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Fraud Ring Steals Children’s Identities
Posted on October 29, 2019 by in Identity & Privacy, Personal, Scam Alerts

This blog series is dedicated to sharing real-world stories of the most serious cases of stolen identities — and just how devastating these crimes can be on organizations, individuals, and families. This recap focuses on how criminal rings are appropriating children’s identities to commit child identity theft.

Children are Increasingly Victims of Identity Theft

In April 2018, Cynthia Lockwood, who worked as a security officer in the Buffalo, NY Public Schools, was arrested as part of an eight-member child identity theft ring. Lockwood was accused of using a 12-year-old victim’s Personally Identifiable Information (PII) to gain access to more than $25,000 in credit. Law enforcement and Social Security officials discovered over a 16-month investigation that she was a member of an eight-member ring that stole Social Security numbers (SSNs) belonging to children — one as young as 11 — across the country. The ring would use the SSNs to open credit cards and ultimately run up $420,000 in bogus purchases.

Several members of the identity theft ring were subsequently arrested and charged with first-degree identity theft and first-degree scheme to defraud. Other charges included third-degree larceny, second-degree possession of a forged instrument, and second-degree identity theft. This is an ongoing case.

Why Identity Thieves Target Children

Criminals view children’s social security information as an easy way to create what are called “synthetic identities” that they can use to make fraudulent credit transactions. Children are issued SSNs at birth but generally do not have any credit history until they apply for credit cards. When banks pull a credit report, they are not likely to find anything in that report — giving the fraudsters a clean slate to pounce upon.

Any identity thief can take a legitimate (stolen) SSN, add a different name, birth date, address and phone number to start a new and fraudulent credit file. It takes only about a month for the thief to open a bank account, apply for loans or credit cards that establish a credit score, and use the synthetic identity to apply for loans, buy merchandise, or receive medical treatment. Some even file a fake tax return to obtain an IRS refund.

According to the Javelin Strategy & Research 2018 Child Identity Fraud study, more than one million children were victims of identity fraud in a single year, resulting in total losses of $2.6 billion and more than $540 million in out-of-pocket expenses to families. Statistically, minors are at far greater risk of PII breaches than adults: it has been estimated that one in four minors will have their identities stolen before they reach the age of maturity. The emotional strain placed on families is tough to fathom, and far more difficult to calculate.

Victims Rarely Know the Identity Thief

The financial and emotional costs of child identity theft are bad enough, but there is another equally disturbing reality: in two out of three cases, the victim does not know fraudster. There are a growing number of organized crime rings that use sophisticated tools to hack into databases where PII is commonly stored. They exploit networks, uncover sensitive data, like passwords, and then use it to take over established accounts — or in the case of children, set up entirely new identities. Or they simply turn around and sell stolen (but valid) SSNs on the Dark Web to other criminals, reportedly for as little as $2 per record.

4 Steps to Protect Children

The devasting financial impact from child identity theft builds over time, as methodical and well-organized criminals sit patiently on the identities they have stolen before “going live.” In many cases, the more sophisticated fraudsters will make small charges against a new account to establish credit and create a pattern of otherwise insignificant purchases to test tolerance.

Here are four steps that parents can take to protect themselves and their families against losses from child identity theft:

  1. Understand where your child’s PII is stored, particularly at schools, dentists and medical offices; verify that their records are secure.
  2. Know how any PII you provide on school forms will be used with whom it will be shared. Verify that these forms are updated and that it is indeed necessary to even provide PII about your child.
  3. Ask about the school’s directory information policy and what information about your child is included. You have the choice to opt-out.
  4. Consider a Credit Freeze for minors, available from all three major credit bureaus, making it more difficult for a fraudster to open new accounts with a child’s PII.

If you are concerned about safeguarding your family against child identity theft, IdentityForce offers ChildWatch as an additional service available with any adult IdentityForce membership. And, for organizations that offer IdentityForce identity protection as a benefit to their employees, ChildWatch is free.

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