Identity Theft vs. Identity Fraud: How are They Different?

identity theft

November 24, 2021

Increasing cases of cybercrime have become a huge cause for concern among enterprises. In the first three quarters of 2021, it’s estimated that over 281 million data breaches have occurred and that the average cost of an attack is now at $4.24 million per incident. These figures are the reason why managers in the financial sector need to stay proactive with their data security.

Unfortunately, fraudsters have developed new and creative tactics to profit from a company. Apart from the ever-notorious data breach, criminals can now steal an individual’s identity and possibly conduct malicious transactions. The good news is investing in reliable authentication solutions can protect you against such cases.

If you are a manager of a bank, credit union, or any other organization that handles sensitive data, understanding both identity theft and identity fraud will benefit you greatly.

What is Identity Theft?

Identity theft occurs when a criminal obtains an individual’s personal information to potentially use in unauthorized transactions under the victim’s name, leaving them with significant damage to their finances and reputation. The theft of your identity can result in bank accounts, credit cards, and significant loans being taken out in your name when the criminal has no intent to pay. Once maxed out, the criminal abandons the identity and moves on – leaving the real person attached to that identity to clean up the mess. 

Below are some of the most common ways that criminals use to steal personal data with the intention of committing identity theft.

1: Phishing schemes

Phishing is the practice of sending fraudulent emails to siphon personal data. Fraudsters will usually disguise themselves as a person’s credit or banking provider and ask for details such as demographic information and banking numbers. Even social media account phishing can lead to financial identity theft; the same security questions used to protect your social media accounts are often the same as those protecting your bank account. 

2: Malware attacks

Criminals will write scripts or programs that will install malware after a click on a bad link. This malicious software then can execute a range of troublesome actions, such as key logging for your passwords, bitcoin mining, or more invasive spying into your computer activities. Since malicious software can steal information without a person knowing, users must install and update their security software.

3: Public network interception

Public networks are notorious for being the hunting grounds of cybercriminals. Since public Wi-Fi stations at malls and other commercial establishments lack security, scammers that take advantage of these public networks are able to eavesdrop on other connected devices. In case a person makes a banking transaction, a hacker may potentially intercept and steal the entered credentials. 

4: Crippling database attacks

Cybercriminals often target enterprises that handle sensitive information. Through sophisticated methods, they’re able to bypass a company’s security systems and leak both personal and financial credentials. 

5: Theft of wallet, documents, and mail

The most direct way that a criminal can access your information is by physically stealing your personal documents. Some may even scavenge through trash cans and dumpsters to acquire a person’s details. Post-it notes with login credentials should be avoided at all costs. 

6: Card skimming

Some criminals will tamper with ATMs and attach a scanner that can make a copy of a bank card. These devices also come with a hidden camera that can scan pin code, making it easy to steal your information. 

7: Child identity theft

Child identity theft is when a fraudster makes use of a child’s sensitive information for his personal gain. While cybercriminals may conduct this modus, it’s unfortunate to know that this act is often committed by family members. By making use of a child’s details, they can commit fraud when applying for credit cards, opening bank accounts, or taking out loans. 

8: Purchasing of credentials via the dark web

Cybercriminals who are able to steal personal records and other sensitive credentials may potentially sell these details on the dark web. In turn, this creates a lucrative market for fraudsters since they can use the purchased information to take over accounts and make unauthorized transfers. 

What is Identity Fraud?

Identity theft can be viewed as the action of stealing your identity, or identifying information. Identity fraud, on the other hand, is each individual act of fraud committed with your stolen identity. Not only can fraudsters steal identities, they may even create synthetic identities or use deceased people’s information to conduct fraudulent transactions. Below are some common examples of identity fraud.

1: Credit card fraud

This type of scam occurs when a fraudster uses stolen information to open a new line of credit or simply max out an existing one for their own gain For example, the criminal may purchase different things online or send money to unknown bank accounts. 

2: Account takeover

Account takeover is when an unauthorized individual gains complete access to a person’s financial accounts. They lock the original user out by changing the login details then steal money and leak recorded information. Scammers can also apply for fake ATM cards and make multiple withdrawals over time.

3: Government benefits fraud

Criminals may use an individual’s personal information to claim their government benefits. In some cases, fraudsters may even take out a loan.

4: Fake IDs

Criminals may create a fake ID using an individual’s personal information. Apart from reputational damage, victims may become liable for crimes they did not commit. Stolen social security numbers can be used to generate synthetic identities, something that children are particularly vulnerable to due to lack of attention to their credit score or accounts. 

5: Home title fraud

This occurs when a scammer gains possession of a person’s property title. Once they get a hold of other sensitive information such as your personal and financial details, they can transfer ownership to themselves and conduct malicious transactions. Since they can use your home equity as collateral, scammers are able to take out big loans under your name. 

The Importance of Identity Proofing

Both identity theft and fraud should be a great cause for concern amongst organizations. Since falling victim to an attack can threaten your company’s stability, the consequences they pose greatly emphasize the importance of identity proofing. Making use of biometric security systems and Multi-factor Authentication will ensure that only verified individuals are able to conduct transactions, access your systems, and manage sensitive resources. 

To ensure the security of both your clients and your organization, investing in comprehensive authentication solutions is a must. Reach out to experts at Q5id today to learn more!

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