Director of Strategic Alliances, Revenue Discovery and Recovery
LexisNexis Risk Solutions
We all know that companies, academia, non-profits and governments are defrauded each year and lose billions of dollars, as a result. The key impediments to stopping fraud are 1) knowing how to detect it and 2) knowing how to prevent it. By sponsoring International Fraud Awareness Week, the ACFE is helping to raise awareness and to educate the fraud prevention community about the resources, tools and best practices available to stop fraud.
My company, LexisNexis, is proud to be a supporter of International Fraud Awareness Week. LexisNexis is so committed to the concept of educating people about fraud that they asked me to author Fraud of the Day, a daily commentary on how fraud is perpetrated against government programs. At LexisNexis, we view Fraud of the Day as an important educational resource for government officials to learn how fraudsters are scamming the government, so they can be knowledgeable about fraudsters’ techniques and be better prepared to prevent them from succeeding.
That’s really what International Fraud Awareness Week is all about – fostering an opportunity for fraud prevention experts to learn what works and what doesn’t in the fight against fraud. And winning that fight begins with talking about the challenges faced by the fraud prevention community. Along those lines, here’s my take on one of the most prevalent types of fraud in the government today: identity fraud.
Identity Fraud – Why the U.S. Will Continue to Suffer
Fraud is defined as a deliberate deception or cheating intended to create an advantage or a gain. Fraud requires two specific things to take place. First, a party must purposely present a mistruth or lie. Second, a different party must accept the misrepresentation as truth.
In cases of government fraud, the accepting party is always the government agency. Federal, state and local governments often depend on self-reported information coming directly from the potential beneficiary. This information, often unsubstantiated, creates an opportunity for deception.
Government program theft is a significant issue within all benefits-based programs. At the foundation of these programs is the most basic question: “who are you?” There are a number of ways to misrepresent the identity of an individual, and the legal documents to substantiate that misrepresentation are easily created or stolen.
The ubiquitous identifier for U.S. citizens is the Social Security Administration’s (SSA) Social Security number (SSN). This number has been used for decades to uniquely identify individuals for both commercial as well as government endeavors. The SSA began issuing SSNs in 1935, with the original purpose of tracking individuals for only Social Security purposes. It has since been widely adopted as the defacto national identifier.
Printed on the Social Security card (SSC) from 1946 to 1972 was the wording “Not for Identification.” This was printed because the SSC was, and still is, not suitable for identification – it does not have a photograph, physical description or date of birth. In fact, all the SSC does is confirm that a particular number has been issued to a particular name.
So, how is it that identity fraud is so easy to perpetrate and so difficult to stop? Because the very foundation to establish an identity is easily stolen and/or recreated. As shown above, even the SSA acknowledges that the SSC should not be used as identification, no less just the number. With just a name and matching SSN, an unscrupulous individual can quickly claim government benefits under another persons’ name/identity. The enablement of technology, especially the Internet, allows fraudsters to easily register and claim benefits under the identities of others without even having to visit the agencies’ office.
Programs ranging from tax return submissions, to food stamps to student loans face a large percentage of identity fraud. How can this be stopped? A national identification card (NIC) must be adopted that ties in biometrics and two factor authentication. A Smart Chip embedded NIC that contains one of the following: fingerprints, facial recognition, voice print or retinal scan information must be used to verify the identity of the individual presenting the NIC. The NIC should contain four critical features: a photograph, the biometric data, an internally retained PIN that is only known to the holder, and a sequencing number allowing all government agencies to look up and access the biometric data for identity verification.
Until the U.S. is ready to move away from the 20th century methodology of identification and embraces 21st century technologies, fraud will continue to grow at triple -digit rates and continue to overrun our agencies.
To read more about how government agencies can combat and prevent fraud, visit FraudoftheDay.com.