Online identity theft

Like in any activity, protecting people’s identity online is vital for the future of the Internet economy. What can be done?
OECD Directorate for Science, Technology and Industry

©David Rooney

Would you shop in a store if you knew the credit card machine at the till was likely to send your bank details to an organised gang somewhere abroad? Such incidents happen every day in the physical world. In fact, credit card fraud from all kinds of real world transactions is a major global crime, and whole government websites are dedicated to fighting it.

But it does not stop people from going out to shop with their credit cards. In general, the public trusts that shopping in a physical store is safe, and it generally is. The Internet is quite a safe place to do business too, and, as long as precautions are taken, keying in credit card details on an encrypted webpage is probably safer than, say, calling personal numbers out over the phone to some unknown sales clerk.

But it is a relatively new marketplace, and trust takes time to build up, particularly when transactions take place across borders and recourse in the event of fraud is unclear. This makes online ID theft particularly brutal on its victims, and makes the public that bit more sceptical.

Building online confidence is a key challenge not just for the future growth of the Internet economy, but for helping in the fight against all types of cyber fraud, including ID theft.

In the US, nearly a third of adults report that security fears compelled them to shop online less, or not at all, during the 2005- 2006 holiday season, according to a survey by the Identity Theft Task Force. In the EU there is a similar pattern of distrust, with three-quarters of people surveyed in an EU report saying that fear of ID theft stopped them purchasing goods or services online. Most of those that did shop online bought goods or services from within the relative safety and comfort of their own countries.

In recent years, a patchwork of public and private sector bodies, and the media, have alerted the public about the threat, at both domestic and international levels.

However, ID theft has been the subject of different legal characterisations in OECD countries, leading to different enforcement schemes. While the US and Canada consider it as a serious crime, EU member states classify it as fraud.

For the OECD, ID theft “occurs when a party acquires, transfers, possesses, or uses personal information of a natural or legal person in an unauthorised manner, with the intent to commit, or in connection with, fraud or other crimes.”

A problem for building confidence is that the thieves’ techniques keep evolving. Victims’ personal information can be mainly obtained through malicious software (“malware”) installed on a computer or by “phishing” e-mails and fake websites imitating well-known institutions. Phishing messages increasingly contain malware and are vehicled through spam. All are designed to fool people into disclosing their personal information.

Phishing itself is becoming more sophisticated and difficult to detect, and comes in many forms with somewhat foreboding names. There is “pharming” whereby users are redirected from an authentic to a fraudulent website that replicates the original in appearance. “Spearphishing” is another form, where the sender impersonates a company’s employee/employer to steal their colleagues’ passwords/usernames. Then there is “vishing,” when a spoofed e-mail invites recipients to call a telephone number, where in turn an automated attendant asks users to enter personal information as a security precaution. Clever users that feel they will not be duped by any of these tricks could still be caught out by “SMiShing,” where a short text message sent out onto their mobile phone confirms their signing up for a company’s services, indicating that they will be charged a fee unless they cancel their order at the company’s website. Such website is in fact compromised and used to steal personal information.

Like burglaries, most people believe cyber theft only happens to others. Yet ID theft has been qualified by many as the “fastest growing crime of the 21st century”. However, its true scale is difficult to measure. Available statistics are inconsistent from one country or authority to another, complicating cross-border comparisons; most data rely on consumer complaints, but many victims do not report their case to the authorities. Some security vendors even say that ID theft has declined in recent years. But most believe it has increased. According to the US Federal Trade Commission, in 2006, for the sixth year in a row, ID theft topped the list of consumer complaints, accounting for 246,035 of more than 674,354 fraud complaints filed with the agency.

ID theft has resulted in substantial economic losses for stakeholders, including individual victims, financial institutions, and even whole economies. In the UK, the Home Office estimates that ID fraud costs £1.7 billion (US$330 billion) to the UK economy, nearly 50% up on 2002. According to APACS, the UK payments association, online banking fraud doubled in the first half of 2006 compared with a year earlier.

What can be done to prevent online identity theft? One solution is education. Various member countries have taken initiatives, often in the form of websites, to alert consumers and users about ID theft risks. There are also videos, leaflets and general information kits. The aim is equally to educate businesses about the problem. In Canada, for example, the Consumer Measures Committee has developed an ID theft information kit informing companies on how to reduce the risk of compromising consumers’ information, and what to do when a thief strikes.

Another step is to take actions to enhance cross-border enforcement cooperation. The development of a globally accepted concept would help implement dissuasive sanctions. One idea is to impose an obligation on companies to disclose security breaches affecting customers’ sensitive personal information. The idea behind it is that if people do not know they are at risk, they are unable to protect themselves against ID theft. Such obligation of disclosure, which has, for example, been established under various US state laws, is under consideration in Australia in the context of the review of the country’s privacy laws, but does not yet exist in the EU.

ID management, and more specifically, electronic authentication tools-in short, technology-may also evolve as helpful means to combat online ID theft. In Korea, in 2006, an improved online identity system was introduced. The 13- digit citizen registration number, which contained people’s personal information and was used as an online ID verification tool, was replaced by a new “i-PIN” (Internet-only Personal Identification Number) with no personal data, which could be replaced if copied or misused, and which could not be used to trace other website registration information. Such techniques should reduce online ID theft as they do not contain the kind of sensitive information thieves look for.

As ever when it comes to building trust, multi-stakeholder co-operation is a vital part of the answer. In 2007, the UN Office on Drugs and Crime (UNODC), developed a set of recommendations on ID-related crimes (UN, 2007), calling on authorities, the private sector and civil society to join efforts to fight ID theft. The 2008 OECD Ministerial Conference on the Future of the Internet Economy is an opportunity to step up that co-operation and make real progress.



  • Identity Theft Task Force (2007), Combating Identity Theft: A Strategic Plan, 23 April 2007, at:
  • United Nations (2007), “Results of the second meeting of the Intergovernmental Expert Group To Prepare a Study on Fraud and the Criminal Misuse and Falsification of Identity”, Report of the Secretary-General, 2 April 2007, E/CN.15/2007/8.

©OECD Observer No 268 June 2008

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