There was a blog post recently on Wallet Pop titled “Online theft not the main cause for identity fraud.” In it, author Josh Smith does a good job calling out the differences between identity theft and identity fraud. In short, identity theft is when someone’s personal identity information has been stolen; identity fraud is when that stolen information is used to commit financial fraud or some other kind of crime. While the two are inevitably related to one another, they are not the same thing.

In the case of identity theft, it’s a common myth that malware, botnets, and other internet scams are to blame; however, Smith cites a study done by Travelers Insurance that actually shows that the majority (78%) of incidents of identity theft actually occur offline. This indicates that peoples’ fears may have been, at least in part, misplaced. Individuals would benefit from an increased awareness and vigilance in all aspects of their life, not just online.

This being said, there still remains the question of identity fraud: what happens once someone’s personal information has been compromised? This is where online businesses still need to be on high alert, because online sites (and not physical stores) will likely remain the No. 1 target of identity fraud. Here’s why: 

It’s safer to commit online identity fraud: Taking advantage of the Internet’s anonymity keeps criminals at a safe distance from their victims and the businesses they are trying to steal from. In other words, why would a fraudster risk getting caught red-handed when he could commit fraud in the comfort of his own home?

It’s more efficient: As you would imagine, today’s Internet-savvy criminals work extremely fast. Within minutes, one stolen identity can be used to apply for multiple credit cards or a stolen card can be used to charge thousands of dollars worth of goods at multiple online sites. By the time the theft is reported, the damage can be wide-reaching.

It’s easier to work in fraud rings: For ages, criminals have used whatever tools were at their disposal to organize and run their operations. Today, criminals around the globe are leveraging the Internet to work together, share information, and trade, sell and purchase stolen personal and financial information like never before.

It’s not limited by geography: Criminals that obtain stolen credit or personal information are no longer limited by their geography. With the Internet all but eliminating distance, crime can now occur anywhere, at anytime, making online businesses everywhere equally vulnerable.

While statistics show that most identity theft occurs offline, you can take it to the bank that once an identity has been stolen, fraudsters will turn to their real target – online businesses, to commit identity fraud.

Tags: fraud prevention, identity fraud, identity theft, Online Fraud

This entry was posted on Tuesday, December 8th, 2009 at 5:07 pm and is filed under Financial Services, Online Communities, Online Gambling, Online Gaming, Online Retail. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.