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Identity theft: The new way to rob a bank

By Jared Thorne and Andy Segal

Identity thieves use fraudulent notary public stamps like this one to help in their scams.


Federal Trade Commission (FTC)
Crime, Law and Justice

HOUSTON, Texas (CNN) -- When Bank One notified Houston veterinarian Mike Janney that he owed $85,000 on his line of credit, he was stunned.

"I'm thinking, 'How can this be?' I've never even used this account," Janney told CNN.

Janney fell victim to fraud when a bank employee sold his personal information to an identity theft ring. His bank had to cover the loss, along with another $12 million stolen from other customer accounts during a two-year identity theft blitz that ended in 2002.

Janney said he considers such thieves to be no better than common bandits from the era of Bonnie and Clyde. "Instead of blowing through the front doors of a bank, guns ablazing, they took my identity," he said. "That was their mask."

Sophisticated and ingenious techniques have allowed these modern-day crooks to use thousands of stolen identities to drain billions from banks and other financial institutions. Meanwhile, the average stickup guy gets about $7,200 in a bank heist, according to the FBI, and is more likely to get caught.

"Not only dollar for dollar, they get more money this way, but it's [also] safer," said Assistant U.S. Attorney Jay Hileman of Houston, who prosecuted many of the 30 conspirators in the Bank One fraud case.

Identity theft has become the most common way to steal from a bank. (View the prevalence of identity theft in the United States)

A 2003 Federal Trade Commission report estimated identity theft losses to financial institutions at $47 billion, roughly the combined gross domestic products of Afghanistan, Madagascar and Jamaica.

In comparison, there are about 7,600 bank robberies a year, amounting to roughly $77 million in losses to the institutions, according to the FBI.

Putting the identity theft ringleaders behind bars barely makes a dent in what prosecutors describe as the nation's biggest white-collar crime.

"I think that we're going to always be one step behind, chasing the crooks," Assistant U.S. Attorney Jim Buchanan of Houston said. "They're always thinking up a new tactic."

The banks fight back with ever-improving methods to detect and deter the frauds, but the identity thieves are constantly fine-tuning their methods as well. "The criminals are like water: They see an obstacle; they try to go around it," said Nessa Feddis of the American Bankers Association.

Here are some examples of how identity thieves have developed ways of robbing bank funds:

  • A bank employee sells your personal information to criminals, who then use the information to take over your account.
  • Crooks use your Social Security number and date of birth to open accounts in your name to launder checks. If the police catch up, it's your name on the account -- not the crooks'.
  • An e-mail scam known as "phishing" attempts to trick people into giving out their personal information and credit card numbers.
  • Victimless crime?

    Those who steal the identities and organize the frauds often view it as a victimless crime. Even a 17-year prison sentence hasn't tempered the attitude of convicted identity thief Jason Carpenter.

    "I still feel it's worse to steal from an individual than it is to steal from a bank," he said. (Read more from Carpenter)

    Matthew Boyden, a U.S. postal inspector who investigates mail fraud, said that viewpoint is typical of many identity thieves. "I've had several tell me it's so easy to do, and [that] it's somewhat our system's fault," Boyden said.

    Meanwhile, consumers end up paying a price, in frustration and time. A survey published in January by the consulting firm Javelin Strategy & Research found that the average identity theft victim spends 40 hours to straighten out the mess.

    "We've talked to a number of victims and they've had frustration; they've been scared to death when they discover this," said Hileman, the assistant U.S. attorney. "They're angry. Some of them feel violated."

    Passing the buck to customers

    Just as shoplifting is built into the cost of retail merchandise, banks recoup their losses through higher customer services fees and interest rates.

    Janney said he realizes that "it doesn't cost me a nickel here, but it does end up costing me down the line, because the bank is not going to sit there and take losses."

    Police, prosecutors and financial institutions are nowhere near claiming victory in what has become a high-stakes battle of wits, and identity thieves are constantly remodeling their schemes to stay ahead of investigators.

    "It's evolution at its finest," Boyden said.

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