Identity Theft: Trends and Issues
Released: 2014-01-16T00:00:00

Introduction

Policymakers continue to be concerned with securing the economic health of the United States—including combating those crimes that threaten to undermine the nation's financial stability. Identity theft, for one, poses both security and economic risks. By some estimates, identity fraud cost Americans nearly $21 billion in 2012. Federal Trade Commission (FTC) complaint data indicate that the most common fraud complaint received (18% of all consumer fraud complaints) is that of identity theft. In 2012, for instance, about 12.6 million Americans were reportedly victims of identity fraud. This is an increase from the approximately 11.6 million who were victimized in 2011 and 10.2 million who were victimized in 2010. Mirroring this increase in the overall number of reported identity fraud incidents, consumer costs relating to these incidents increased in 2012; the average identity fraud victim incurred a mean of $365. Nonetheless, this cost is about 42% less than the average expense roughly a decade ago.

An increase in globalization and a lack of cyber borders provide an environment ripe for identity thieves to operate from within the nation's borders—as well as from beyond. Federal law enforcement is thus challenged with investigating criminals who may or may not be operating within U.S. borders; may have numerous identities—actual, stolen, or cyber; and may be acting alone or as part of a sophisticated criminal enterprise. In addition, identity theft is often interconnected with various other criminal activities. These activities range from credit card and bank fraud to immigration and employment fraud. In turn, the effects felt by individuals and businesses who have fallen prey to identity thieves extend outside of pure financial burdens; identity thieves affect not only the nation's economic health, but its national security as well. Consequently, policymakers may debate the federal government's role in preventing identity theft and its related crimes, mitigating the potential effects of identity theft after it occurs, and providing the most effective tools to investigate and prosecute identity thieves.

This report first provides a brief federal legislative history of identity theft laws. It analyzes selected trends in identity theft, including prevalent identity theft-related crimes, the federal agencies involved in combating identity theft, and the trends in identity theft complaints and prosecutions. The report also discusses the relationship between data breaches and identity theft as well as possible effects of the FTC's Identity Theft Red Flags Rule. It also examines possible issues for Congress to consider.

Definitions of Identity Theft

When does taking and using someone else's identity become a crime? Current federal law defines identity theft as a federal crime when someone

knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person with the intent to commit, or to aid or abet, or in connection with, any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law.

The current federal law also provides enhanced penalties for aggravated identity theft when someone "knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person" in the commission of particular felony violations. Aggravated identity theft carries an enhanced two-year prison sentence for most specified crimes and an enhanced five-year sentence for specified terrorism violations.

Identity theft is also defined in the Code of Federal Regulations (CFR) as "fraud committed or attempted using the identifying information of another person without permission." Identity theft can both facilitate and be facilitated by other crimes. For example, identity theft may make possible crimes such as bank fraud, document fraud, or immigration fraud, and it may be aided by crimes such as theft in the form of robbery or burglary. Therefore, one of the primary challenges in analyzing the trends in identity theft (e.g., offending, victimization, or prosecution rates)—as well as the policy issues that Congress may wish to consider—arises from this interconnectivity between identity theft and other crimes.

Theft vs. Fraud

Identity theft and identity fraud are terms that are often used interchangeably. Identity fraud is the umbrella term that refers to a number of crimes involving the use of false identification—though not necessarily a means of identification belonging to another person. Identity theft is the specific form of identity fraud that involves using the personally identifiable information of someone else. Both identity fraud and identity theft are crimes often committed in connection with other violations, as mentioned above. Identity theft, however, may involve an added element of victimization, as this form of fraud may directly affect the life of the victim whose identity was stolen in addition to defrauding third parties (such as the government, employers, consumers, financial institutions, and health care and insurance providers, just to name a few). This report, however, maintains a focus on identity theft rather than the broader term of identity fraud.

Knowledge Element

Another definitional issue is one that went before the U.S. Supreme Court. The statutory definitions of identity theft and aggravated identity theft indicate that they are crimes when someone " knowingly [emphasis added] transfers, possesses, or uses, without lawful authority, a means of identification of another person" in conjunction with specified felony violations outlined in the U.S. Code. The definitional element under question was the word "knowingly." In Flores-Figueroa v. United States , the Court decided that in order to be found guilty of aggravated identity theft, a defendant must have knowledge that the means of identification he used belonged to another individual. It is not sufficient to only have knowledge that the means of identification used was not his own. Although the case before the Court specifically involved aggravated identity theft, the issue may apply to the identity theft statute as well, due to its overlap in wording about the element of knowledge.

Since the Court has issued its final decision in Flores-Figueroa v. United States , Congress may wish to consider whether there is a need to clarify the difference between these two types of knowledge in the U.S. Code. If a clarification is warranted, Congress may wish to consider whether the identity theft and aggravated identity theft statutes should be amended to reflect the definitions of both types of knowledge.

Legislative History15

Until 1998, identity theft was not a federal crime. Leading up to Congress designating identity theft as a federal crime, identity fraud was on the rise, and the Internet was increasingly being used as a method of defrauding innocent victims. Law enforcement and policymakers suggested that the current laws at the time were ineffective at combating the growing prevalence of identity theft; the laws were not keeping up with technology, and stronger laws were needed to investigate and punish identity thieves. In addition, policymakers also suggested that industries that handled records containing individuals' personally identifiable information—such as credit, medical, and criminal records—needed superior methods to ensure the validity of the information they collected and utilized.

Identity Theft Assumption Deterrence Act

In 1998, Congress passed the Identity Theft Assumption Deterrence Act ( P.L. 105-318 ), which criminalized identity theft at the federal level. In addition to making identity theft a crime, this act provided penalties for individuals who either committed or attempted to commit identity theft and provided for forfeiture of property used or intended to be used in the fraud. It also directed the FTC to record complaints of identity theft, provide victims with informational materials, and refer complaints to the appropriate consumer reporting and law enforcement agencies. The FTC now records consumer complaint data and reports it in the Identity Theft Data Clearinghouse; identity theft complaint data are available for 2000 and forward.

Identity Theft Penalty Enhancement Act

Congress further strengthened the federal government's ability to prosecute identity theft with the passage of the Identity Theft Penalty Enhancement Act ( P.L. 108-275 ). This act established penalties for aggravated identity theft , in which a convicted perpetrator could receive additional penalties (two to five years' imprisonment) for identity theft committed in relation to other federal crimes. Examples of such federal crimes include theft of public property, theft by a bank officer or employee, theft from employee benefit plans, false statements regarding Social Security and Medicare benefits, several fraud and immigration offenses, and specified felony violations pertaining to terrorist acts.

Identity Theft Enforcement and Restitution Act of 2008

Most recently, Congress enhanced the identity theft laws by passing the Identity Theft Enforcement and Restitution Act of 2008 (Title II of P.L. 110-326 ). Among other elements, the act authorized restitution to identity theft victims for their time spent recovering from the harm caused by the actual or intended identity theft.

Identity Theft Task Force

In addition to congressional efforts to combat identity theft, there have been administrative efforts as well. The President's Identity Theft Task Force (Task Force) was established in May 2006 by Executive Order 13402. The task force was created to coordinate federal agencies in their efforts against identity theft, and it was charged with creating a strategic plan to combat (increase awareness of, prevent, detect, and prosecute) identity theft. It was composed of representatives from 17 federal agencies.

Recommendations

In April 2007, the task force authored a strategic plan for combating identity theft in which it made recommendations in four primary areas:

preventing identity theft by keeping consumer data out of criminals' hands, preventing identity theft by making it more difficult for criminals to misuse consumer data, assisting victims in detecting and recovering from identity theft, and deterring identity theft by increasing the prosecution and punishment of identity thieves.

With respect to identity theft prevention, the task force suggested that decreasing the use of Social Security numbers (SSNs) in the public sector and reviewing the use of SSNs in the private sector could help prevent identity theft. Also, the task force suggested that educating employers and individuals on how to safeguard data, as well as establishing national data protection and breach notification standards, could further aid in preventing identity theft.

Relating to victim assistance, the task force suggested that identity theft victims may be better served if first responders were specially trained to assist this particular class of victim. It also addressed victim redress by recommending that identity theft victims be able to obtain an alternative identification document after the theft of their identities. Through the Identity Theft Enforcement and Restitution Act of 2008 (Title II of P.L. 110-326 ), Congress responded to the task force's recommendation that criminal restitution statutes allow victims to be compensated for their time in recovering from the actual or attempted identity theft.

Regarding identity theft deterrence, the task force recommended enhancing information gathering and sharing between domestic law enforcement agencies and the private sector, ramping up identity theft training for law enforcement and prosecutors, and increasing enforcement and prosecution of identity theft. The task force also promoted international cooperation to decrease identity theft through identifying countries that may be safe havens for identity thieves, encouraging anti-identity theft legislation in other countries, and increasing international cooperation in the investigation and prosecution of identity theft.

Legislative Recommendations

More specifically, the task force recommended that Congress close gaps in the federal criminal statues to more effectively prosecute and punish identity theft-related offenses by

amending the identity theft and aggravated identity theft statutes so that thieves who misappropriate the identities of corporations and organizations—and not just the identities of individuals—can be prosecuted, amending the aggravated identity theft statute by adding new crimes as predicate offenses for aggravated identity theft violations, amending the statute criminalizing the theft of electronic data by eliminating provisions requiring that the information be stolen through interstate communications, amending the computer fraud statute by eliminating the requirement that damage to a victim's computer exceed $5,000, amending the cyber-extortion statute by expanding the definition of cyber-extortion, and ensuring that the Sentencing Commission allows for enhanced sentences imposed on identity thieves whose actions affect multiple victims.

Congress has already taken steps to address some of these task force recommendations. Through the Identity Theft Enforcement and Restitution Act of 2008 (Title II of P.L. 110-326 ), Congress, among other things, eliminated provisions in the U.S. Code requiring the illegal conduct to involve interstate or foreign communication, eliminated provisions requiring that damage to a victim's computer amass to $5,000, and expanded the definition of cyber-extortion.

However, Congress has not yet addressed the task force recommendation to expand the identity theft and aggravated identity theft statutes to apply to corporations and organizations as well as to individuals, nor has it addressed the recommendation to expand the list of predicate offenses for aggravated identity theft. Issues surrounding these recommendations are analyzed in the section " Potential Issues for Congress ."

Red Flags Rule25

The Identity Theft Red Flags Rule, issued in 2007, requires creditors and financial institutions to implement identity theft prevention programs. It is implemented pursuant to the Fair and Accurate Credit Transactions (FACT) Act of 2003 ( P.L. 108-159 ). The FACT Act amended the Fair Credit Reporting Act (FCRA) by directing the FTC, along with the federal banking agencies and the National Credit Union Administration, to develop Red Flags guidelines. These guidelines require creditors and financial institutions with "covered accounts" to develop and institute written identity theft prevention programs. According to the FTC, the identity theft prevention programs required by the rule must provide for

identifying patterns, practices, or specific activities—known as "red flags"—that could indicate identity theft and then incorporating those red flags into the identity theft prevention program; detecting those red flags that have been incorporated into the identity theft prevention program; responding to the detection of red flags; and updating the identity theft prevention program periodically to reflect any changes in identity theft risks.

Possible "red flags" could include

alerts, notifications, or warnings from a consumer reporting agency; suspicious documents; suspicious personally identifiable information, such as a suspicious address; unusual use of—or suspicious activity relating to—a covered account; and notices from customers, victims of identity theft, law enforcement authorities, or other businesses about possible identity theft in connection with covered accounts.

The deadline for creditors and financial institutions to comply with the Red Flags Rule was originally set at November 1, 2008. However, many of the organizations affected by the Red Flags Rule were not prepared to institute their identity theft prevention programs by this date. Therefore, the FTC moved the deadline to May 1, 2009, further extended the compliance date to November 1, 2009, and later to June 1, 2010. The final enforcement date was set at December 31, 2010, and this last extension was, in part, a result of the debate over whether Congress wrote the FACT Act Red Flags provision too broadly by including all entities qualifying as creditors and financial institutions (discussed further below).

The effect that the Red Flags Rule will have on the prevalence of identity theft remains uncertain. One potential effect is that the Red Flags Rule may help creditors and financial institutions prevent identity theft by identifying potential lapses in security or suspicious activities that could lead to identity theft. This could possibly lead to an overall decrease in the number of identity theft incidents reported to the FTC, as well as the number of identity theft cases investigated and prosecuted. Once detected, the Red Flags Rule requires that the creditor or financial institution respond to the identified red flag. One response option that creditors and financial institutions might include in their prevention programs is to notify consumers or law enforcement of data breaches that could potentially lead to the theft of consumers' personally identifiable information. While notification is not a required element in the identity theft prevention programs, early notification could lead to consumers taking swift action to prevent identity theft or mitigate the severity of the damage that could result if they had not been notified as quickly.

When the Red Flags Rule was created, the FTC originally estimated that it would impact approximately 11.1 million creditors and financial institutions required to implement the identity theft prevention programs. The FTC estimated the total annual labor costs (for each of the first three years the rule is in effect) for all creditors and financial institutions covered by the rule to be about $143 million. Some entities considered creditors or financial institutions under the rule expressed concern that the burden of the rule overlaps with burdens already incurred under other regulations. For example, the American Bar Association (ABA) questioned whether lawyers are considered "creditors" under the Red Flags Rule because they generally do not require payment until after services are rendered. Further, the American Medical Association indicated that physicians should be exempt from the Red Flags Rule because of patient privacy and security protections required by the Health Insurance Portability and Accountability Act (HIPAA). In addition, there may have been concern that to avoid being considered creditors, some physicians could possibly require full payment at the time of service (rather than allowing deferred payments). This could in turn lead to some patients avoiding potentially necessary treatment if they are unable to pay in full at the time of service; on the other hand, the rule may have no effect on patients' willingness to seek medical treatment. The Red Flag Program Clarification Act of 2010 ( P.L. 111-319 ) limited the Red Flags Rule's definition of a creditor, excluding any creditor "that advances funds on behalf of a person for expenses incidental to a service provided by the creditor to that person." This legislation did not exempt any broad categories of businesses or entities, but the majority of businesses in certain categories—such as physicians—would be exempt from Red Flags Rule compliance. Any actual effects of the Red Flags Rule—including effects on identity theft rates as well as any indirect consequences—have not yet been evident. Congress may consider monitoring the effects of the impending Red Flags Rule on subsequent identity theft rates.

Trends in Identity Theft

A number of studies have aimed to measure the prevalence of identity theft. Due to a number of factors, including a lack of a consistent definition of identity theft victimization across studies and differing survey populations, there is not a clear understanding of the true scope of identity theft in the United States. For instance, a Bureau of Justice Statistics (BJS) study estimates that 16.6 million U.S. residents were victims of at least one identity theft incident. Another study by Javelin Strategy & Research estimates that in 2012, about 12.6 million Americans were victims of identity theft; this is an increase from the approximately 11.6 million estimated to have been victimized in 2011.

In addition to survey research on identity theft victimization, trends in consumer complaints of victimization provide additional insight into the issue. Similar to the increase in estimated victimization exhibited in surveys, consumer complaints of identity theft to the FTC exhibited a corresponding increase. The FTC received 369,132 consumer complaints of identity theft in 2012, up from 279,156 complaints in 2011. Nonetheless, identity theft incidents reported to the FTC remain a fraction of the estimated victim population. There is a noted difference between the 369,132 complaints received by the FTC in 2012 and survey data indicating that between 12.6 million and 16.6 million people may have actually been victimized. This disparity between research on identity theft victimization and consumer reports could be a result of several factors. For one, while some identity theft victims may file a report with the FTC, others may file complaints with credit bureaus, while still others may file complaints with law enforcement. Not all victims, however, may file complaints with consumer protection entities, credit reporting agencies, and law enforcement. Another possible factor contributing to the disparity is that victims may not—for any number of reasons—report an identity theft incident. These individuals, however, may be more likely to indicate the incident on a survey prompting them about their experiences with identity theft or fraud.

Since the FTC began recording consumer complaint data in 2000, identity theft has remained the most common consumer fraud complaint. Figure 1 illustrates the number of identity theft complaints received by the FTC between 2000 and 2012 in relation to the number of all other fraud complaints received. According to CRS analysis, since 2000, the number of identity theft complaints has averaged about 32% of the total number of consumer complaints received by the FTC.

Identity theft has remained the dominant consumer fraud complaint to the FTC. However, while the number of overall identity theft complaints generally increased between 2000 (when the commission began recording identity theft complaints) and 2008, the number of complaints decreased in both 2009 and 2010 before rising again in 2011 and 2012. Figure 2 illustrates these trends in identity theft complaints reported to the FTC.

Perpetrators

Increasing globalization and the expansion of advanced technology have provided a challenging environment for law enforcement to both identify and apprehend identity thieves targeting persons residing in the United States. For one, these criminals may be operating from within U.S. borders as well as from beyond. There is no publically available information, however, delineating the proportion of identity theft (or other crimes known to be identity theft-related) committed by domestic and international criminals. Secondly, while some identity thieves operate alone, others operate as part of larger criminal networks or organized crime syndicates. The FBI has indicated that it, for one, targets identity theft investigations on larger criminal networks. These criminal networks may involve identity thieves located in various cities across the United States or in multiple cities around the world, and these criminals may be victimizing not only Americans, but persons living in countries across the globe. In a joint study by Verizon and international law enforcement partners, including the U.S. Secret Service, of selected data breaches of businesses around the globe during 2012, 55% of data breaches by external actors—sources outside the compromised organization—were attributed to organized crime. It is unknown, however, how many of these records compromised by organized crime were used in identity theft and related crimes. A third challenge in identifying identity thieves is that perpetrators may operate under multiple identities including actual identities, various stolen identities, and cyber identities and nicknames.

Investigations and Prosecutions

As mentioned earlier, identity theft is defined broadly, and it is directly involved in a number of other crimes and frauds. As a result, there are practical investigative implications that influence analysts' abilities to understand the true extent of identity theft in the United States. For instance, only a proportion (the exact number of which is unknown) of identity theft incidents are reported to law enforcement. While some instances may be reported to consumer protection agencies (e.g., the FTC), credit reporting agencies (e.g., Equifax, Experian, and Trans Union), and law enforcement agencies, some instances may be reported to only one. For example, the FTC indicates that of the 42% of identity theft complaints that included information on whether the theft was reported to law enforcement, 68% were reported to law enforcement.

Another issue that may affect analysts' abilities to evaluate the true extent of identity theft is that law enforcement agencies may not uniformly report identity theft because crime incident reporting forms may not necessarily contain specific categories for identity theft. In addition, there may not be standard procedures for recording the identity theft component of the criminal violations of primary concern. Issues such as these may lead to discrepancies between data available on identity theft reported by consumers, identity theft reported by state and local law enforcement, and identity theft investigated and prosecuted by federal law enforcement.

Various federal agencies are involved in investigating identity theft, including the Federal Bureau of Investigation (FBI), the U.S. Secret Service, the U.S. Postal Inspection Service, the Social Security Administration Office of the Inspector General (SSA OIG), and the U.S. Immigration and Customs Enforcement (ICE). In addition, federal law enforcement agencies may work on task forces with state and local law enforcement as well as with international authorities to bring identity thieves to justice. The Department of Justice (DOJ) is responsible for prosecuting federal identity theft cases.

Federal Bureau of Investigation (FBI)

The FBI investigates identity theft primarily through its Financial Crimes Section. However, because the nature of identity theft is cross-cutting and may facilitate many other crimes, identity theft is investigated in other sections of the FBI as well. The FBI is involved in over 20 identity theft task forces and working groups around the country. It is also involved in over 80 other financial crimes task forces, which may also investigate cases with identity theft elements. The FBI focuses its identity theft crime fighting resources on those cases involving organized groups of identity thieves and criminal enterprises that affect a large number of victims. The FBI partners with the National White Collar Crime Center (NW3C) to form the Internet Crime Complaint Center (IC3). The IC3 serves the broad law enforcement community to receive, develop, and refer Internet crime complaints—including those of identity theft.

United States Secret Service

The Secret Service serves a dual mission of (1) protecting the nation's financial infrastructure and payment systems to safeguard the economy and (2) protecting national leaders. In carrying out the former part of this mission, the Secret Service conducts criminal investigations into counterfeiting, financial crimes, computer fraud, and computer-based attacks on the nation's financial and critical infrastructures. The Secret Service has 43 Financial Crimes Task Forces and 33 Electronic Crimes Task Forces that investigate identity theft, as well as a number of other crimes. In FY2012, the Secret Service arrested 4,277 suspects for crimes related to identity theft, and in FY2013, they arrested 3,868 such suspects.

United States Postal Inspection Service

The U.S. Postal Inspection Service is the federal law enforcement arm of the Postal Service and is the lead federal investigative agency when identity thieves have used the postal system in conducting their fraudulent activities. The most recent Postal Inspection Service data indicate that in FY2012, the Postal Inspection Service sponsored 15 multi-agency task forces across the country that specialized in financial crimes, including identity theft. Further, postal inspectors arrested 627 identity theft suspects—from both Postal Inspection Service investigations and task force investigations in which the Postal Inspection Service was involved. In addition to investigating identity theft, the Postal Inspection Service has been involved in delivering educational presentations to consumer groups to assist in preventing identity theft, and inspectors are involved in sponsoring outreach programs for victims of identity theft. Examples of victim services include notifying victims of potential identity theft if the Postal Inspection Service discovers compromised identities as well as assisting in victim restitution by providing victims money from the funds forfeited as a result of Postal Inspection Service identity theft investigations.

Social Security Administration Office of the Inspector General (SSA OIG)

Because the theft and misuse of Social Security numbers (SSNs) is one of the primary modes of identity theft, the SSA OIG is involved in investigating identity theft. The SSA has programs to assist victims of identity theft who have had their SSNs stolen or misused by placing fraud alerts on their credit files, replacing Social Security cards, issuing new Social Security numbers in specific instances, and helping to correct victims' earnings records. The SSA OIG protects the integrity of the SSN by investigating and detecting fraud, waste, and abuse. It also determines how the use or misuse of SSNs influences programs administered by the SSA. The SSA OIG is involved in providing a limited range of SSN verification for law enforcement agencies. Further, the SSA OIG maintains a hotline for consumers to report identity theft, and then these data are transferred to the FTC to be included in their consumer complaint database.

Immigration and Customs Enforcement

The U.S. Immigration and Customs Enforcement (ICE) investigates cases involving identity theft, particularly immigration cases that involve document and benefit fraud. In 2006, ICE created Document and Benefit Fraud Task Forces (DBFTFs). These DBFTFs, located in 19 cities throughout the United States, are aimed at dismantling and seizing the financial assets of criminal organizations that threaten the nation's security by engaging in document and benefits fraud.

Department of Justice

The U.S. Attorneys Offices (USAOs) prosecute federal identity theft cases referred by the various investigative agencies. CRS was unable to determine the proportion of identity theft cases referred to the USAOs by each investigative agency for several reasons. For one, some of the investigations reported by each agency are investigations conducted by a task force, to which several agencies may have contributed. Consequently, these investigations may be reported by each participating agency. If the total number of reported investigations from each agency were combined, it is likely that the overall number of identity theft investigations would be inflated because of double (or more) reporting of an investigation from multiple agencies. A second factor is that the USAOs do not track the proportion of case referrals by statute; rather, they track case referrals by program area. For instance, the proportion of identity theft (18 U.S.C. §1028) and aggravated identity theft (18 U.S.C. §1028A) case referrals from each agency are not tracked according to the charging statutes. Identity theft cases fall under several programmatic categories—including white collar crime and immigration—which also contain several other crimes. Thus, trends in federal identity theft and aggravated identity theft cases may be better tracked by the number of total cases referred to and prosecuted by the USAOs, irrespective of the referring agency.

While the number of identity theft complaints to the FTC has fluctuated over the past several years, so too has the number of identity theft cases prosecuted by DOJ. Figure 3 illustrates the number of identity theft (18 U.S.C. §1028) and aggravated identity theft (18 U.S.C. §1028A) cases filed with the USAOs as well as convictions between FY1998 and FY2013.

The number of identity theft and aggravated identity theft cases filed both increased in FY2013 relative to FY2012; conversely, the number of identity theft and aggravated identity theft case convictions decreased in FY2013 relative to FY2012 levels. Identity theft case filings and convictions peaked in 2007 and 2008, and have generally declined since. Aggravated identity theft case filings and convictions, on the other hand, have largely continued to increase since aggravated identity theft was added as a federal offense in 2004. Still, if the identity theft and aggravated identity theft data are combined, total case filings and convictions have mostly declined since 2008.

There are several possible explanations for these trends. One possibility is that there has been a decrease in the overall number of actual identity theft incidents, and law enforcement has been responding proportionally by arresting fewer identity thieves and filing fewer cases with the U.S. Attorneys' Offices. However, research indicating that the number of individuals victimized by identity thieves is actually continuing to increase, which would suggest this is not a viable explanation. A second possibility is that there has actually been an increase in the number of identity theft incidents, but that either these criminals are evading federal law enforcement or law enforcement has dedicated fewer resources toward combating identity theft, which has resulted in decreased investigations and prosecutions. Yet another explanation may be that fewer perpetrators are actually impacting a greater number of victims. As criminals become more technologically savvy, they may be able to expand their reach to a greater number of victims.

As illustrated in Figure 3 , the number of identity theft cases filed in FY2013, while larger than the number filed in FY2012, maintained the largely downward trend beginning in FY2008. This was accompanied by a sustained increase in aggravated identity theft case filings. Several factors could possibly contribute to these divergent trends. One explanation is that some cases in which defendants would have been charged with identity theft in earlier years may more recently have resulted in defendants being charged with aggravated identity theft. Therefore, a decrease in identity theft case filings may be complemented with an increase in aggravated identity theft case filings. As mentioned before, aggravated identity theft became a federal crime in 2004, and is reflected in Figure 3 by the increase in aggravated identity theft case filings and convictions in later years.

Domestic Impact

As noted, survey data suggest that between 12.6 million and 16.6 million people may have been victimized by identity thieves and fraudsters in 2012. And these are the known cases. The FTC recognizes two primary forms of identity theft: existing account fraud and new account fraud. Existing account fraud refers to the misuse of a consumer's existing credit card, debit card, or other account, while new account fraud refers to the use of stolen consumer identifying information to open new accounts in the consumer's name. Figure 4 illustrates the most common misuses of victims' identities.

Between 2000—when the FTC began tracking identity theft complaints—and 2008, the FTC consistently reported that the most common misuse of a victim's identity was credit card fraud. In 2008, government documents and benefits fraud became the second most prevalent misuse of a victim's identity, and in 2010, it became the most prevalent—remaining the leading category in 2012. Within the documents/benefits fraud category, the FTC has reported a particularly large increase in identity theft related to tax return fraud. And, tax return-related fraud was involved in about 43% of the identity theft complaints received by the FTC in 2012 and about 24% of these complaints in 2011.

Identity theft and the various crimes it facilitates affect the economy and national security of the United States. Selected crimes facilitated by identity theft are outlined in the section below.

Credit Card Fraud69

After a victim's identity is stolen, the primary criminal use of this information is credit card fraud. Beyond amassing charges on a victim's credit card, identity thieves may sometimes change the billing address so that the victim will not receive the bills and see the fraudulent charges, allowing the thief more time to abuse the victim's identity and credit. If a victim does not receive the bill, and therefore does not pay it, this could adversely affect the victim's credit. In addition to abusing existing credit card accounts, a thief could also open new accounts in the victim's name, incurring more charges on the victim's line of credit. These actions could in turn affect not only the victim's immediate pocketbook, but future credit as well. The Identity Theft Resource Center (ITRC) has predicted that organized crime groups will become more involved in identity theft-related crime such as credit card fraud and that these crimes will become increasingly transnational. As mentioned, criminals are no longer constrained by physical borders, and they can victimize U.S. persons and businesses both from within the United States and from beyond.

In February 2011, Operation Power Outage led to the arrest of 83 individuals associated with Armenian Power, an Armenian and Eastern European transnational criminal organization. These individuals were allegedly involved in a range of criminal activities including credit card fraud. One scheme is reported to have used skimming devices, secretly installed on cash register machines, to steal customer account information. This information was subsequently used to create counterfeit credit and debit cards. In September 2013, eight individuals pleaded guilty to charges "relating to the activities of the Armenian Power criminal enterprise," and 51 persons "previously pleaded guilty for their roles."

Document Fraud73

Identity thieves can use personally identifiable information to create fake or counterfeit documents such as birth certificates, licenses, and Social Security cards. One way that thieves can use the stolen information is to obtain government benefits in a victim's name. This directly affects the victim if the victim attempts to legitimately apply for benefits and then is denied because someone else may already be (fraudulently) receiving those benefits under the victim's name. The creation of fraudulent documents may, among other things, provide fake identities for unauthorized immigrants living in the United States or fake passports for people trying to illegally enter the United States. In addition, DOJ has indicated that identity theft is implicated in international terrorism. In May 2002, former Attorney General John Ashcroft stated that

[I]dentity theft is a major facilitator of international terrorism. Terrorists have used stolen identities in connection with planned terrorist attacks. An Algerian national facing U.S. charges of identity theft, for example, allegedly stole the identities of 21 members of a health club in Cambridge, Massachusetts, and transferred the identities to one of the individuals convicted in the failed 1999 plot to bomb the Los Angeles International Airport.

Identity theft and resulting document fraud can thus have not only an economic impact on the United States, but a national security impact as well.

In September 2013, three defendants pleaded guilty for their roles in "a sophisticated scheme to produce and sell high-quality false identification documents throughout the nation ... generating profits of more than $3 million over several years." The fraudsters, through their illegitimate business, "Novel Design," sold over 25,000 fraudulent driver's licenses throughout the nation. They even outsourced some of the manufacturing of these fake documents to entities in Bangladesh and China.

Employment Fraud

Identity theft can facilitate employment fraud if the thief uses the victim's personally identifiable information to obtain a job. With the recent elevated levels of unemployment, policymakers may wish to monitor trends in employment fraud. This form of fraud could adversely affect a victim's credit, ability to file his or her taxes, and ability to obtain future employment, among other things. Not only can identity theft lead to employment fraud, but employment fraud may be a means to steal someone's identity. Identity thieves may use scams that falsely advertise employment as a means to phish for personally identifiable information. The thief can then use this information to commit other crimes while the job-seeking individual remains unemployed and victimized.

Data Breaches and Identity Theft

The Identity Theft Resource Center (ITRC) is one organization that tracks data breaches across the nation, and the resulting statistics indicate that the total number of reported data breaches generally increased between 2005 and 2008 and then fluctuated through 2013 (during which year, there were 619 reported breaches). Figure 5 illustrates this trend. Breaches are recorded across five industries: banking/credit/financial, business, educational, government/military, and medical/healthcare. In 2013, the medical/healthcare industry experienced the greatest number of data breaches (43.1%) for the first time since the ITRC began tracking this information in 2005 (from 2007-2012, the business sector had filled this top spot). The medical sector was followed in number of breaches by the business (33.9%), government (10.2%), educational (9.0%), and banking (3.7%) sectors.

Several factors may influence the number of reported breaches. One such factor may be the increasing number of states that have enacted laws requiring data breach notification. California was the first state to enact such legislation in 2002. As of December 2013, 46 states, the District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands have enacted data breach notification laws. The increasing prevalence of state laws requiring breach notification could lead to an increase in reported breaches to law enforcement, media, or the individuals affected. Nonetheless, the actual number of data breaches remains underreported, and the number of reported breaches does not reflect the magnitude of data breaches. Because of these factors, analysts are unable to say with certainty whether the increase in the number of reported data breaches in 2013 is an accurate reflection of the trend in data breaches.

Furthermore, the number of records affected by each data breach is variable, and in many cases unknown. In 2013, for example, at least 57,868,922 records were put at risk, but information on the exact number of records exposed was only available for 366 (about 59%) of the 619 reported data breaches. Of note, however, "due to the mandatory reporting requirement for healthcare industry breaches affecting 500 or more individuals, 84% of [the] healthcare breaches publicly stated the number of records exposed."

Because available data on known data breaches and reported identity theft incidents are not comprehensive, and because year-to-year changes in one measure may not trend with changes in the other, it can be difficult to determine whether there is a relationship between the two. Intuitively, the data breaches and identity theft may seem to correlate, but some analysts have found that the link may not be very strong. There are several ways to analyze the relationship between data breaches and identity theft. One is to examine the set of data breach victims and determine the proportion of those victims that are also victims of identity theft. Some claim that data breaches are a direct cause of identity theft and may rely on this position to advocate the need for increased data security and data breach notification laws to protect consumers and help with quickly mitigating any potential damage from such data breaches. Meanwhile, other experts claim that less than 1% of data breach victims are also victims of identity theft. Some may use this data to argue against the need for increased data security and breach notification laws, suggesting that such laws could produce a larger cost for businesses than prevention for consumers. Results from one study note that 25% of surveyed individuals had, at some point, received a "notification about a data breach that involved the loss or theft of their personal information" (and 51% of respondents couldn't recall whether they had received such a notification. And, Javelin Strategy & Research data suggest that nearly one in four (22.5%) individuals receiving breach notifications became victims of fraud.

Another means to evaluate the relationship between data breaches and identity theft is to examine identity theft victims and analyze the proportion of those victims whose identity was stolen as a result of a data breach. Javelin Strategy and Research found that about 11% of victims' identities that were stolen had been under the control of a company and were stolen from the company through methods such as data breaches. Most victims (65%) did not know how their identities had been stolen, and some proportion of these could have occurred as a result of a data breach. Synovate conducted a similar study on behalf of the FTC and found that about 12% of victims' stolen identities had been under the control of a company and were thus accessed via a data breach. The Center for Identity Management and Information Protection at Utica College evaluated identity theft cases handled by the U.S. Secret Service between 2002 and 2006 and found that in nearly 27% of the cases, a breach of company-controlled data was the source of the identity theft.

It appears that the stronger relationship between identity theft and data breaches is found when analyzing identity theft victims whose data were obtained through a data breach rather than in analyzing data breaches that result in identity theft. In efforts to curb identity theft, policymakers are left with the issue of how to target data breaches. The question is whether the federal government's role in curbing identity theft should be more preventative, more responsive, or both. One policy option may be for Congress to increase data security for the purpose of preventing those data breaches that could potentially result in identity theft. Congress has already enacted data breach laws targeting certain components of the public and private sectors, such as the Veterans Administration and healthcare providers. Another option could be for Congress to dedicate resources to assisting victims of identity theft and providing sufficient deterrence and punishment measures (in the form of penalties or sanctions). These options are analyzed further below.

Potential Issues for Congress

As Congress debates means to prevent identity theft, mitigate the potential effects of identity theft, and investigate and prosecute identity thieves, there are several issues policymakers may wish to consider. One issue surrounds the extent to which reducing the availability of SSNs may reduce the prevalence of identity theft. A second issue involves the degree to which increasing breach notification requirements may reduce both identity theft and the monetary burden incurred by victims. Yet another issue concerns the adequacy of (1) the current legal definitions of identity theft and aggravated identity theft and (2) the list of predicate offenses for aggravated identity theft.

Identity Theft Prevention

Policymakers may question what the extent of the federal government's role should be in preventing identity theft. One element of this discussion centers around the fact that identity theft is often committed to facilitate other crimes and frauds (e.g., credit card fraud, document fraud, and employment fraud). Consequently, preventing identity theft could proactively prevent other crimes. When policymakers consider the federal government's role in preventing identity theft, they necessarily consider the government's role in preventing interrelated crimes.

Congress may also consider the various means available to prevent identity theft and evaluate the federal government's role—if any—in implementing them. Possible ways to prevent identity theft include securing data in the private sector, securing data in the public sector, and improving consumer authentication processes.

Securing Social Security Numbers

The prevalence of personally identifiable information—and in particular, of Social Security numbers (SSN)—has been an issue concerning policymakers, analysts, and data security experts. There are few restrictions on the use of SSNs in the private sector, and therefore the use of SSNs is widespread. Some industries, such as the financial services industry, have stricter requirements for safeguarding personally identifying information. There are greater restrictions on the use of SSNs in the public sector, as Congress has already taken direct steps in reducing the prevalence of SSNs in this arena. For example, in the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ), Congress prohibited states from displaying or electronically including SSNs on driver's licenses, motor vehicle registrations, or personal identification cards. One document that continues to display SSNs, however, is the Medicare identification card. Congress may consider whether the continued display of SSNs on Medicare cards places individuals at undue risk for identity theft as well as for becoming a victim of other crimes facilitated by identity theft and whether it should enact legislation to prohibit the display of SSNs on Medicare cards. Proponents of legislation to remove SSNs from Medicare cards cite reports that as of 2013, approximately 50 million Medicare cards displayed Social Security numbers, potentially placing these individuals at risk for identity theft. Opponents of such legislation may cite that transitioning to a different Medicare identifier has most recently been estimated to cost between $255 million and $317 million.

Another policy option to safeguard personally identifiable information that Congress may consider is increasing restrictions on the disclosure of certain forms of personally identifiable information, such as SSNs, in connection with federally funded grant programs. One example of Congress taking such action is in the Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ). Provisions in this act prohibit grantees that receive funds under the Violence Against Women Act of 1994 from disclosing certain personally identifiable information—including SSNs—collected in connection with services through the grant program. Congress may consider whether existing SSN restrictions for federal grant recipients are sufficient or whether the federal government should play a larger role in limiting the use of SSNs—and more specifically, whether it should set limitations as part of eligibility requirements for federal assistance.

The Government Accountability Office (GAO) has identified vulnerabilities in federal laws protecting personally identifiable information—and specifically, SSNs—across industries. For one, some industries, such as the financial services industry, have more restrictions on safeguarding this information, while information resellers are not covered by the same restrictions. In order to reduce discrepancies across industries, one policy option may be to provide certain federal agencies with authority to curb the prevalence of SSN use in the private sector; for example, GAO has recommended that Congress provide SSA with the authority to enact standards for uniformly truncating SSNs so that the entire nine-digit numbers are not as readily available. A similar option may be to provide the Attorney General, the FTC, or the SSA with the authority to set rules and standards for the sale and purchase of SSNs.

Others have suggested that policies should be focused on eliminating the use of SSNs as authenticators rather than on securing their use. The premise is that SSNs are often public information and, if not already available, they can be predicted with relative ease. For instance, researchers have demonstrated how the public availability of names and birth data allow for SSN predictability and subsequent vulnerability. As such, some have recommended that efforts not be focused on securing SSNs that are often already public and predictable. Rather, they have suggested that private sector entities abandon the SSN in favor of an alternative identity authenticator.

Effects of Data Breaches

One issue that Congress may consider involves the relationship between data breaches and identity theft. Although there is not a large body of research examining this relationship, existing data suggest that between 12% and 27% of identity theft incidents may result from data breaches. However, this proportion is truly unknown because most victims of identity theft do not know precisely how their personally identifiable information was acquired. In order to prevent any proportion of identity theft that may result from data breaches, or to mitigate the extent of the damage resulting from breach-related identity theft, Congress may wish to consider whether to strengthen data breach notification requirements. Such requirements could affect both the notification of the relevant law enforcement authorities as well as the notification of the individual whose personally identifiable information may be at risk from the breach.

Proponents of increasing breach notification requirements point to research on recent trends in identity theft and the resulting monetary loss. As mentioned, the sooner people become aware that they are victims of identity theft, the faster they take compensatory steps to mitigate the damage. Proponents also argue that placing enhanced reporting requirements on industries may influence businesses to increase their data security standards, which could, in effect, decrease data breaches and any possibly resulting identity theft. Results from one study suggest that the adoption of state-level data breach disclosure laws could reduce the identity theft from these breaches by, on average, 6.1%. On the other hand, opponents of increasing notification requirements point to research suggesting that the percentage of data breaches that result in identity theft could be less than 1%, as previously discussed. Opponents may then argue that the costs that businesses could incur from increased notification (in terms of dollars and personnel time) could thus exceed the costs incurred by potential identity theft victims from the small proportion of data breaches that may actually result in identity theft.

In addition to strengthening post-breach notification requirements, another policy option aimed at decreasing data breach-related identity theft involves strengthening data security. Several options to reduce the availability of personally identifiable information were discussed in the preceding section. However, a broader data security issue concerns overall information security. Because many incidents of identity theft may occur over the Internet, enhancing cyber security measures could reduce the incidents of identity theft.

Deterrence and Punishment

As mentioned, identity theft is broadly defined in current law. This is in part because it is a facilitating crime, and the criminal act of stealing someone's identity often does not end there. Consequently, investigating and prosecuting identity theft often involves investigating and prosecuting a number of related crimes. In light of this interconnectivity, the President's Identity Theft Task Force recommended expanding the list of predicate offenses for aggravated identity theft, as discussed earlier. The task force specifically suggested adding identity theft-related crimes such as mail theft, counterfeit securities, and tax fraud. However, the task force did not cite specific data to support the claim that these specifically mentioned crimes are in fact those most often related to (either facilitating or facilitated by) identity theft. If Congress considers expanding the list of predicate offenses for aggravated identity theft, it may request that the U.S. Attorneys as well as the appropriate investigative agencies (e.g., FBI, USSS, ICE, and USPIS) provide a report detailing the relationship between identity theft and other federal crimes not yet codified as predicate offenses. A second question that Congress may raise if it considers expanding the list of predicate offenses regards which identity theft-related crimes may most affect national priorities such as economic health and national security.

As more information is stored online by individuals and organizations, there is a risk that online identity thieves may take advantage of this large body of data. And there need not be an increasing number of data breaches in order for criminals to reach a large pool of information. As illustrated in Figure 5 , the number of reported data breaches does not necessarily trend with the number of potentially exposed records. As mentioned, the range of potential victims includes not only individuals but organizations as well. The task force cites "phishing" as a means by which identity thieves assume the identity of a corporation or organization in order to solicit personally identifiable information from individuals. For reasons such as this, the task force recommended that Congress clarify the identity theft and aggravated identity theft statutes to cover both individuals and organizations targeted by identity thieves.