ID Theft and SAR filings

ID Theft and SAR filings

In the past, authoritative reports on identity theft have used surveys conducted with the general public to collect ID theft related data.  However, in a recent FinCEN report, the data collected came directly from SAR’s filed from the financial institutions themselves, resulting in a much more accurate assessment of the scope of the identity theft problem.

About the SAR: The most recent version of the Suspicious Activity Report (SAR) is dated July 2003, and has required financial institutions to report in the separate category of identity theft since 2004.  (It’s found in Part III, 35 (u), with the narrative in Part V.)  Since the category was made available, the number of SAR filings reporting identity theft has gone from 15,445 in 2004, to 36,210 for 2009.

About ID Theft: The ID Theft/Red Flags Act is actually titled “Identity Theft Red Flags and Address Discrepancies under the Fair and Accurate Credit Transactions Act of 2003”, and was approved by the FFIEC and all regulatory bodies in October, 2007 with compliance mandatory by November 2008.  Since then enforcement has been delayed several times, most recently until December, 2010.  This does not extend the requirement for financial institutions to comply with the act, only regulatory enforcement.  All institutions should have (at the very least) and ID Theft policy, as well as established procedures.

About the report findings: There were a number of interesting findings in this report, but the most interesting to me was that the 2 most commonly identified Red Flags (as listed in Supplement A to Appendix A of the act) were #25 and #26;  or

  • 25. The financial institution or creditor is notified of unauthorized charges or transactions in connection with a customer’s covered account.
  • 26. The financial institution or creditor is notified by a customer, a victim of identity theft, a law enforcement authority, or any other person that it has opened a fraudulent account for a person engaged in identity theft.

These 2 Red Flags accounted for 75% and 23% respectively of all filings.  This is interesting because it appears that the vast majority of the ID theft notifications are coming from the customers themselves.  When combined with the finding that 43% of ID theft related activity is discovered within 4 weeks, perhaps the most effective loss preventive control for institutions to consider is one that delivers account information to the customer more quickly.

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Tom Hinkel
As author of the Compliance Guru website, Hinkel shares easy to digest information security tidbits with financial institutions across the country. With almost twenty years’ experience, Hinkel’s areas of expertise spans the entire spectrum of information technology. He is also the VP of Compliance Services at Safe Systems, a community banking tech company, where he ensures that their services incorporate the appropriate financial industry regulations and best practices.

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