Identity theft is a fraudulent activity wherein one person poses as another to achieve (mostly) financial gain. It often starts a colossal crime.
The FTC’s Consumer Sentinel Network Data Book lists identity theft as a top consumer concern in 2021.
Familiarizing yourself with this issue and learning of its most common types may one day help you prevent it occurring to you. This article outlines the most common forms of identity theft as of 2023.
1. Tax Return Fraud
Tax return fraud is one of the most lucrative forms of identity theft. Criminals steal your Social Security number and personal data to file a tax return in your name with a small overpayment.
After submitting the return digitally, the IRS will refund the thief at the address provided within a few days. Prepaid cards, which are simple to convert into cash or other assets, are commonly used to issue refunds.
2. Credit Card Fraud
Credit card fraud is identity theft that entails stealing credit card information. The point is to use it for making purchases or withdrawing funds.
There are two main types of credit card fraud:
Application fraud occurs when someone uses your information to open a credit card in their name. It can happen if the culprit has enough information to fill out the application. They might also use fake documents.
In an account takeover, the criminal makes unauthorized charges on your card and reports it stolen or missing. The bank then sends a new card to the address the fraudster provides.
Today, criminals may make purchases without a physical card, thanks to online shopping. Moreover, credit card information stored in online databases could be compromised. Criminals can also use a skimmer to copy credit card information.
3. Loan or Lease Fraud
Reports of home loan fraud sometimes include identity theft claims. The borrower uses an unwilling and unknowing victim’s address, Social Security number, and birth date to acquire financing illegally.
Bank records, tax returns, pay stubs, W-2s, and phony employment verification letters are some financial information used in mortgage fraud. Getting a fake loan on a property you do not own or inhabit is also possible by forging paperwork.
4. Utility Fraud
The most prevalent form of utility fraud is when someone uses a victim’s personal information to open a utility account. This form of fraud is widespread because it is simple to commit.
Utility bills are usually kept open for several months past the due date before being turned over to collections, lowering the victim’s credit score. When a victim discovers the crime, the wrongdoer is gone and preying on another victim.
5. Bank Fraud
Willie Sutton, a notorious bank robber, allegedly spoke to Mitch Ohnstad, a reporter. Sutton stole almost $2 million and spent more than half of his adult life behind bars. Ohnstad asked, “Why do you keep robbing banks?” Sutton replied, “Well, that is where the money is.”
That sums up why banks are such a target for identity thieves.
Fraudsters can attack banks using stolen identities to:
- Create a bank account
- Getting a loan and then not paying it back
- Laundering money
When criminals commit bank fraud, they build a digital footprint that matches the victim’s ID or create a synthetic ID profile. They get their information through data breaches and phishing. That cements the need for cybersecurity solutions, including password managers, VPNs, and cloud storage solutions.
6. Securities Account Fraud
Investment fraud occurs when unaffiliated parties exploit a company’s connections with investors. These are the four most typical scams:
- Money laundering and account opening scams
- Con artists impersonating legitimate businesses
- IT Support fraud
- Email phishing scams
Regulation S-ID helps prevent investment funds. Financial services providers, like investment advisers, broker-dealers, and investment companies, are subject to this regulation’s mandate. On July 27, 2022, the SEC imposed fines ranging from $425,000 to $1,200,000 against three broker-dealers for abuses of Regulation S-ID.
7. Social Media
Scammers are also increasingly using social media. In 2021, social media ads, posts, or messages were the initial point of contact for more than one-quarter of fraud victims. Data suggests that in 2021, social media was the most lucrative channel for scammers.
Hackers could exploit your stolen social media account to defraud others or damage your reputation. Criminals can make you look bad in the eyes of your friends, family, and coworkers if they succeed in scamming those people for money or spreading hate speech.
Identity theft involves a perpetrator opening new accounts in your name, applying for credit, or impersonating you to use your account. Therefore, identity theft is most commonly seen as a subtype of online fraud. Learning about the various forms of fraud will help you avoid falling prey to any of them in the future.
