Identity Theft Cost Victims $54B in 2009

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More than 11.1 million adults in the U.S. were victims of identity theft and fraud in 2009, a record number that illustrates both the volume and sophistication of online hackers and phishers, according to financial services researcher Javelin Strategy & Research.

This 12 percent surge in new identity theft incidents translated into a loss of more than $54 billion by consumers and businesses, a figure that security experts predict will only increase this year and through the rest of the decade.

On the bright side, the Pleasanton, Calif.-based company's report found consumers and businesses are doing a much better job of responding to these crimes when they happen.

According to Javelin, the average fraud resolution time dropped 30 percent last year to right around 21 hours and nearly half of all identity theft victims are taking the time to file reports.

This additional vigilance combined with more funding and training for cybercrime units at the local and federal level resulted in double the reported arrests and convictions for cybercriminals in 2009 and a three-fold increase in prosecutions, Javelin's report found.

"The good news is consumers are getting more aggressive in monitoring, detecting, and preventing fraud with the help of technology and partnerships with financial institutions, government agencies, and resolution services," Javelin president James Van Dyke said in the report. Operation Phish Phry targeted cybercriminals

High-profile busts such as the FBI's Operation Phish Phry dragnet in October may be few and far between, but serve as a reminder to cybercriminals that law enforcement agencies are willing to collaborate with those outside their jurisdiction to bring identity thieves to justice.

The Operation Phish Phry investigation began in 2007, enlisted the services of multiple agencies both inside the U.S. and Egypt and culminated in the largest cyber fraud phishing prosecution in U.S. history with more than 100 people arrested.

Javelin Strategy & Research in November conducted telephone interviews with more than 5,000 U.S. consumers to identify and track the methods fraudsters used, the impact of fraud on Americans and how these findings can help consumers most effectively avoid becoming victims of fraud.

The survey found that while technology is helping companies and individuals detect fraud faster, the fraudsters are taking advantage of these same technologies to commit crimes. And when consumers discover fraud through electronic monitoring, they typically spend less time and money to recover.

When people wait to find fraud on paper statements, they incur a higher out-of-pocket cost to recover and it takes longer to detect -- $274 and 39 days compared to $116 and 30 days for discovering fraud through electronic monitoring.

However, the study found a 12 percent spike in bogus new e-commerce accounts at sites such as eBay and Amazon, as well as e-mail payment accounts including PayPal, a clear sign that con artists are finding more creative ways to avoid detection and loot victims' accounts.

Finally, the study found that the percentage of Social Security numbers compromised in 2009 actually decreased from 38 percent of all stolen data to 32 percent -- an indication that companies are doing a better job of safeguarding these numbers.

However, it also discovered a 4-percent jump in health insurance information breaches.

Larry Barrett is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.