Cybercriminals are increasingly targeting children for identity theft, and lower-income families are the most frequent victims, according to a new study published today.
Research firm Javelin Strategy released its first-ever 2012 Child Identity Fraud Survey Report, a detailed study of more than 5,100 U.S. households. The report, sponsored by identity fraud prevention company Intersections Inc. and the Identity Theft Assistance Center, states that one in 40 U.S. households experiences child identity theft at least once in the family's lifetime.
"Organized crime is looking for ways to build accounts using clean credit records," says Steve Schwartz, president of partner services at Intersections. "Using a child's data makes it easier for them to create a new persona -- a synthetic identity that can be used to steal or launder money or any number of other crimes."
Surprisingly, it is the children of the poor, not the rich, who most frequently fall victim to identity fraud, the study says.
"Child fraud victims hail disproportionately from households living below the national poverty line -- 39 percent earn less than $25,000 a year, compared with only 17 percent of all households with children)," the study says. "This trend is a reversal of that among adult victims of ID fraud; 58 percent more households in which children have defrauded earn less than $25,000 a year, compared with 28 percent fewer households of adult fraud victims earning less than $25,000."
Observers in the industry, including the Federal Trade Commission (FTC), postulate that many identity thefts affecting minors may be crimes of desperation when perpetrators known to the victim fall on difficult economic times. Child ID fraud is frequently committed by family or friends, the study says -- 27 percent of victims reported knowing the individual responsible for the crime.
The Social Security number is the one item of information most frequently stolen from children, says Alphonse Pascual, industry analyst of security, risk, and fraud at Javelin Research and author of the study. With a valid SSN, criminals can set up fake identities, open bank accounts, and get credit cards -- all without a credit bureau reporting it back to the owner, he notes.
"The one bit of advice I offer to parents is that your kids' Social Security cards should be locked in a drawer -- there's no reason for them to even know the numbers," Pascual says. "Don't use their Social Security numbers for anything unless you absolutely have to -- and never put that data online."
Pascual's point about credit bureaus is critical because it means that misuse of children's identity data can't be tracked in the same way that adults' data can, notes Schwartz.
"If you're an adult and someone opens an account in your name, that's going to show up in the credit bureaus," Schwartz notes. "But most kids don't have credit records. There's no central place where the misuse of that data will be flagged." Some children don't find out that their personal information has been defrauded until they're old enough to apply for a bank account or a student loan, he notes.
The survey indicates that child identity crimes take an average of 334 days to detect and 44 hours to resolve. Seventeen percent of children were victimized for a year or longer, Javelin says.
Some of the identity protection firms, including Intersections, offer child identity services that proactively go out and search the Web and cybercriminal forums for instances of a child's name, address, and Social Security information, Schwartz observes.
"This is something that's in the hands of the parents, but often the parents don't have the resources to do this type of data search," Schwartz notes.
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