The session is onidentity theft and our speaker is John D. Arterberry he’s the deputy
chief fraud section,criminal division United States department of Justice. Mr. Arterberry
has served in thecriminal division of the United States department of Justice since 1981
and currently holdsthe position of deputy chief in a criminal division fraud section. He
has investigated andprosecuted complex white collar crime cases, and venues through
out United States.Among current duties Mr. Arterberry chairs to of the departments
enforcementcoordinating bodies and the National Interagency Bank Fraud Enforcement
Working Group and ANational Securities and Commodities Fraud Working Group.
Prior to joining thedepartment of Justice Mr. Arterberry served as a trial attorney in the
enforcement divisionof the United States Securities and Exchange Commission. His
responsibilitiesthere included investigating violations of the federal securities laws and
bringing civil andadministrative enforcement actions. Mr. Arterberry has been a speaker
on white collarcrime, enforcement topics at conferences and seminar sponsors by the
department ofJustice federal regulatory agencies and bar administery associations. Mr.
Arterberry holds theJurors Doctorate Degree from Vanderbilt University Law School
and a masters of LawDegree from Georgetown University Law Center.
APPLAUSE
John Arterberry:
Thanks very much andlet me join each of us in welcoming all ourselves to Orlando. A
beautiful place tohave conference like this. And I think just looking at the events thatarescheduled over the coming days this going to be well let me say one thingit’s gonna be difficult selecting one item and have to exclude others. I don’tenvy you at all but I do
think that the topicwere gonna be talking about next hour is one that certainly is captured
a lot of attention.
It captured thepublic’s attention over the pass couple of years it is
something that alsois getting a lot of attention from governors both federal state and
local. So Iappreciate your interest today and I do encourage as we go through the topic
this morning to askquestions or raise any issues as we go along, because I think this
subject really is anumbrella over a lot of different activities and abuses. And its one that
also taps intoissues such as privacy and the right to know. So I’m not going to suggest
that it’s a simpletopic or its one that we can fully cover in one hour.
At the same time I encourageyou because I think benefits the group to raise questions as they occur. In thefirst instance, as I said a minute ago we have a broad topic identity theft Idare say that five years ago; not one of us in this room really had heard theterm identity theft. As a white collar crime prosecutor over the years I haddealt with investigations with schemes with cases were we had people who werepretending to be someone they weren’t they were using false pretenses otherconcepts rather that we had all ways been familiar with in the fraud context.
But identity theftwas not in the law enforcement lexicon and I think
it was certainlysomething not known to the general public. Well that raises the question
is it really aserious problem. I’m here to tell you this morning that I don’t know the
answer to thatquestion. I really can’t tell you, I will however, share with you this
morning a few factsthat I can point to and I’ll let you reach your own conclusions about
what you thinkwhether the incidents certainly raises specter of a crisis or just simply a
serious problem oris it something that we’ve just attached a very catchy title to.
Identitytheft reallydoes have a nice ring to it and I’m sure all of you have been aware of
headlines. And oftelevision news programs that have had full features on this topic of
identity theft. Soits not that its not getting any attention, but the big question how serious
is the problem. Ifwe think for a minute about identity theft I just told you that in my
work I had seeninstances when people were using the very concept of identity theft. That
is pretending to besomeone they aren’t as part of a scheme to defraud companies, to
defraud otherindividuals. But now that we’ve focused on identity theft as a stand alone
crime were beginningto see how it really is a common thread in a lot of different
offenses. Forexample, credit card schemes it is a classic element of credit card takeover
schemes that youhave an individual whose identity is stolen by some else and used to
make unauthorizedcharges. The same way with fraudulent bank loans individuals pose
as someone theyaren’t obtain funds using someone else’s good their credit worthiness to
obtain credit. Itgets into the higher tech fields when we move into cellular phones into
the kinds of nonface to face transactions that are becoming more common place. And
that’s one of thekeys that were gonna see running through this morning. Identity theft
has become a topicof discussion as we move more and more away from the customary
face to facetransactions we’ve all I think grown up with. Whether it was with the local
merchant, whether itwas in the strip mall, or in our local bank. Whatever the transaction
we almost always hada face to face dealing and that accomplished many things not the
lease to which is afairly high level of security, because the individual who was
conducting thetransaction had some he or she could identify. In some instances could
even requestidentification it’s not full proof, but it’s a far cry from the anonymity that
people now have intransactions that are common place by telephone and more and moreby home PC. SoI think you can begin to see how this emerging and how its really
beginning to emergeas part of the overall phenomenon of ecommers.
But for many other fraudsin many other types of abuses that have identity theft as a prime feature.Here’s one that can cause people a lot headaches; someone pulled over forspeeding that can have serious implications not only for drivers licensepoints. It can also have implications for insurance premiums more and more werefinding individuals who if pulled over for a traffic offense with someoneelse’s name and identifying information. It may be an ex-college roommate theindividual took the roommates I.D. card or had other identifying information.Maybe a ex-co worker any number of ways in which the information can be obtained,but once that information is passed on to the individual who’s writing theticket it’s simply becomes its may name and social security number it becomesmy problem.
Now I have a trafficoffense on my record now my insurance company is going to be
looking to me whenit cranks out the new premiums. And I’ve got to clean up the mess
that’s fairlyserious. Think about this though now were finding individuals who when
they’re arrestedcharged with a crime are using someone else’s identification there not
just using an aliasthere not just using some false name there using someone else’s name
and identifyinginformation. Now to the people who have been victimized by this it really
is pureunadulterated hell. They can not its’ the old expression putting the toothpasteback
in the tube; it’s akin to putting the toothpaste back in the tube. They must prove now and
really for rest oftheir lives that they were not the individual arrested in that particular
case. What’s thesolution: there is no solution what most people have resorted to after a
lot of legalexpense; is they obtain a court order that they carry with them. And they will
have to carry unlesswe come up with a new system for the rest of their lives. That says this individualidentified for example, if it’s my name was not arrested for an offense on a
particular date anddoes not have a criminal record at this time. So your proving a
negative to peoplewho found themselves in this situation it really is a nightmare and I
think it points outone of the things that is a key to what’s developed over the past couple
of years.
We’ll talk about injust a minute; well I told you I was going to show you a few
facts so you couldmake up your own mind about whether identity theft is a serious
problem. This firststat is I think dramatic you can see just in terms of total losses
reported to thesecret service in the cases investigated; over a 2 year period we have 75
percent increase inlosses. Now that suggest certain conclusions but it’s not necessarily
decisive. A nationalcredit bureau reports that over a period of 5 years they’ve seen more
than a tin foldincrease in the reports of identity theft related instances that is complaints
received.
Now were getting Ithink the picture is becoming a little clearer. United St
ates
postal inspectionservice which investigates many white collar crimes if they have a
nexus some sort ofconnection to the U.S. mail is now estimating around 50 thousand
victims per year.But that’s a very difficult estimate to come by, because until recently we
really haven’t had away qualifying what going on in the identity theft area. For a number
of reasons first ofall it was not a stand alone offense; it was not something that we
tracked and that wecharged as a crime.
That picture ischanging there a few other stats that I think that could be instructed as youmake up your own minds about whether we have a serious problem. The socialsecurity administration is responsible for maintaining all of our accounts thatare built up over the years. As our wages are taxed with our social securitytax, and we build up that; that retirement benefit under each account number that’swhat our S.S.N is supposed to do. Remember when you first got yoursocialsecurity card not for identification purposes, well everybody ignoresthat even the government. Now that’s I think one of the problems that we’veidentified we use that S.S.N. as a universal identifier today were accustom toit, its convenient commerce finds it efficient its gonna be a very difficultthing to change. But its one of the basic problems we encounter investigatingthese cases.
SSA: Social SecurityAdministration is not in the business of investigating identity theft cases,however they do receive complaints through there inspector generals office andthrough a hotline that they have. They receive complaints from citizens justlike us reporting instances in which someone is using their SSN. About threeyears ago they were able to handle those calls with the staff of about 3 to 5people at last count they had a staff number well over 30 and they were stillhaving a hard time keeping track of calls and this over a period of 2 to 3years. Perhaps there is now were accumulating a body of evidence here that maysuggest that we have a problem.
Just this summer andI gonna talk about it more in detail later the Federal Trade Commissionestablished a hotline to receive complaints from citizens who thought they mighthave been victimized of identity theft. When the hotline first opened actuallywas
in the mid springwhen the hotline opened the hotline was fielding around 500 hundred
calls per week. Thelast count I received from The Federal Trade Commission dates to
July of this year;so in about a four month period that 500 has changed to nearly 1200
complaints per week.So a little more evidence I think its safe to say and I’ll let you make
up your own minds. Ithink its safe to say that we do have a strong indication if not an
absolute iron cladcase. We have a strong indication here that identity theft is a growing
problem and it’s amenace not just to businesses, not just to government operations. But a
menace to individualcitizens to have their lives disrupted who have their credit recordsruined. Andwe’ve talked to people who have maintained over a 40 to 50 year period perfectcredit record. They’ve always paid their mortgage payments, they’ve always madesure that all their bills were paid on time, and then someone steals theiridentity and trashes absolutely trashes their credit. Now we can take a verystand off view about this and say well after all its just a credit history thatcan be repaired. True it can be repaired but it takes a lot of time and a lotof effort in the meantime there really is an emotional side to this.
Well talk about somecases in a little while were you can see how this effects
these people. Wellits safe to say that if there is evidence of a problem that’s growing out
there in society.Eventually there’s going to be a kind of a percolation effect; and all the
concern and thesense of crisis is going to percolate, and ultimately its going to come to
the attention of thecongress and that happened in late l998. In late 1998 congress passed
a act and it wassigned into law known as the: Identity Theft and Assumption Deterrence
Act of 1998 it’s along title for what we just now call the identity theft act. Congress at
the time that itpassed this legislation had satisfied itself that it was a widespread problem
of identity theft.That it was not simply something that had gotten a catchy name and was
now getting a lot ofmedia attention. Congress was satisfied through the hearings that
conducted thatpeople were being victimized. And that it warranted law enforcement
attention with afocused statue that looked right at the identity theft.
There is another importantside to identity theft I said earlier that identity theft has always been anelement that found in many fraud cases. It was just something we took forguaranteed as we investigate the cases. For example, in credit card fraudalmost always there was the element that someone’s identity was being used tomake those unauthorized charges. But how were those cases prosecuted, they wereprosecuted as credit card fraud cases andwhose the victim in that case. Wellunder federal law we cardholders are protected from all; but about $50 of thelosses that the fraudulent charges that are made on our card even I think mostcard companies don’t claim that $50. So for credit card fraud the victim obviouslyis a credit card company and that’s the way things go until the enactment ofthe identity theft statue.
Here’s the subtledifference for the first time are cases focus not just
on the financiallosses there are obvious monitory losses suffered by the credit card
company, but now wehave a statue that let’s us focus on another victim. The cardholder
the individual whoseidentity was stolen and misused. That’s something we did not have
an opportunity to doits’ simply was not part of the law before, and I think its given us not
only an importantweapon to use that amplifies our charges when we go after fraudsters
who are cheating,lying, and stealing. But it also let’s us focus attention and I think it’s
very appropriateattention on the individuals who up until now really forgotten; and they
were really left totheir own devices. They had to figure out how to clean up the mess and
it was a difficultmess to clean up.
Now the identity theft act for any lawyers inthe house is found in title 18 that’s where most of the federal criminal codeexist, and it said that the statute only a lawyer could like. But it has somefeatures that whether were lawyers or late persons it has some features that Ithink are interesting. First of all it’s a very broad statue that is in termsof it language is very sweeping and prosecutors like that, because it a lot offlexibility when were looking at a set of facts in a particular case.
Can we charge thisas identity theft?. Well if we have someone who is using without any lawfulauthority the means of identification of someone else and that means ofidentifications defied broadly. I’ll show you in a few minutes, but if that’sbeing used for the intent to commit any federal violation not just a federalcrime, but a federal violation very broad for anystate felony then we have theessential elements of an identity theft crime. Now you can see that when wedefines a needs of identification its not just S.S.N. its not just are names,but it can be drivers’ license numbers and I’m happy report that in partbecause of the public attention that’s been focused on identity thefts almostevery state has now changed its policy and no longer uses are S.S.N.’s as adriver’s license numbers. Now I don’t know how many of you today are carrying adrivers’ license that still uses your SSN. I have to put my hand up because Ilive in the district of Columbia and when mine was issued they were still usingS.S.N.’s. So very small fractions of us are still doing that it is a terribleidea to have an S.S.N. on our drivers’ license so next time you get them renewedget rid of that the states now get the message and its almost universal thatthey will not use anything close to an S.S.N. But we have other things whetherits passport numbers or whether its employee identification numbers. Any kindof identifying information your mother’s maiden name that’s a favoritetechnique that credit card companies use in trying to insure they’ve got theright person. But we have a statue that broadly defines it, because ways inwhich we identify individuals today are completely different from a hundredyears ago. A hundred years ago was essentially your name and your associationwith you r family; today its much more complicated. How complicated well letsmove into biometric data and now were really getting into the informationtechnology age.
Biometric data maybeany sort of single or combination of ways in
which to identifypeople. The technology exist and some of you here in the audience
think no better thanI but technology exist now today to identify people based upon facial
profile, based uponiris recognition, or retinal recognition, and digitized fingerprints that
we didn’t dreamabout 10 years ago. I’m told by some bankers that there are now at least if theywant to buy them there on the market, ATM machines that before the customer
reaches the ATM. Themachine has read the iris of the customer and has determined who
it is and has themachine ready to go and may even greet you: Hello Mrs. Smith what
would you like to dotoday. That’s were we’re going with biometrics but for everyone of
those there issomeone out there trying to figure out a way to compromise that; that’s the
challenge.
Finally you have theother high tech side the telecommunications and that can
blend over into homePC communications. Identifying information all of these are tags
that are placed uponus individuals today that just didn’t exist before. Another thing that
those officers oflaw enforcement are very interested in; is what’s the penalty if you have
a statue it betterhave a bite or its not going to be one that’s used very much. Well if we
have property lossof more than a thousand dollars then we have the potential for 15 years
imprisonment for anoffense under this statue, so it’s a serious offense. We also, have the
possibility offorfeiture that’s important, because one of the things we’ve learned whether
its’ narcoticstrafficking or whether its white collar crime. As if we get the property back
from the criminal ifwe get the loot if we get the ill gotten gain. We take the profit out of
the crime and wetake a lot out of the incentive of trying it again so one of the things that
we really focus on.
Finally, we’re nowin the federal side and I won’t turn this into a law enforcement seminar. Butthe federal law enforcement community we operate under United States sentencingguidelines. And sentencing guidelines were instituted by the government to takesome of the inconsistency away from sentencing. As we look across the countrywe have about 94 judicial districts; federal districts. Each one has a United Statesdistrict court and has one or more United States district judges. The judgesare the people who sentence prosecutors don’t. So when it came time to sentencewe were oftenfinding we had 94 different formulas, whether it was a whitecollar crime case, whether it
was a narcoticstrafficking crime case. Whatever the offense so we had a lot of variations
from district to theother. The sentencing guidelines are intended to bring everything
within a fairlyuniformed pattern. So that by looking at the characteristics of an offender
we can predict afair degree of certainty where the range of incarceration will fall. So
what is meant is:its meant more consistent sentencing and its meant more certain
sentencing.
In the past whitecollar crime especially is an area where we often didn’t see
jail time. Under thesentencing guidelines more and more we are seeing jail time. And the
case of identitytheft the United States sentencing commission has proposed enhanced
penalties. In anumber of areas those who’ve become affected November 1, if congress
does not interveneand we have no reason to believe that congress is going to be
intervening, becausewe think congress intended the sentencing to give this a hard look.
So we have a statuethat has serious exposure in terms of incarceration we have
guidelines that makeit even more serious in terms of the actual crime that a criminal will
do it’s a goodformula. Again I’m not gonna turn this into a law enforcement seminar just
to get the playerstraight on the federal side we have the department of justice as the
prosecuting officethe attorney general is the pre—law enforcement office of the United
States. Obviously,she doesn’t prosecute cases, but she has 5,500 prosecutor’s across the
country who areresponsible for doing that. Most of them are simply United States
assistant attorneysthey work in United States attorney offices; in 94 districts those 94
federal districts Ijust talked about.
There are a few ofus who in Washington who work in main justice just a few hundred, but most ofthe 5,500 are out in the field. Now on the investigative side we have the FBIwe have the U.S. secret service, we have the postal inspection service, we alsohave a number of inspector general offices. Most of the major departmentswhether we’re talking about health and human services, transportation, commerceall of these departments have their own inspector’s general. And its some of theadministration like social security administration they are law enforcementthey have law enforcement powers and they investigate cases.
So we have a numberof ways that we get input; primarily though we’re gonna see these casesdeveloping from the traditional law enforcement agencies F.B.I., secretservice, and postal. The F.B.I. alone has over 11,000 agents a good number ofwhom are involved at white collar crime investigations. So we have a force outthere that can take a hard look at these cases.
There’s somethingelse going on around to though and that this is not occurring in a
vacuum the feds arenot the only people who are looking at identity theft. At last count
more than 2 thirdsof the states had recently adopted the identity theft statue. I said
recently in the pasttwo or three years up until then the states were just like the feds.
There was no statue,there was no crime, and you can see the problem that creates for law
enforcement whenindividuals. One of you for example, finds that someone has taken
your identity and isusing it to obtain bank loans or to something else you report it to the
local police andthey have no idea what to tell you; other than call your bank or call your
credit card company.That was the response in the past and it left the victim with very
little very help atall. Well we decided that the evidence satisfies us that there’s a problem
out there whetherit’s a serious problem, whether it’s a crisis, it’s hard to say; but we
recognize that it’sa problem its one that deserves attention.
Using the identitytheft statue as the foundation for our efforts we established a coordinatingeffort through the attorney general’s white collar crime council. That a bodyin Washington that consist of state, federal law enforcement and regulatoryagencies. It meets regularly looks at white collar crime issues and tries tocoordinate a response. So that we have the states, the locals, and the federalall working together if we don’t we have that artificial separation be
tween race,government agencies we just create gaps of enforcement and all that does isbenefit the criminal element. So coordination has become a very important partof what we do.
In the case ofidentity theft the white collar crime council thought that deserved its own
special attention soit formed a identity theft subcommittee. That subcommittee brings
together not justthose federal investigative agencies I referred to just a few minutes ago
and prosecutingofficers, but it also brings in state and local police and prosecuting
organizations. Organizationslike international association of chiefs of police, the national
association ofattorneys general, national district of attorneys association. All of these
organizations thatare responsible in their states and local communities for law
enforcement actionsnow are working together all of us in an common effort to try to
co
