Business Identity Theft

A Very Real Concern

by David B. Watts, CLI, CFE, CITI

"Business identity theft is a very real concern in today's marketplace.  From a criminal's perspective, it is significantly more cost-effective to steal business identities than consumer identities," according to Steve Cox, CEO/President of Council of Better Business Bureaus.
But why is it so cost-effective for thieves?
First, a company's data is easier to obtain than an individual's.  Our public filing system gives up all the corporate information crooks need to assume a company's identity and it is all online.   Secretaries of State maintain corporate records that include name, FEIN, company and officer addresses, annual reports and copies of all relevant filings.  These easily accessible records can be compared to an individual's SSN, date of birth and home address.  There they are - ripe for the picking.

Next, businesses have hefty bank accounts and high credit terms.  Large purchases with flexible terms is the norm.  This results in a target rich environment and the criminals get it.

Furthermore, business operates for the most part in an atmosphere of trust.  We want to believe in those with whom we deal and expect fair dealing back from them.  We bill a client or customer for our service or product and expect payment in a reasonable time period, usually 30 to 90 days.  Again, this trusting environment helps the bad guys as it leaves a vulnerable time frame in which they can conduct their "business" and make a clean getaway.

Modern business is committed to technology.  A business today simply cannot compete without being computerized.  Instant communication of proprietary data and its storage is an absolute necessity, making for increased vulnerability.  But the cost of adequate security measures preclude most small businesses from investing in suitable cyber-intrusion protection.

In short, businesses represent "a fox in the hen house" opportunity to identity thieves.
Business Identity Theft: A growing problem
Identity theft is the fastest growing form of consumer fraud with much of it spotlighting the individual as victim.  But these fraudsters have caught on to business identity theft, as they easily get hold of the information they need to assume company identity.  They then steal corporate assets, client lists, credit lists, etc.  
It's only big business at risk, right?
Business size is not a factor - all are at risk. In fact, small and medium sized businesses seem to be more susceptible to identity theft because they often don't invest in adequate safeguards.   Losses are not confined to just financial damage, either.  Indeed, a company's reputation can be irreparably injured by business identity theft.  To complicate matters, businesses tend to shy away from the publicity attendant to their own victimization due to the embarrassment associated with it.  This is another reason thieves pick on businesses.  It is bad enough that identity thieves rarely are caught, but for the victim to "take the hit" and move on only perpetuates the problem.
How do they commit Business Identity Theft?
Identity thieves steal papers and electronic data by any means possible.  They will raid your garbage or hack into your computers.  They will mirror your operation in another geographic area and order material in your name and, of course, never pay for it leaving you stuck with the bill. Using your good name or brand, they will steal goods or money from your customers/clients.  They will bribe, compromise or even threaten your employees for information.  They will max out your company credit card.  Again, all your business identity data is online with the corporate section of the Secretary of State's Office giving these criminals an information head start.  The methods used by identity thieves are endless and they come with new scams every day.
How can a company defend itself against identity theft?
Defense for business begins with recognizing the reality of Identity theft.  With so much attention on credit card fraud against the individual, business identity theft has not gotten much publicity.  

Business managers need to take a good hard look at their security controls and assess the areas where they see openings for identity thieves.  It may be just getting a good cross-cut shredder and assuring that anything with proprietary data does not appear in the garbage or recycling bins.  The current wisdom dictates a “shred all” policy to avoid human error or judgment as to what to shred.  If volume dictates, hiring a professional shredding service would be appropriate.

Proper background checks on new hires is essential; but researching vendors and even clients is just as important.  Anyone can commit identity theft, ergo any new relationship should be examined before jumping in.
Educating employees to the dangers of identity theft and how they should respond to suspicious inquiries or circumstances is another sensible measure.

Even though you don't run the Pentagon or the CIA, it is wise to have a restricted access policy.  Why would you allow complete access of proprietary information to all your employees?  It is best to compartmentalize data, thus limiting exposure to identity theft and other types of fraud.  Smart business owners set up secure document storage protocols.  

Another avenue is to monitor the internet for same sounding or companies that mirror yours.  You might also conduct a business credit search on your own company to uncover information that suggests tampering with your finances.
To wrap up, business identity theft is a real threat to U.S. companies - large and small.  Coming to grips with this reality may not be comfortable, but it is something you dare not ignore.  It is far better to enact measures to avert identity theft than to deal with the consequences once you are victimized.  


Dave Watts is a Certified Legal Investigator in New Jersey. For over 30 years he has conducted all types of investigations for law firms, businesses and individuals. He and Linda, his wife of over 50 years, live in both Califon, NJ and Sanibel, FL. He can be reached at (800) 950-4808 or

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