FROM THE OFFICE OF PUBLIC AFFAIRS

May 16, 2005
JS-2444

Deputy Assistant Secretary D. Scott Parsons
Remarks before the Identity Management in Financial
Services Summit
Scottsdale, AZ
Beating Identity Crime: How the Public and Private
Sectors are
Working Together to Help Consumers and Put Fraudsters
Behind Bars

Good morning, ladies and gentlemen. It is a privilege to be here.

President Bush aptly stated, "The crime of identity theft undermines the basic trust on which our economy depends." I know that all of you understand that trust is at the heart of our financial system.

This morning I want to talk with you about the risks of identity theft; outline the actions of the public and private sectors; and finally, challenge each of you to accelerate your efforts to protect personal information.

Identity theft is fraud, plain and simple. But it's fraud in an often sophisticated fashion with a vast web of victims. According to the Federal Trade Commission, in 2003 about 10 million Americans had their identities stolen by criminals. Secretary Snow has stated that "it is important to realize that such crimes exact a heavy toll on our economy. Every such crime weighs on our entire system of credit, raising the cost of doing business and subtly but surely impeding economic growth." The ability to collect, use, and disclose reliable information securely is essential to the effectiveness of our financial system.

For example, record numbers of Americans have bought or refinanced a home in the past five years. Securing a mortgage at a favorable interest rate likely required the lender--many of you in the audience today--to check the credit rating. The rating was based in part on information in credit reports. Hopefully, that was a relatively quick and painless process for the consumer. But we know that the mortgage lending process would cost more, would take longer, and would be more difficult if that underlying information about our credit worthiness were not reliable and accessible.

Another risk of identity theft is the potential "chilling effect" on e-commerce. Surveys suggest that some consumers are wary of buying online because they fear identity theft. When fraud discourages Americans from taking advantage of one of the greatest innovations of our age, we all suffer. Online banking, for example, not only enables efficiency and cost-savings for financial institutions, these electronic transactions increase consumers choice and enhance competition in the industry. An erosion of trust can threaten the effectiveness of our financial system.

Collectively, we understand the concern of our citizens, customers, and business partners. We must communicate, though, that millions and millions of financial transactions are processed daily without incident. Americans, as well as our trading partners around the globe, should know that our financial system is the most reliable in the world.

There is no single solution to this challenge. Nor is there a "one size fits all" solution. Fighting identity theft requires a cooperative effort among all of the stakeholders. There is an army of protectors in the public and private sectors. Businesses large and small, technology vendors, financial institutions, government agencies and consumers all play a vital role in winning the fight against this 21st century form of fraud.

President Bush recognized the threat of identity theft early in his first term and has displayed a record of leadership in combating it. The President signed the Fair and Accurate Credit Transactions Act, known as the FACT Act in December of 2003. For consumers, it provides preventive resources and also help to "clean up" your record if you become a victim of identify theft.

By September 1 of this year, anyone may obtain a free copy of his or her credit report from each of the three nationwide credit bureaus by contacting a centralized request system. You will find the information needed to do this at www.annualcreditreport.com. Reviewing one's credit record is one of the best ways to catch identity theft early.

Every American can put fraud alerts on his or her credit files with the major credit bureaus if you believe that you may be a victim of identity theft or become one.

Victims of identity theft can get additional free credit reports. And with proper documentation, consumers can stop financial institutions and credit bureaus from passing along information resulting from an identity theft incident.

The President also signed into law the Identity Theft Penalty Enhancement Act in 2004. This statute created a new crime of "aggravated identity theft" and increased federal criminal penalties for this crime. Identity thieves can be sentenced for an underlying crime, like mail fraud, and face an additional, consecutive sentence for identity theft. This encourages prosecutors to pursue the identity crime as well as the underlying or related ones.

Recently, the federal banking regulatory agencies issued guidance about the response plans that banks need to combat unauthorized access to or misuse of customer information. The response plans must address when customers will be notified that sensitive information about them has been breached.

As you know, banks are highly regulated institutions when it comes to the collection, use, and disclosure of consumer data. The Gramm-Leach-Bliley Act governs the disclosure of consumer information to non-affiliated third parties. It also requires policies and procedures for the security of customer information, and prohibits obtaining information from financial institutions under false pretenses.

The Fair Credit Reporting Act (FCRA) can have an impact on financial institutions' disclosure of information to affiliated entities. And the FACT Act helps consumers enhance the accuracy of information about them and restrict its disclosure.

While regulation influences financial institutions' responses to identity theft, the actions freely chosen by financial institutions are significant. We appreciate the financial sector's effort and investment to preserve confidence in the security of all financial transactions, online and off.

Today you would be hard pressed to find a financial institution that does not offer its customers information on how to prevent identity theft and what to do about it. The financial sector trains employees to protect the security of customer information to assist customers who become victims.

Members of the Financial Services Roundtable and others developed the Identity Theft Assistance Center (ITAC). Supported by about 50 of the largest financial services companies, ITAC offers individualized assistance to customers of the member institutions and to victims who find that accounts have been opened at those institutions due to an identity theft crime.

We have also seen an explosion of promising technological innovation, evident by the exhibits on the latest and greatest solutions on display here today. We applaud the opportunity for a market based solution versus a more heavily regulated environment. Anti-phishing and anti-spyware software, software updates, and firewalls all exist to help spot the crime, spot the origin of the Internet scam, and slow the amount of potentially dangerous spam email that gets through to users.

Financial institutions also have developed sophisticated, automated anti-fraud technologies that can spot unusual or risky transactions and stop them quickly.

From a legal perspective, there are federal criminal and civil statutes for prosecuting identity thieves, including criminal penalties for computer, wire, and mail fraud, as well as anti-spam penalties. States have anti-fraud statutes as well, and some states have specific identity theft laws.

Law enforcement is committed to stopping ID thieves and capturing those who commit crimes. Networks of anti-fraud and identity theft task forces bring federal, state, and local enforcement together to tackle some of the largest or most complex cases.

Identity theft knows no borders. We've become a "connected world" and benefited enormously from the Internet age. But unparalleled access has spawned previously unimaginable threats. I've seen cases of crooks from one country using computers from a series of other countries to create an elusive criminal organization that is difficult to find and then prosecute across geographic boundaries. Fighting cyber-crime in the global theater is a daily challenge for law enforcement.

Some of you here today are bankers. Others are corporate security experts or technology innovators. But we are all consumers. And we are empowered to help protect ourselves. Understanding the crime, acting to protect your identity, and knowing what to do quickly if you become a victim is the most critical defense. Informed, proactive consumers will enable us to win the war on identity theft.

At the Treasury, we are passionate about fighting fraud. From partnership with the private sector to direct consumer education – such as the upcoming release of a DVD on how consumers can protect themselves from identity theft – Treasury is committed to equipping our country to protect personal information. And each of you is at the center of the action. We need innovative ideas, game-changing technology and a cooperative spirit. I challenge you today to continue to work cooperatively to assure the confidence that fuels our economic engine.

Thank you all for your attention.