Preventing ID fraud

Discovering that personal information has been stolen to carry out fraudulent acts can be overwhelming to a victim, and render him or her incapable, physically and emotionally, of unravelling the wreckage.

Predictably, most victims approach law-enforcement authorities, financial institutions, credit rating bureaus and other such agencies. Few think of turning to the one person who’s responsible for their financial well-being: the advisor. But do advisors have a plan? Should their clients come to them for help and guidance? How far are they willing to walk with their clients? And most importantly, are they equipping clients with enough knowledge and preventive procedures so as to help them forestall a situation like this in the first place?

The extent an advisor can get involved when a client’s personal information is stolen is at best debatable. Some, like James R. Taylor, CLU, Financial Health Management, believe “financial advisors play a key role in assisting a client who’s been exposed to ID theft, [as] the recovery of credibility and credit rating is important to establishing future financial security. “The services of this type of engagement cover review of credit status; assisting with details and a history of the financial situation that’s been breached; directing issues with banks, credit cards, government and rating agencies; and working with other professionals as required to rehabilitate credit worthiness,” he says.

Others, like Edwin Palsma, a financial advisor at Raymond James Ltd., feel advisors don’t have a direct role.

That being said, there are a few things he does for his clients. “First, I regularly remind them that I’m a gatekeeper to their financial assets and so my office is very careful with their information,”says Palsma. “Because we get to know our clients well, a stranger could never come in and pretend to be them.”

While many advisors say none of their clients have had their personal information stolen, it’s important to discuss the subject so clients can take some commonsense precautionary measures.

“Never send your date of birth and SIN out together via e-mail unless it’s to a secure source,”cautions Tony De Thomasis, president, De Thomas Financial Corp. “Many firms, including the Canada Revenue Agency, use these two items to confirm your ID.”

De Thomasis agrees advisors have a role to play when their clients fall prey to this fraud.

“Once it does happen, an advisor can help do a checklist to make sure the client calls everyone they should,”including banks, credit card companies, accountants, the fraud squad, the SIN department, the health card department and the CRA.

If a client is really nervous, he suggests cancelling the bank account and creating a new one, cancelling all credit cards, checking house registration and, maybe, buying insurance re fraud of home sale. And while they’re at it, cancel all lines of credit and other credit sources.

The problem with identity theft is that it’s a bigger issue than it seems.

Tina Tehranchian, a financial advisor at Assante Capital Management in Toronto, throws some light on the scale of the crime. “It’s a big issue; I was stunned to find out it’s costing businesses, banks and retailers $2.5 billion each year in Canada.”

The figures, she says, come from the Better Business Bureau, a not-for-profit, public service organization that sets and upholds high standards for fair and honest business behaviour.

Tehranchian admits ID theft could be very unsettling when it strikes. She favours conventional wisdom: prevention is better than cure. “There are a few measures people can take to protect themselves. Keep a close tab on your credit card purchases [and] statements, and immediately investigate anything that looks suspicious.”

She also strongly recommends subscribing to a well-established credit watch and credit-monitoring facility. “[They’ll] alert you to any suspicious activity that’s going on in any of your credit card accounts. You’ll get a periodic report, which allows you to stay on top.”

These days, most of us carry a multitude of cards in our wallet. Credit cards, health card, driver’s licence, store cards, discount cards; each of these can potentially assist crooks on the prowl for your personal information.

Tehranchian urges her clients to keep a log of all the plastic in their purses. “Write down the name of the issuer, the card number, the expiry date and the customer service number—because that’s the first number to call in case your card is lost or stolen.”

The onus is on the consumer to try and be on top of it as much as possible, she says. So “the earlier you find out about it, the least amount of damage [will be done] both to the consumer and the financial institution, and the better the chances you can reverse the damage.”

She admits an advisor should be equipped to offer clients help and guidance when they get exposed to identity theft. “It never hurts to talk about it,”she says. “A financial advisor could give a little more perspective. The client is going to be distressed and the advisor can give him or her a better plan of action in terms of where to call, where to make a complaint, whether [to go] to the privacy commissioner [or] the Financial Consumer Agency of Canada, whether [to] call PhoneBusters or get in touch with the police.”

Prem Malik, a financial advisor with Queensbury Securities in Toronto, has seen a couple of his clients fall prey to identity theft in the past two years alone. He says it alters a victim’s psyche. “They’re now scared as to the extent of the damage,” he says.

“So one of the recommendations I have made to clients is that they consider adding ID theft insurance to their house insurance policy. It’s offered by some companies and is worth looking into.”

Chris Mathers has spent most of his life working undercover for the Royal Canadian Mounted Police, US Drug Enforcement Administration and the US Customs Service. Often called a human chameleon, he has posed as a gangster, a drug trafficker and as a money launderer. His book, CRIME SCHOOL: Money Laundering, provides a rare insight into a criminal mind.

“At its core, someone is trying to be, pretending to be you for a short period of time in order to establish credit or get goods, or get some kind of financial credit, and leave you with the actual debt,”says Mathers. “They understand that ultimately you probably won’t be responsible for that debt, so it’s the financial institutions that are bearing it.”

The response of financial institutions has been multi-faceted. Certainly there’s a need to educate consumers, but in true fashion, they’ve also come up with products like identity theft insurance.

Mathers says if you’ve been fairly astute with trying to look after your identity, the financial institution ends up having to pay most of the cost. “So it makes sense for them to try and make some money going back the other way by selling insurance.

For obvious reasons, real estate is one of the most common motives behind identity theft. Stories abound where a property was fraudulently sold or remortgaged while its rightful owners were in some distant part of the world on a cruise vacation.

“Obviously people go for the largest bang for the buck, the bad guys,”says Mathers. “So getting large chunks of credit is what they’re looking for, and that typically involves real estate.” He says the thugs are primarily looking for real estate that’s free and clear that they can get a mortgage on. Pretending to be the owner of the property, they put it up for sale or they go to a bank and try to refinance the property – that’s the quickest way of doing it.

“The bank writes them a cheque for a significant amount of money,”says Mathers. “Quite often it’s done through mortgage brokers, and non-traditional institutions and non-traditional legal means, usually using paralegals.

Since he knows the anatomy of the crime so well, he’s also the best person to suggest its cure – or should we say its prevention?

“People need to always keep in mind: only give up your personal information, particularly on the telephone or the Internet, if you’re the one who instigated the contact.” Mathers asserts “It’s YOUR responsibility to prevent identity theft, not the financial institutions’.”He strongly recommends getting a credit bureau report on a regular basis just to ensure everything is above board.

There might be some information on there that’s wrong. “There may be some enquiries you won’t recognize. When you get a statement from your credit card [company], from your bank, look at it. Look at every single cheque. And if you see a cheque [or purchase] that’s not yours, call your bank.

Relying on instinct can have its reward. “One thing I say to people: if you get a funny feeling, whether talking to someone, or reading a piece of paper, do something,”says Mathers. “Don’t write it off as living in the 21st century. That’s five million years of evolution. Something is pushing one of your buttons, telling you something’s amiss.

People have always pretended to be other people to gain advantage. It’ll never stop. The problem now is compounded by the fact that we’re completely electronic. “You have to be safe, you have to do things smart; don’t get too carried away,”says Mathers. “I go on the Internet and I see people’s CVs on there with all their details including their SIN number.”People do it all the time. “They put their date of birth up there.”

Moreover, some of the private data posted on social networking sites can go a long way in helping those surfing for it to pull off their next theft.

A lot of people unfortunately don’t understand the ramifications of posting personal information, says Sonja Schindeler, vice president of Fraud Solutions in the Canadian market, TransUnion, an organization that helps clients understand their credit history, the impact of their financial behaviour, and guard against identity theft and financial fraud.

“There are so many social networking sites where people – the youth population, particularly – are putting their whole life story out there,” says Schindeler. “You have to think about who can see your information and what it tells them.

She highly recommends having a shredder as a way to dispose of papers bearing personal information. “When you don’t need it, don’t put it in the garbage, put it in a shredder.” Mathers goes a step further: “You need to make sure it’s a cross-cut shredder. And don’t throw your personal information in the garbage. Get rid of it, burn it.”

Consider keeping a locked post office box to avoid mail theft, says Schindeler. And she recommends being particularly sensitive about social insurance numbers. “You should never be carrying that card.

She also warns that some of those pesky telemarketers may be more than just that. “Never give information on inbound calls or e-mails unless you can firmly verify who is communicating with you.

Your obligation as a citizen is to ensure you protect yourself, says Michael Collins, spokesperson for Shred-it, an organization that specializes in providing a tailored document destruction service.

Collins suggests clients create sensible document-retention policies and shouldn’t keep documents beyond their life cycle.

“When a document is no longer of value to you or the government, just destroy [it]. That way, you’re not exposing yourself to exceptional risk,”says Collins, whose firm spends a lot of time performing data-security audits and reviews of businesses, and providing them with both guidance and counsel on the necessary processes and procedures with regards to retention and destruction of records.

But while many organizations are doing all they can to help guard their clients against identity theft, it’s not clear-cut how every advisor should handle the victimization of one of their clients, if they do so at all.

“The role of advisors is to enlighten their clients, whether it’s against fraud or money laundering or identity theft, or any other kind of crime,”says Mathers. “But to enlighten their clients, they have to know something about it. And I think a lot of advisors are too busy chopping down the tree to stop and sharpen the axe, if you know what I mean.