The following article was kindly supplied to us by Debtsource.

Experts are calling identity theft “an absolute epidemic” and law-enforcement authorities are stating that it has become the fastest growing crime in the USA. While accurate local statistics are not readily available the US Federal Trade Commission reported that in 2005 alone some 255 000 cases of identity theft were reported. The problem has taken on such proportions that President Bush established a special Identity Theft Task Force in May 2006, comprising 17 federal agencies and departments including the likes of the FBI and Secret Service. According to the co-chairman of the task force – Attorney General Alberto Gonzales – identity theft is “the chic and cataclysmic crime of our new age of information.”

On the local front the problem is no less severe and local credit bureaus are reporting significant increases in the number of complaints received. In recent months there has also been a marked increase in the number of commercial identity theft cases reported. In some instances the value of goods lost via this emerging crime has amounted to hundreds of thousands and commercial credit grantors need to become more vigilant in preventing this fraud.
But what is identity theft? The term first emerged in U.S. literature circa 1996 where the main concern for consumers were financial crimes exploiting their credit worthiness to commit loan fraud, mortgage fraud, lines-of-credit fraud, credit card fraud, commodities and services frauds. In its simplest terms, fraudsters obtain details of your identity and apply for credit in your name. They continue to make purchases for as long as the credit provider will allow them and then don’t pay. By the time that the provider makes contact with the real you, the ramifications in terms of repairing your credit record is immense. For the criminal, identity theft is a relatively low-risk, high-reward endeavor and is considered a “soft” crime – no-one gets hurt and the chances of being prosecuted is minimal. Credit card issuers (for instance) often don’t prosecute thieves who are apprehended. Why? The firms figure it’s not cost efficient. They can afford to write off a certain amount of fraud as a cost of doing business!
The same trends are now emerging in the South African commercial credit environment – and in many ways commercial identity theft is easier than that of consumer credit. In commercial or trade credit there is no single specific document that has to be presented when applying for credit – such as an ID book. Registration papers in the case of a registered entity are also easily falsified, especially seeing that the majority of applications processed are faxed documents. Moreover, the pay-off in a commercial environment is significantly higher as normal lines of trade credit are usually much more than those granted in a consumer environment. These facts have not been lost on local fraudsters.
With the proliferation of information available on companies – using technologies such as the internet – a potential fraudster can relatively easily source sufficient information on a company to complete an application for credit. Once the application has been approved, purchases can be made and the goods are then usually – but not always – collected from the supplier’s offices. Even if the credit provider diligently researches every new account application the likelihood of discovery is minimal as the research is primarily focused on credit risk rather than fraud detection.
The scary part is that detecting this type of fraud is difficult and may mean that entities will have to change some of their procedures on normal account applications. The upside is that only entities who sell goods that are easily resalable are normally targeted. Fast moving consumer goods; electronic equipment and building and hardware material suppliers are typical examples of industries that are more prone to being hit. Companies in these higher risk industries should be more vigilant, but measures in other industry types should also be implemented. A fraudster with a particular “order” for a specific product will just as easily target some other industry.
There are however measures that can be employed to combat the crime – here are some guidelines to assist:
*As mentioned earlier – the preferred method of operation is to have goods collected. Unless absolutely required, never allow especially new account applicants to collect goods. This policy will make matters significantly more complicated for the thief as the delivery team may be unlikely to deliver the product unless the premises are at a formal address. When goods absolutely have to be collected, ensure that there is an adequate security system in place that records the name, ID number and vehicle registration number of the person collecting the goods. While not foolproof this additional measure will make the fraudster’s life a little more complicated.
*Ensure that the contact details on the credit application actually match the company’s contact details as per the telephone directory or other works of reference. In almost all cases of commercial identity theft this was found not to be the case, with the fraudster hoping that he or she will be contacted on some particular number to verify details etc. If an applicant states that they specifically want to be contacted on say a mobile number, make a point of contacting the company on the referenced landline number and verify whether such a contact person is indeed employed. In addition – a quick conversation with the company’s buyer or in the case of small business with the owner or financial controller at the referenced number, is probably the most effective procedure to combat commercial identity theft.
*Ask for additional paperwork such as copies of the Directors ID documents to accompany (as standard) new applications. While most of these documents are admittedly easily falsified it may serve as an additional deterrent.
* Implement a policy whereby crimes such as these are always investigated and prosecuted, even if it means spending money on a private investigation after the fact. If a syndicate or even single criminal knows that your company won’t investigate or prosecute you are more likely to be targeted. This will also serve as a significant deterrent if internal staff are involved.

Today’s consumers participate in a global marketplace where a world of goods and services are at their fingertips. But with the promise of new choices and technological convenience, many are unwitting victims of identity theft – an insidious practice that allows fraudsters to disrupt consumer’s lives, ruin their credit histories and worse! A consumer’s and a company’s first defense is to learn about identity theft and what steps can be taken to prevent it.