The Dangers of Identity Theft
Nobody knows the ins and outs of identity fraud better than Frank Abagnale. Before becoming a financial security entrepreneur, he gained renown as the young man whose brazen impersonations enabled him to swindle a couple million bucks--and whose story was so colorful it was made into the movie Catch Me If You Can.
Abagnale, who concocted his false identities rather than stealing them, is now turning identity theft into something of a personal crusade. "I know cons," he writes in his recent book, Stealing Your Life: The Ultimate Identity Theft Prevention Plan, "and right away I saw that this one was going to be the sweetest of all."
Times have changed in the 40 years since Abagnale's heyday. Identity theft, broadly defined as everything from purloining a credit card number to misusing bank or other accounts to full-blown impersonation, is commonplace now. The Justice Department's National Crime Victimization Survey found last year that close to 3 percent of all households were victimized during a single six-month period of 2004. To put this in perspective, only 3 percent of households were burglarized during all of 2005. Yet most people take more steps to keep burglars out than to thwart financial crooks.
The real issue is data security, at every level. Anyone can be at risk for snooping, data misappropriation, or identity theft, but successful entrepreneurs have more to protect than most people. The Justice Department survey found that households with incomes exceeding $75,000 were among those most likely to fall victim. The biggest cost to entrepreneurs may be in the time required to sort out a nefarious impersonation. The Federal Trade Commission has estimated that in 2002 identity theft victims spent between 15 and 60 hours untangling the mess.
Abagnale's book offers many suggestions--scrutinize your monthly statements, don't disclose private information, use strong passwords. Much is beyond your control, Abagnale notes; for example, key private information for thousands of individuals is often lost or stolen on laptops or to hackers. But there are things you can do--including protecting your own laptop. If your laptop goes missing, crucial business as well as personal data could be compromised. The first line of defense is to keep track of your laptop and when possible, lock it with a cable. You should also use a strong start-up, or BIOS, password (see your owner's manual), and make sure your notebook can't be booted from a floppy or CD drive. You can also use data encryption, which is built into Windows XP Pro (NASDAQ:MSFT).
Several companies offer software that they say will locate a missing notebook computer via the Internet. John Livingston, CEO of Absolute Software, says his company already has agreements for its products to be preinstalled in many laptops by Lenovo (OTC:LNVGY), HP (NYSE:HPQ), Gateway (NYSE:GTW), Dell (NASDAQ:DELL), Panasonic, and Fujitsu (OTC:FJTSY). The software clocks in with the company daily; once you report your notebook stolen, the company checks on its whereabouts and works with local law enforcement to get it back. Absolute claims a recovery rate exceeding 80 percent.
But the biggest weapon in your arsenal against identity theft is cryogenic, and you should use it--by freezing your credit. If you're a successful entrepreneur you've probably got more credit cards than you need. So why not lock things down? By the time you read this, at least two dozen states, including California and New York, will have given individuals the right to prevent any credit from being issued in their names. All you have to do is notify the three big credit-reporting agencies--Equifax (NYSE:EFX), Experian, and TransUnion--in writing. When a credit file is frozen, lenders can't even get a look at it, although some states make exceptions for landlords and employers. Freezing a file is a modest hassle but worth it. If the need should arise, you can temporarily unfreeze your file by telephone.
One more tip: Use credit cards--your liability is strictly limited, and theft of a credit card number is among the easiest types of identity theft to resolve. Abagnale recommends against paying for anything by check--especially if a merchant wants your driver's license number or other proof of identity. A check, after all, shows your address, your account number, and your signature for all the world to see--and steal.