New study highlights significant increase in identity theft-related SARs

To coincide with National Protect Your Identity Week earlier this month, the Financial Crimes Enforcement Network (FinCEN) released a major report on identity theft-related Suspicious Activity Reports (SARs), entitled  Identity Theft: Trends, Patterns, and Typologies Reported in Suspicious Activity Reports. The study analyzes SARs submitted by depository institutions from 2004-2009 citing identity theft and describes trends and patterns in such reports. Not surprisingly, the report revealed a significant increase in identity theft-related SARs as well as some alarming and interesting findings, which should further cement our resolve as financial institutions to prevent identity theft through the implementation of risk mitigation procedures. The findings include:

• Identity theft-related depository institution SAR filings increased 123 percent from 2003-2009, and was the sixth most frequently reported characterization of suspicious activity following structured/money laundering, check fraud, mortgage loan fraud, credit card fraud and counterfeit check fraud.
• Credit card fraud appeared in 45.5 percent of identity theft filings, proving to be the most frequently co-reported suspicious activity related to identity theft.
• Loan fraud was co-reported in approximately 31 percent of SAR filings, including fraud related to auto loans, mortgages, student loans and other loans.
  • While the use of identity theft to facilitate auto loans was twice as high as for other types of loan fraud until 2009, the data highlights financial institutions have significant success in detecting fraud prior to funding, with nearly 50 percent of fraudulent auto loans being identified before being funded.
  • Beginning in 2006, student loan fraud accounted for the largest plurality of identity theft facilitated in non-auto loan filings, representing 46.5 percent of all loan sample filings from 2006-2009. Such evidence suggests an overall shift away from auto and mortgage loan fraud toward student loan fraud; however, like with auto loans, there is much success with identifying fraudulent loans prior to funding. The success rate of detecting fraudulent student loans prior to funding was higher than others at 54.5 percent.
• Spoofing, phishing and computer hacking were used to facilitate identity theft in less than 3.5 percent of filings.
• While accounting for an overall lower amount of identity theft-related SAR filings at 3.5 percent, the operation of known identity theft/fraud rings has increased significantly year-to-year. Related filings indicated theft/fraud rings in about 700 filings in 2004 and increased to nearly 2,200 filings in 2009.
• At least 27 percent of filings reported family members, friends and/or those with some sort of relationship to the victim perpetrated the identity theft.
• Interestingly, in key areas where identity theft was used to facilitate loan fraud, such as with credit cards and student loans, the subjects perpetrating the fraud used his/her own name along with the victim’s name on said account/loan in:
  • 30 percent of credit card account takeovers
  • 15 percent of new, unauthorized credit card accounts
  • 56.5 percent of attempted and/or successfully funded student loans
• For financial institutions, the two most common red flags reported in SAR filings were:
  • Notification by the identity theft victim or law enforcement that the FI has opened a fraudulent account for a person engaged in identity theft in nearly 75 percent of relevant filings
  • Notification of unauthorized charges or transactions in connection with a member’s covered account in approximately 23 percent of relevant filings.