Identity Theft Protection – Wake Up Businesses!
Almost every day, we read or hear something in the news about the latest loss or theft of customer or employee information. In the past few years, identity theft has grown exponentially, due in part to the relative ease to commit such a crime and its low conviction rate. Accordingly, organized crime now leads the way in identity theft crimes.
The term Identity Theft is often used to refer to several related concepts: information loss or breach, information theft, and fraud. Personal information can be lost or compromised with or without malicious intent. Most data breaches occur these days due to insufficient systems security. In 2005 alone, there were over 50 million records lost due to computer data breaches, and that is not including the 92 million records that one company’s employee sold to thieves.
Why So Prolific? Our personal data is stored in electronic and paper form in hundreds of databases, accessible by many, many people. Technology designed to make life, work, and commerce easier also makes hacking drastically easier and possible on a massive scale. As well, the personal anonymity of online transactions enables easy impersonation while using stolen data. Recent successful thefts of tens of millions of identities from huge corporate databases may also spur or encourage similar future thefts or copycats.
In the Workplace. The number one underlying source of identity fraud is theft of records from employers (businesses), according to a study by TransUnion. A Michigan State University study confirms this: an estimated 70 percent of identity crimes in the U.S. start with theft (or loss) of personal data by an employee. And while most businesses think of customer records as the most valuable, what are lost or stolen with increasing frequency are employee records.
Seventy percent of small businesses consider information security a high priority, and more than 80 percent exhibit confidence in their existing protective measures. However, more than half of these small businesses have experienced one or more security incidents in the past 12 months, making perception at odds with reality, according to a survey by the Small Business Technology Institute. Additionally, 74 percent of small businesses do not even have an information security plan.
Businesses Suffer. When a customer is a victim of identity theft or data loss, the business suffers along with the victim. Monetary losses of goods and services are often compounded by chargebacks. Then there is the loss of customer trust, and in turn, loss of customers. According to CIO magazine, after a breach, 20 percent of customers sever all ties with the company, 40 percent say they consider doing the same, and another 5 percent will be hiring lawyers.
When data loss and identity theft occur, the business suffers; it is a victim, but most people do not see it that way. They see the business of the offender because they did not protect the information enough to prevent it from being lost or stolen.
Costs of Identity Theft
Federal Trade Commission Chairman Majoras testified before Congress that thieves rack up $53 billion a year in identity theft. Consumers are stuck with $5 billion directly, while businesses are saddled with the remaining $48 billion. In individual cases of identity theft, the average dollar amount charged ranges between $40,000 and $92,000, according to the Identity Theft Resource Center. Laws hold victims partially responsible for fraudulent debt after 48 hours, and hold them fully responsible if not reported within 60 days.
Indirect costs of identity theft to businesses include the time employees must take to restore their identity should they become a victim of identity theft, 200 to 600 hours on average. Additionally, if lost information is traced back to a business, it will be held liable. Plaintiffs in identity theft lawsuits may seek class action status and often seek monetary, statutory and punitive damages.
In terms of information theft due to employee fraud, small companies get hit much harder than larger ones. A company with fewer than 100 employees that experiences employee fraud suffers a median loss of $98,000, according to a study from the Association of Certified Fraud Examiners. That is more than midsize businesses, and close to the $105,500 loss typical in companies with more than 10,000 employees.
Acting in Good Faith
The best way for businesses to minimize their risks associated with loss and theft of customer and employee information is to put safeguards in place before they suffer a breach. There are a variety of federal and state legislation that require businesses protect non-public information about their customers, employees and vendors. According to Betsy Broder, assistant director of the FTC’s Division of Privacy and Identity Protection, businesses need to have a plan in writing describing how customer data is to be secured and an officer on staff responsible for implementing that plan. “We are not looking for a perfect system, but we need to see that you have taken reasonable steps to protect your customer’s information.” says Broder.
Once an information security plan is established, businesses need to ensure their employees understand what is included in the plan and their responsibilities for safeguarding information. This is best accomplished through employee training. Businesses can also consider identity theft protection as a voluntary benefit to help protect their employees.
An effective information security program need not be elaborate or expensive. The key is to take action before identity theft strikes.
About the author
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