Some Small Towns Loom Large in Latest ID Fraud Research

Merchants, card issuers, utilities, e-commerce operators, and other businesses looking to guard against identity fraud may want to take a closer look at applications coming from Floral Park, Queens, a part of New York City. They may also need to scrutinize new customers from Faulkton, S.D., population 800. That's because these two disparate areas have the highest rates of identity theft according to new research released this week by ID Analytics Inc., a San Diego company that collects customer data from clients and runs pattern-recognition routines to pinpoint suspicious activity. The research, which ID Analytics claims is the first based on incidents reported by businesses rather than by consumers, isolates fraud rates by state and then by three- and five-digit zip code areas. The company calculates fraud rates by dividing cases of fraudulent applications as reported by businesses by the total number of applications received across its network of clients. The five riskiest states, based on data drawn from 2003 through June of last year, are New York, California, Nevada, Michigan, and Arizona. The five safest are New Hampshire, Vermont, Montana, Ohio, and Idaho. At the other end of the spectrum, the most dangerous five-digit zip codes, besides the ones mentioned above, include three more New York City-area zips, with a Chicago zip coming in sixth. New York City, Chicago, Detroit, Memphis, Tenn., and Los Angeles zips dominate the risky list. Still, this list also features such unexpected towns as Grand Marais, Mich. (No. 8), Merlin, Ore. (No. 10), and Benezett, Pa. (No. 12). Even Yellowstone National Park shows up with a high fraud rate in the ranking of three-digit zip code areas. Overall, the research shows the rate of fraudulent applications has been declining over the past year, and now falls into a range of 0.6% to 1.2%. ID Analytics says anywhere from 10% to 15% of ID fraud is so-called true-name fraud, where criminals use the actual names, addresses, and other identity information of a victim. The balance, the company says, is “synthetic fraud,” in which fraudsters concoct identities compounded of stolen and fabricated data. In these latter incidents, no consumer is victimized, and so fraud rates based wholly on victim reports is incomplete, the company argues. ID Analytics says its ID Network, to which its client businesses submit data, contains some 3 billion identity elements, such as names, addresses, and Social Security Numbers, and tracks applications for cards, cell phones, in-store credit, credit for Web-based purchases, and other so-called events. The database contains more than 400 million applications for credit and other products, as well as 2.5 billion transactions.