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Don't become a victim of criminal identity theft

On July 7, reported that King County officials entered two charges of felony identity theft against Gary Wayne Bogle. According to Washington man charged with felony ID theft, by Danielle Leigh, Bogle used his brother's identity to obtain free health care and attempted to avoid a criminal record in his own name. His brother ended up with false convictions and a destroyed credit because of unpaid hospital bills fraudulently entered under his name.

Financial identity theft occurs when someone misappropriates your personal information to open new accounts, or uses your existing bank or credit accounts to make purchases. The above case shows a newer type of identity theft — criminal identity theft — that's spreading across the country and can be even more damaging than having a criminal destroy your credit rating.

Historically, criminal identity theft meant a criminal would obtain a driver's license or state identification card using the victim's information, including their photo. The criminal would provide this identification to police officers when they were pulled over for a traffic stop or while being arrested for a crime. They'd sign for the ticket and then miss the court hearing. Or they'd be arraigned and released pending trial and then miss the trial. Because no one appeared in court, the judge would issue a bench warrant for the arrest of the victim, whose stolen personal information was used by the actual criminal.

Often the victims of this type of identity theft find out about the crime when they're arrested or terminated from their job because of an outstanding warrant. They also might struggle to find employment because some companies conduct pre-employment background checks on job applicants. Take, for example, a California woman who was detained six times by law enforcement, arrested four times, spent 20 days in jail on no-bail warrants and even had her children removed from her care by child protective services — all because she was a victim of criminal identity theft.

Machinations of the scheme

The typical pattern for criminal identity theft is for the criminal to first misappropriate a victim's Social Security number (SSN), driver's license number, passport number and other personally identifiable information (PII) via data breaches, mail fraud, phishing, vishing, etc. They also can get PII from social networking sites or by purchasing it on the internet.

Once they have the victim's PII, they use that person's name and SSN to set up a shell company — usually an LLC because it's the easiest. They'll file paperwork for the shell company with the state, but they won't have any operations nor conduct any real business.

After the state approves the shell company, the fraudster opens a bank account with the victim's SSN, with that person as the principal and the sole proprietor of the LLC. The address for the shell company will usually be a rented P.O. box in the victim's name usually paid for in advance with cash.

If it's necessary to have documents notarized to set up the shell company and bank accounts the criminal orders fake notary seals. To prove how easy it is to get a fake notary seal, I ordered one for "I'm A Crook." It cost me $25 and expires in 2020. If I was a criminal, I could use that to notarize documents. As long as the criminals are willing to pay the fees they can get as many notary stamps as they want.

When everything is set up, the fraudsters get to work cashing stolen checks and processing transactions from stolen credit cards into the shell company's bank accounts. Once the funds are available in the accounts the criminals immediately wire the money out to overseas bank accounts — usually on the very same day the funds were released — to make it more difficult to trace. The money is then laundered and put back into the criminal's pockets.

In a case from Houston, Texas, a fraudster cashed more than $5 million in stolen checks using this scheme. In another case from California, two defendants pleaded guilty for fraud after cashing stolen U.S. government checks using bank accounts that were opened using stolen identities.

Why criminals choose this scheme

Criminal identity theft has certain advantages for the thieves. When law enforcement learns about fraudulent and stolen checks or the multiple transactions that have been processed using stolen credit or debit cards, they launch an investigation into the accounts where these funds were deposited, which leads them to the shell company. The victim becomes the prime suspect because the identity theft victim's name and SSN are listed on the shell company registration and bank account documents.

Unfortunately, without proof, law enforcement usually doesn't believe that victim is innocent. After all, what criminal hasn't professed their innocence?

Protect yourself

Innocent victims of criminal identity theft can suffer serious embarrassment, spend a significant amount in legal fees and even land in jail. Even though it's impossible to completely prevent criminal identity theft, you can take some steps to help reduce your risk.

Regularly review your credit report and run background checks on yourself to find out if you're listed as an owner or statutory agent on any businesses you don't recognize. Select a background service that pulls data from federal and state databases. Nationwide background searches are more expensive but, of course, identity thieves aren't limited to stealing PII from local victims — they have a worldwide reach using the internet.

Run your name though general and specific search engines. Search public records to discover any arrest warrants or if litigation has been started listing you as a plaintiff.

Take proactive steps to protect your PII because just like with financial identity theft, there's no guarantee that you won't become a victim. You can carry identity theft insurance to cover the expenses of clearing your name as a rider on your homeowners' or renters' insurance policy. Coverages and prices vary by company and state.

We know that we should guard our SSNs and only provide it when absolutely necessary, but we should also zealously protect our driver's license numbers and passport number because identity thieves can use them to create fake IDs with their photos. Fraudsters can purchase driver's license blanks for all 50 U.S. states, as well as fake passports for the U.S. and other countries on the internet. Some websites selling fake IDs claim their documents are good enough to fool transportation security agencies. Also, if you have a new passport with a radio-frequency identification (RFID) chip, make sure you keep it in an RFID sleeve, just as you do for chip-enabled credit and debit cards. (RFID chips use electromagnetic fields to automatically identify and track tags attached to objects.)

Don't forget to keep track of other forms of identification such as student ID cards and employment IDs because fraudsters can use them, in conjunction with a copy of your birth certificate, to obtain other types of identification such as a state ID card or driver's license. Shred your identification cards when they expire. Don't store documents containing your PII on computers, cellphones or other electronic devices.

You've fallen prey — now what?

What can you do if you find out you're a victim of criminal identity theft? Unfortunately, if you've found out because you were arrested, there's little you can do but hire an attorney and a forensic accountant, Certified Fraud Examiner and/or private investigator to fight the charges. Don't go to court without proper representation.

If you find out you're a victim before the police knock on your door contact the law enforcement agency that reported the crime and the court that issued the warrant for your arrest and tell them your identity was stolen. File a police report. You'll need to provide proof your identity, such as a photo ID and a fingerprint card at your local law enforcement office, and it will submit it to the agency that reported the crime. Hopefully, all charges will be dropped. Keep copies of all documentation; the courts system might mistakenly reenter your name with the crime.

Even if authorities expunge your name, the fraudster might still be using your identity to commit other crimes. If you find out your name has been used to register a business, contact the department in the state that registers businesses (usually the secretary of state or corporation commission) immediately and inform them you're a victim of identity theft.

Close the accounts at the financial institution where the fraudster used your PII to open them. Consider getting your driver's license or state-issued identification card and passport reissued with new numbers. Though it can be difficult, it's possible to obtain a new SSN if you can prove you were a victim of criminal identity theft.

Awareness is key

Because of the growing number of cases of criminal identity theft, it's important for individuals to be aware that their identities could be used to commit crimes beyond fraudulent financial transactions. In our connected world it's easy for the criminals to obtain your PII. Constant vigilance can reduce your risk of loss from identity theft.

Robert K. Minniti, CFE, CPA, CVA, CFF, is president of Minniti CPA, LLC. He can be reached at: