the date?

7. After battling a number of health problems, you are told by your doctor that you should consider a number of medications to help. However, these medications are all very expensive and you opt instead to simply try to make do. In the next few months, your condition only worsens — but so does your financial situation. You cannot even afford to see your doctor again, as you have no health insurance coverage. You go online to see if there are any home remedies or non-prescription drugs available to help you, and you find an online pharmacy that will consult with you and help you buy drugs at a fraction of the cost. It seems legitimate. You are asked to fill out a form about your condition, which will then be reviewed by a medical staff to see if you qualify. If you do, you can get generic versions of the drugs you need without an official prescription, and they will cost a lot less. You fill out the application, noting your symptoms and past treatment, and in less than a week you have been approved. Do you order the online medications at a low price?

8. Larry was one of the country’s first PhD students in the field of computer sciences. He is an average-looking guy with a five o’clock shadow and a love for building new programs. After studying programming for a few years, he begins to develop a new program that scans Web sites all over the Internet, leaving no stone unturned. He decides to quit school and focus on this project full-time, realizing that this new technology could bring in millions. Larry understands computers better than just about anyone else in the whole world, and he asks you if you would like to invest in his little project. Do you?

9. It is your son’s first day of soccer practice and the coach informs you that, in order for your son to play, you must release his social security number and health insurance information. It seems like a valid need, but does make you a bit uneasy, especially since the coach asked for the number in a quick e-mail to you. Your son really wants to play soccer, and a call to the school confirms that, to play, the coach does need the social security number in case your son is hurt while you are not there or cannot be contacted. Do you trust the coach?

10. You and your spouse finally have enough money saved up to purchase a house. You begin looking at a few properties and decide to contact a real estate agent to help you find the perfect house. She shows you a few, and you are surprised at just how expensive real estate can be. However, she also tells you that she can work out a deal with a lender rather quickly and, being on a tight budget, you choose a house in the downtown area. It needs a few repairs, but the realtor and her lawyer show you the documentation that the house has been inspected and the information from the lender that you have been approved for the loan. Should you sign the paperwork and buy the house?

The stats below may surprise you – these are the people who are really stealing your identity, according to numerous studies done by the Federal Trade Commission, the Social Security Administration, and private protection agencies:

• About 60 percent of identity thieves are people who do not know you. That means the other 40 percent are people who do know you – family members, co-workers, neighbors, friends, or other acquaintances.

• The vast majority of identity thieves (over 70 percent) have no prior criminal record. For many, they are not even running scam rings – this is their first offense.

• While most identity thieves are males, women account for about one-third of all cases, which is a much higher percentage than most other crimes.

• An overwhelming majority of people are not stealing identities because they need drug money. In fact, drug-related identity theft crimes account for less than 3 percent of all identity theft cases.

• When businesses are attacked, it is only done by an insider about 30 percent of the time. Over time, an outside source finds a loophole and attacks.

As you can see, the numbers are really general. If we had a hundred identity thieves in a room together, you would know 40 of them and not know 60 of them. 30 of them would have been in trouble with the law before, but 70 of them would be first-time offenders. Thirty-three of them would be women and 67 of them would be male. You cannot really draw conclusions from those characteristics at all – identity thieves really can be almost anyone.

That does not mean that we should be paranoid. In general, only a small percentage of the population is trying to steal your identity. However, it does mean that you have to be smart. You have to know that absolutely everyone in your life – from your teenage son to your next door neighbor to your drycleaner – is a potential identity thief. Do not let paranoia take over your life, but at the same time, do not share information with everyone you meet.

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