Identity Thieves Face Pay CutWhile the number of fraud incidents is rising, criminals are earning less for each crime they commit.
Overall Fraud Impact 2003-2008
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Identity thieves, like other workers in today's troubled economy, have had to endure a pay cut.
Despite a 22% increase in the number of fraud incidents in 2008, compared with 2007, the cost of identity fraud to consumers dropped by 31%, according to a report released Monday by Javelin Strategy & Research.
"We may be seeing the first signs of the proverbial shrinking of the middle class among fraudsters, or at least a shrinking in average value among individual cases of fraud," said Jim Van Dyke, president and founder of Javelin Strategy & Research, in an e-mail. "We are seeing signs of increasingly deliberate action on the part of criminals, with increases in crimes that have both shorter and longer average duration between information exposure (theft of data) and information usage (fraudulent transactions conducted with someone else’s identity information).
"Is it fair to say criminals are taking a pay cut? Yes, if we're referring to the average profit a criminal realizes on a per-crime basis. While there are more crimes, more crimes are being committed (at a lower average amount per) to realize the same amount of profit. This is no different from someone having to work overtime in order to realize the same gross pay they once made with fewer hours."
Javelin's 2009 Identity Fraud Survey Report says that the average consumer cost of identity fraud fell 31%, from $718 to $496 per incident, its lowest level since 2005. It attributes the decline to faster fraud detection, reduced fraud amounts, and more rapid complaint resolution, brought about by industry efforts and consumer education.
Even so, the rise in the increased number of fraud incidents is troubling because it reverses the declines in fraud seen over the past four years. The Javelin report says that the increase corresponds to "reports of an increase in crimes of opportunity seemingly driven by economic misfortune and availability, and targeting immediate gains." Fraud rates typically increase as the economy declines, the report says.
The upward trend is amplified by the increasing sophistication of global identity theft rings, the rising market for secondary financial information, and the availability of fraud toolkits online.
One measure of that sophistication is the speed at which identity thieves strike. In 71% of reported incidents, the report says, the fraud began less than a week following the theft of the data. That's 33% faster than fraud incidents in 2005.
Despite the prevalence of online fraud, low-tech attack methods -- stolen wallets, checks, credit cards, or mail -- still represent the most common way that personal information is obtained. Forty-three percent of fraud incidents where the method of compromise was known involved such methods.
It may be for this reason that women were 26% more likely to be the victims of identity theft than men in 2008. According to the report, women make more purchases in stores, where low-tech attack methods can be applied.
Fraud arising from online access to information accounted for only 11% of incidents with known methods of compromise.
It's worth noting, however, that the method of compromise is known by only 35% of fraud victims.
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