Abstract
Since the internet was introduced, e-commerce was born but with it came the danger posed by hackers. The internet has become an integral medium through which criminals can access personal information on individuals and use such information in the same medium to carry out their personal objectives. Online identity fraud has increased over the years due to inefficient privacy laws and lack of policies that direct businesses to safeguard personal information on individuals.
Identity theft occurs when someone’s personal information is illegally obtained by an individual and subsequently used by the individual to obtain financial resources or benefits by posing as the victim. Such a victim is normally left unaware of the stolen identity or misappropriated resources until it’s too late. Such victims are then left to tackle the high debts ran on their credit cards and other bills emanating from the use of their identity.
The economy and e-commerce in particular, has been negatively affected by the rising cases of identity theft, with businesses and individuals losing billions of dollars per year. Online businesses have felt the blunt of decreased business since customers are hesitant to engage in e-commerce since they associate increased risk of identity theft to online transactions. The internet has also been blamed for the rising cases of identity theft.
This study finds that there are ways of preventing against the possibility of becoming an identity theft victim while still carrying out online transactions. The government, through the FTC (Federal Trade Commission) is implementing mechanisms that protect against identity theft, and educative campaigns aimed at consumers that teach ways of preventing and handling cases of identity theft.
Introduction
Background
Each year, millions of Americans are affected by identity theft, with the figure reaching an estimated 11 million people in 2009 alone, costing businesses and the economy some US$56 billion according to The Washington Post. Criminals use social security numbers, financial records and other personal information to assume, or “steal” the identity of a person and conduct transactions without the knowledge of the victim.
Victims are losing thousands of dollars to compensate for the damages caused by the identity thieves, and also spend a sizeable amount of money to restore their lives. In addition, each theft averages a cost of $600 victim. For this reason, more and more consumers are becoming wary of e-commerce transactions, with some avoiding it altogether to the detriment of the industry.
Companies that rely on e-commerce should ascertain to consumers that their personal information will be handled with integrity and that their transactions will not pose a danger for them in the future (Smith 111).
Congress should enact laws, which would persuade businesses to protect customer confidentiality and allow for fast and well-organized corrections of credit documents. Legislation could also make it easier to detect identity theft criminals, and severely punish those that commit this from of fraud.
There are a number of ways that fraudsters use to acquire and exploit victims’ identities. One of the traditional methods is by stealing credit cards, identification cards or tokens by pick pocketing victims, or even through housebreakings.
Criminals could also use dumpster diving, as the term implies, which involves rummaging through a person’s trash in order to seek personal information from undestroyed documents. Criminals may employ dumpster diving to retrieve preapproved credit card applications that the victim may have discarded without tearing or shredding the document.
Some criminals eavesdrop on unsuspecting victims when they are giving their credit card number to a hotel or car rental agency over the phone. Criminals could also hack into a company’s database and steal personal information on the company’s employees (Hayward 60). In such a situation, there is little that individuals can do to safeguard their personal details.
The internet has supposedly made it easier for fraudsters to illegally acquire personal information from internet users. Information acquired from victims ranges from passwords, social security numbers to banking information. Hackers become more experienced in the internet field, continually upgrading their craft.
Many people are caught unaware and respond to spam messages that request some personal information from the recipient. Criminals make these spam messages irresistible to some, promising future benefits if they cooperate, whereby the criminals end up obtaining large amounts of personal data from the victims (Hoffman and McGinley 64).
Criminals mostly use personal data obtained from victims for their personal gains.
Criminals may duplicate credit cards using the victim’s personal data or request new credit cards while assuming the identity of the victim. Criminals may withdraw large amounts of cash from the victim’s bank account, and use the victim’s identity to run credit purchases for expensive items, in the process accumulating to the victim’s debts. Some criminals use the personal information to acquire loans and other benefits such as medical care by use of the victim’s insurance information.
People may not be aware that they are victims until a considerable amount of damage has been caused by he fraudster. Criminals take careful considerations to ensure that their new found source of wealth lasts as long as possible (Khosrowpour 129). and this includes measures aimed at keeping the victim in the dark.
Criminals may take steps to divert the incoming postal mails from reaching the address of the victim. In so doing, the victim may not get a chance to view his bank statement or credit card bills. In transactions that take place online, all the criminal has to do is fill out personal data obtained from the victim, which is easier than having to forge a signature (OECD 21). By the time the victim learns about the identity theft, he will have to deal with the piling debt levels and a ruined credit rating.
Statement of purpose
This report will review the effects of identity theft on both companies and e-commerce consumers. The report will also evaluate the trends in identity theft, ad what is being done to protect consumers and businesses from the crime. By the end of the article, there will be recommendations and suggestions on how cases related to identity theft can be minimized.
Scope
The study focused on published findings and observations from the US and Canada, whereas noted laws and legislations are those found in the US. Publications on the topic, as well as ongoing educational campaigns by the government and businesses, have made data on the subject easily accessible.
Limitations
This section seeks to determine the root causes for the increase in identity theft crimes, and reasons that make the fight against identity theft difficult. In the tough economic times, more and more individuals are lured into the possibility of getting easy low risk cash. Most of the thieves are people that the victim knows, and people who have easy access to the victim’s personal information.
People are generally unsuspicious when it comes with dealing with relatives and friends, sharing information freely and thereby making it easier for these criminals to use the information for illegal purposes. The 2006 Federal Trade Commission reports that pin-pointing the origin of the identity theft is also difficult as most people do not know how their identities were stolen (Biegelman 274).
The internet has also made it easier for people to access information, and subsequently increased cases of cybercrimes. More and more businesses and individuals are connected to the internet, and with the increase of readily available hacking software on the internet, people are becoming more skilled in the art of online identity theft.
Organizations that fail to follow adequate protocol in implementing their systems are an easy target for experienced hackers to breach their weak security systems. Mail systems that have weak security systems make it easier for criminals to divert the victim’s mail, hence making the victim unaware of the rising credit bills.
The popularity of online social sites also creates more opportunities for cyber criminals to access personal information. Risk exposure is increased for individuals who do not follow their social networking safety preferences, thereby exposing their information for anybody who is capable of accessing it. The internet is also a major limitation in the fight against identity theft since it aids criminals to make purchases or order for new credit cards without the need to phone or visit a store physically.
Interstate jurisdiction issues cases a delay in the fight against identity theft, especially when the victim and the criminal are in two different states. Police in the different states are usually unsure on who is to investigate the crime. The time wasted to get around the red tape is usually enough for criminals to get away.
Also, time consuming jurisdictional processes between countries further frustrates the fight against cybercrime. The fight against identity theft is further frustrated where the criminal is in a country that has not implemented any form of legal infrastructure to combatant against this form of crime. Unfriendly countries may be reluctant in sharing information that may lead to the arrest of an identity thief.
Methodology
This study is both exploratory and explanatory. Exploratory research delves on the rise of identity theft in the US while the explanatory research looks at the causes of identity theft and its impact on e-commerce. Extensive library and Internet research was carried out to build on more knowledge on the latest developments in the respective field. Information obtained was subjected to qualitative analysis. Qualitative data was based on descriptive statistics using non statistical technique on subjective statements and explanations.
Findings
Impact of identity theft
Identity theft can have an emotional impact on the victim, where they end up feeling vulnerable and depressed when trying to recover from the theft. These victims are more likely to engage in e-commerce transactions in the future since they are afraid that the incident may befall them again. Individuals may have their credit score affected before they even realize that they are victims of identity theft, and have to keep close contact with credit reporting agencies in order to make sure that frauds in their names have stopped.
Victims continue to endure hardships when the identity fraud has ceased when they are applying for new financing or bank accounts. Although the former victim may follow all the correct procedures, he may be subject to additional scrutiny since a theft flag has been raised in their reports, thereby creating inconveniences for the individual.
In this regard, undoing the damages caused by identity criminals is a daunting process. Identity theft also has a negative impact on the economy. Businesses suffer losses due to fraudulent transactions and decreased online purchases as a result of risk-averse consumers.
Effect on E-commerce
E-commerce has been negatively affected by the increasing cases of identity theft. The main reason behind this is that consumers are avoiding online transactions due to the negative perception of increased risk exposure emanating from online transactions. Consumers are fearful that no matter how careful they are, they might become identity thief victims.
Although, according to reports that criminals opt for traditional forms of identity theft, more and more consumers are avoiding online transactions. This means that companies such as e-bay, Amazon and Pay-Pal that rely heavily on online transactions are reeling from the diverse effects of identity theft.
Merchants who conduct online sales may end up paying higher transaction fees and rates for accepting credit cards than if they had accepted these cards physically in a store. Merchants may also spread anticipated losses on the prices charged to consumers, thereby making e-commerce expensive (Bradley 162).
Where the card provider has a chargeback at the time of the fraudulent purchase, then the merchant will have to bear the loss of the product or service provided to the criminal. This causes the merchant to exercise discrimination in order to protect their position. In so doing, the merchants may bar honest consumers from making legitimate transactions, and lose potential revenue in the process.
Merchants, in their effort to prevent against financial losses, may establish restrictions on shipping products to customers. A merchant may provide that all products should be shipped to the billing address used by the card provider. This becomes inconvenient for honest buyers who want the purchased item shipped to another address, such as their offices, even though the merchant has created additional security for both himself and the cardholder.
Even though the merchant may take stringent measures to ensure security against would be identity thieves, they will still be held accountable if they permit fraudulent transactions even though they had good intentions (Collins 173). In such a case, the merchants lose both the merchandise and the associated revenue since they have to forfeit any funds received.
To prevent this, merchants are becoming PCI (Payments Cards Industry) compliant, which involves setting up more mechanisms to ward off fraudulent transactions (Wright 44). Merchants have to bear the costs associated with becoming and remaining PCI compliant, which reduces profits from the business.
Prevention of identity theft
There are several procedures that individuals can engage in to protect themselves from becoming victims of identity theft. Although it would be seemingly impossible to ensure 100 percent protection, these strategies will make it harder for a criminal to steal a person’s identity and such criminals will move on to easier targets.
Individuals can practice being selfish with their personal information (Mitic 218). By using a need to know approach, individuals can ask themselves whether they really need to provide their personal information in certain transactions.
Individuals should also net respond to spam messages that ask for personal information in exchange for a job opportunity or other benefit. People should also not follow links provided in spam emails. Instead, they could open the site through another window to determine the authenticity of the email. Ensuring that the computer does not store or remember passwords is another way of preventing against hackers.
Different passwords should be used for various online accounts, while strong passwords provide extra protection. Alternatively, people could purchase firewalls for their computers to ward off hackers. Protecting the computer ensures that sensitive content stored does not fall into the wrong hands.
Individuals should regularly ask for their credit reports in order to keep up with all the transactions carried out with their credit cards (Hammond 92). Where the individual fails to receive a credit report or a bank statement, then he should be suspicious and contact the bank or credit company to enquire about the delay in postage.
In case a criminal has already diverted the victim’s mail, then such victim could learn early about the identity theft. The individual should also make sure that he checks his bank account balance periodically, which may help identify suspicious withdrawals. These steps help prevent and quickly identify possible identity theft crimes, thereby limiting the damages.
Conclusions and recommendations
Summary
Identity theft could affect Americans, and could ruin their financial life in the process and the American economy as a whole. Statistically, identity theft costs the US economy billions of dollars annually, with millions of Americans and organizations been affected.
Fraudsters are increasingly adopting new mechanisms to rob people and live off other people’s identities and unless the government acts fast, this trend is likely to continue. Most police agencies are developing financial fraud divisions to tackle the growing cases of identity theft and credit fraud. Even though criminals target almost anyone, there are strategies that individuals can use to prevent becoming victims, or identify fraud in the early stages.
Recommendations
The likelihood of becoming a victim of identity theft decreases the extent an individual protects his or her personal information. Consumers should be careful in their online transactions, instead of avoiding e-commerce, given its convenience benefits. In case a person thinks he is a victim of an identity fraud, he or she should act quickly to minimize the damages that may be caused by the criminal.
The individual could report to the FTC (Federal Trade Commission), or contact other suitable agencies that may aid the individual. Consumers should feel more safe conducting transactions online now that the government is continually developing new laws to fight against cybercrime.
Works Cited
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