Identity fraud against children on the rise
Over one million children in the US were victims of identity fraud last year
A new report has highlighted the increasing problem of identity fraud against children.
The independent study by Javelin Strategy & Research, found that over one million children in the US were victims of identity fraud in 2017, resulting in losses of $2.6 billion, and out of pocket expenses to families of $540m.
Children are increasingly being targeted for identity fraud because their lack of credit history and other identifies means that stolen identity information, such as social security numbers, can more easily be used to set up new accounts and credit cards, which makes their identities more valuable.
Half of all identity fraud against children is new account fraud, and the study showed that on average fraudsters were able to steal twice as much in fraud against a child than in identity theft incidents against an adult.
Identity theft against children is also more likely to result in losses to the victim or family, whereas adult victims are more easily able to prove they were not liable.
Sixty percent of identity fraud against children is committed by people who know the victim, and researchers also found that children who were bullied online were nine times more likely to be victims of identity fraud.
The online survey of 5,000 households was conducted in September and October last year, and was sponsored by Identity Guard,
Two-thirds of child fraud victims are under the age of eight, 20% were between the ages of 8 and 12, and 14% were aged between 13 and 17.
Among those who were notified their information was breached, 39% became victims of fraud, compared with 19% of notified adults. The limited financial histories of minors give fraudsters a long-term opportunity to slowly develop networks of accounts, mimicking legitimate holdings.
"Child identity fraud is a serious problem and is frequently overlooked as the public focuses on high-profile breaches involving the personally identifiable information of adults," said Al Pascual, senior vice president, Research and Head of Fraud & Security at Javelin Strategy & Research. "Child identity fraud has unique characteristics that make it particularly hard to prevent, though there are steps that parents and guardians can take to help keep children safe."
More than half (60%) of child identity fraud victims personally know the perpetrator. In contrast, only 7% of adult fraud victims know their victimizer. Many of these perpetrators have legitimate access to the personal information of victims, and children of any age are not safe. Two-thirds of child identity fraud victims are under the age of eight.
The study also finds a strong connection between bullying and fraud. Minors who are bullied online are more than nine times more likely to be victims of fraud than minors who were not bullied (incident rates of 6.67% vs. 0.72%). In-person bullying is associated with higher fraud amounts.
"In many cases, fraud and bullying are not perpetrated by the same individual but arise from the same underlying vulnerabilities," said Pascual. "Children who are unprepared to protect themselves from online risks are likely to encounter individuals who wish to target them emotionally or financially. Bullied children also may be more vulnerable to fraud as they are taken advantage of when they seek friendship online."
Because children are less likely to have their own debit or credit cards, existing-card fraud (ECF) is comparatively rare. This stands in marked contrast to identity fraud among adults, where ECF dominates the fraud landscape. While adults are most frequently targeted for the value of their account - the funds available for immediate theft from a checking account or credit card - minors are targeted for the value of their identity.
The complexity of fraud against minors tends to lead to dramatically more expensive fraud schemes than those faced by adults. On average, fraudsters were able to steal $2,303 when they misused the identity of a minor, more than twice the mean fraud amount for adult fraud victims. Worse, while adult fraud victims are typically able to avoid liability for fraud, the families of child identity fraud victims paid an average of $541 out of pocket.
Javelin recommends that parents start encouraging children to protect their identity data to prepare them for later life, and to pay special attention to children who may be bullied. They should also monitor the child's accounts, and pay attention to any notifications of fraud.
They should also keep physical documents relating to children in a safe place, and considered checking and freezing the child's credits where this is possible. Parents should also seek help from financial providers or other agencies if in doubt.