Identity crime and its associated fraud is problem that is on the rise in this country. New Zealand businesses lost an estimated $1.4 billion to identity crime and fraud last year, with that figure set to increase in 2007. Indeed, one client told me recently that identity crime is one of the few growth areas of his business. We live increasingly in an information economy – estimates suggest more content will be created in 2006/2007 than in the entire history of mankind. Ninety-three percent of that content is digital. Unfortunately, this vast pool of sensitive information is an ideal resource for identity thieves to exploit. While businesses and consumers are at times struggling to make use of the data explosion, criminals are displaying their typical ability to innovate and capitalise.
New Zealand: the weakest link
So why is identity fraud such problem in New Zealand? In the wake of 9/11, countries such as the United States have tightened up security measures in an attempt to stem identity crimes committed for the purposes of money laundering and terrorism. This has made it much harder for criminals to operate. But New Zealand is suffering as result, because identity criminals will always follow the path of least resistance. Whereas fraudsters view the United States or Britain as tough nut to crack, we are unfortunately seen as something of weak link. The security measures we have in place for things such as credit cards and loan applications are far more lax and easily circumvented than in most other developed countries, putting us at greater risk of identity theft and fraud.
Despite the fact that fraud is clearly on the increase, there is disconcerting complacency towards the issue amongst many organisations. In 2006 KPMG survey of New Zealand and Australian businesses, only 23 percent of respondents believed identity fraud to be problem for their business, yet 61 percent thought it was major problem for business in general, an alarming disconnect. While we are trying to encourage businesses to take steps to address the identity fraud issue, this apparent lack of concern is obviously major stumbling block. In short, New Zealand businesses are not doing enough at the moment to mitigate the risk of fraud, and that is to the detriment of consumers and businesses alike.
All businesses have responsibility to their customers to ensure that they adopt best practice in protecting the information they hold. Most consumers have little real knowledge of information that is held about them, so they are entirely reliant on organisations to accept responsibility for the security of their data. Businesses that fail to put premium on consumer trust risk permanent damage to their reputation in the event of data breach. Several prominent cases of data breach in the United States in recent years have had massive impact on the companies involved. Information brokers ChoicePoint had the personal information of 163,000 consumers breached, resulting in 800 cases of identity theft. The company has subsequently been tied up in numerous suits, at cost of millions.
Kiwi ID Crime Taskforce
Because the increasing sophistication of identity crime makes it so hard to police, the onus has to be on businesses to take the lead in the development and ongoing evolution of systems that mitigate the risk of fraud. We cannot expect government intervention alone to provide solution. Veda Advantage has formed an ID Crime Taskforce, working with the police and some of New Zealand’s leading banks, insurance companies, money lenders, and credit providers, to come up with workable solution for businesses. Part of that solution involves matching depersonalised data (therefore guaranteeing personal privacy) across the organisations involved, which enables us to identify emergent patterns relating to incidences of identity crime. From there we can develop best-practice procedures to improve security.
It is major challenge keeping pace with identity criminals, and to do so requires collaborative, concerted effort on the part of New Zealand businesses. There is huge potential in the information economy, but we need to also recognise the inherent risks of the ever-growing swathes of information, and take proactive and responsible action to minimise the threat of fraud.
John Roberts is the New Zealand country director of business intelligence service and solutions company Veda Advantage.
www.vedaadvantage.co.nz
