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Gangs upping the ante in identity theft

by Neal O'Farrell on November 2nd, 2011

One of my greatest identity theft fears has been the involvement of other criminals in identity theft. By that I mean criminals who have traditionally focused on other crimes, like burglary, switching to identity theft because they realize that identity theft is a much better business opportunity and career path for them.

We do know that burglary and identity theft are already connected, because most burglars realize that a stolen Social Security number or birth certificate is worth far more than a stolen TV or jewelry. Not only is personal information worth more, it can be sold over and over again, and there’s far less risk of being caught. And of course drugs like meth have long been associated with identity theft, in part because in the early days of identity theft the chemicals used to wash stolen checks were also a key ingredient in the synthesizing of meth.

But what if more organized criminals, like street gangs or drug dealers, realized that there was more money to be made in identity theft than selling drugs on street corners? What if they switched business and moved en masse into identity theft? It could spark another massive escalation that would be very hard to stop.

Well, it seems that my worst fears are being realized. A few weeks ago I wrote about Operation Rainmaker, an identity theft scheme busted by law enforcement in Florida. The thieves may have netted as much as $130 million by using stolen identities to file fraudulent tax returns. The most disturbing part, apart from the fact that the thieves managed to pull off such a massive heist so easily, was that the thieves were street level drug dealers who took courses in how to use the internet to commit identity theft.

They realized that if they just learned some basic skills they could make much more money, with much less risk, if they focused on identity theft over drug dealing. Drug dealing is hard work and brings a lot of risk, from arrest to death. And the dealers almost always have to rely on other people – the distributors to provide them with the drugs, the sellers on the streets to move the “product,” and of course customers willing to buy from them instead of their competitors.

But with identity theft these dealers don’t need anyone else. They can commit the crime themselves from the comfort of their own home, there’s a lot less risk, and they don’t need partners or suppliers. Unless of course you count the stolen identities they exploit.

If more drug dealers come to the same conclusion, if could be good news for the fight against drug use but terrible news for identity theft. And signs are other criminals are catching on. According to an analysis just released by the FBI, “gangs are also engaging in white collar crime such as counterfeiting, identity theft, and mortgage fraud, primarily due to the high profitability and much lower visibility and risk of detection and punishment than drug and weapons trafficking.”

And according to the National Gang Intelligence Center (NGIC) many gang members are now using the Internet for identity theft, computer hacking, and phishing schemes. Earlier this year, law enforcement officials arrested dozens of members of the Armenian Power gang on a variety of charges that included including a $2 million credit card scam and a large-scale check fraud scheme.

The FBI estimates that there are around 33,000 known gangs in the United States, with nearly 1.5 million active members. If these gangs start moving seriously into identity theft and other frauds, there’s no telling how bad identity theft will become. And especially with law enforcement already stretched to the limit.

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