National Institute of Justice

Business

The cost of identity theft to business is generally unknown. Although some credit card companies publish information concerning their costs from lost or stolen cards and "card not present" losses, they do not report their financial losses concerning other aspects of identity theft, such as the cost of investigating cases, or the cost effectiveness of introducing new security procedures versus taking the losses. The two largest credit card companies estimated that "aggregated identity-theft-related losses from domestic operations rose from $79 million in 1996 to $114 million in 2000, an increase of about 43 percent." [1] Most credit card companies do not consider categories such as lost or stolen cards, never-received cards, counterfeit cards, mail order or telephone order fraud to be identity-theft-related.

A serious lack of data on these issues inhibits research into possible intervention strategies that could reduce the harm.

Since businesses routinely do not report losses resulting from identity-theft-related crimes to law enforcement agencies, the temptation is to think of them not as real crimes, but simply as a cost of doing business. This issue requires deeper consideration, particularly as it speaks directly to the question of the sharing of responsibility between law enforcement and business for the prevention and reduction of harm done to society by these crimes.

The Criminal Justice System

The researchers found three main costs or areas of cost for agencies—investigation, Federal prosecution, and corrections. No good source of data exists for determining the dollar figures of actual costs incurred by these areas. The only available prosecution data suggests an approximate cost of $11,400 per case, but this seems to have weak substantiation. The Bureau of Prisons reported that the cost of operating a minimum-security facility, where most white-collar offenders reside, averaged $17,400 per inmate in 2000. One may add to this the average cost of $2,900 per offender for community supervision after release from prison, but this figure does not include costs for special conditions such as electronic monitoring. [2]

Individuals

Much has been written about the human cost of identity theft victimization. Some individuals incur financial costs; these can range from $30 to many thousands of dollars. The report cites some findings in this regard, but acknowledges that the human costs for the victim in time lost, credit problems engendered by the crime, and lack of assistance are the most important and least quantifiable.

Societal

The extent of harm done by identity theft to society or to an economy that relies on open markets has yet to be determined. Identity theft is harmful to open markets because they depend on the very trust that identity theft violates. Other potential cost areas include national security risks or threats, burdens created by the presence of illegal immigrants, and higher premiums passed on to consumers.

[1] U.S. Government Accounting Office, Identity Theft: Prevalence and Cost Appear To Be Growing pdf, report to Senate Subcommittee on Technology, Terrorism, and Government Information, Washington DC, 2002.

[2] Ibid.