The Real Cost of Identity Theft to Employees & Businesses

When it comes to breaches, identity theft can be the first step towards compromising a business

Identity theft is on the rise, with research from the Identity Theft Research Center (ITRC) estimating a 68% increase in data compromises between 2020 and 2021. A further study from Javelin Strategy & Research found that identity fraud cost US businesses an estimated total of $56 billion in 2021.

When company employees fall prey to identity theft, there is a risk of a serious data breach or ransomware attack on that company. An IBM-sponsored study conducted by the Ponemon Institute found a typical data breach can cost a business upward of $4 million to recover from, so protecting employees' digital privacy is critical. While cybersecurity and privacy tools go some way to combat identity fraud, identity thieves continue to find new and innovative ways to steal personal information.

So, businesses and individuals need to take additional measures to safeguard employee identities and protection of sensitive information.

How often does identity theft happen?

The Federal Trade Commission’s (FTC) Consumer Sentinel Network received 1.4 million identity theft reports in 2021. The majority of complaints (31%) related to government benefit applications, with credit card fraud close behind, accounting for 29.2%. Research from the Aite-Novarica Group found that 47% of Americans experienced financial identity theft in 2020, incurring losses of $1,100 on average.

The consequences of identity theft and how to protect individuals

There are several financial, reputational, and legal consequences of identity theft for businesses. The following incidents are just some of the more serious problems that individuals and businesses may face.

• Damaged credit If identity thieves steal a social security number and open an account in the victim's name, they could wreck their credit score. They may even become responsible for debt incurred by the thief, requiring a lengthy court case to resolve. Even after resolution, victims often find it harder to get insurance, a loan, or a mortgage and takes victims hundreds of hours to resolve. Twenty percent of employees say they’ve been victims of identity theft. The stress alone harms employees — while the hundreds of hours it takes to call banks, government offices, credit bureaus and other entities only open during business hours is a major drain on productivity.
• Reputational Damage Businesses risk severe reputational damage if they suffer a data breach that involves their customer's personal information. The most common cause of a corporate data breach is the theft of an employee's identity, often via a phishing email or similar scam, a complex crime that occurs every two seconds.
• Tax and unemployment fraud Filing taxes is stressful enough without having to play “tax fraud leapfrog,” trying to stay one step ahead of tax scammers. Criminals can use a stolen identity to file false tax returns and claim unemployment benefit in the victim's name. Resolving such issues can be costly and time-consuming, and delay the filing of genuine tax returns.
• Financial loss One of the worst and most common issues facing identity theft victims is financial loss.The FTC reports that consumers lost $5.8 billion to fraud in 2021, with the two largest categories being identity theft and imposter scams. While fraudulent credit card charges can be reversed, cash withdrawn from a savings account is usually impossible to recover. Businesses risk even greater financial losses in fines or ransom rewards if an employee's identity is stolen and company servers are breached. Cybercrime is expected to cost the global economy $10.5 trillion by 2025. “Businesses have never been more vulnerable, and even large enterprises with substantial cybersecurity defenses can fall victim,” according to Electric.ai.
• Legal implications If somebody commits fraud while using a false identity, the victim could be implicated and possibly even arrested for that crime. Mistaken identity is usually resolved fairly easily, but individuals could end up spending a few nights in jail and months in court while resolving the issue. Businesses could face heavy fines and further legal implications if an identity theft results in a failure to comply with data protection laws.
• Personal inconveniences Recovering from identity theft can be an arduous process that takes time to repair, causing employees to take time off work, cancel appointments, and miss family commitments. The stress can also have negative health implications and leave them feeling worn out and debilitated. As hybrid work becomes the norm in a post-pandemic world, employers are spending 50% more of their time and resources on data privacy and security risks compared to two years ago, according to a joint research study published by ALM’s BenefitsPRO Custom Solutions Group and sponsored by IDX.

Five signs that someone is attempting to steal employee identities

While identity thieves are usually good at covering their tracks, there are some warning signs ‌that employees and businesses should always be on the lookout for:

1. Phishing emails Teach your employees to never click links in emails that they weren't expecting to receive. When in doubt, always check with IT.
2. Unexpected calls Phishing attempts can sometimes occur over the phone, too. Make sure your employees are cautious to verify the identity of unexpected callers before giving out any information.
3. Unrecognized communications Employees should report any inexplicable communications, such as colleagues responding to queries they don't remember making.
4. Requests to verify unfamiliar purchases Fortunately, many banks now attempt to contact you if somebody tries to make a suspicious purchase on your account. If your employees get unexpected calls or texts, they may be the victim of identity theft.
5. Online account lockouts If somebody is using an employee's identity fraudulently, it can often result in their corporate account being locked. Employees should notify IT immediately if their accounts become locked out for no reason. Somebody may have hacked the account and could extract sensitive company information from colleagues via phishing emails.

The three D's of identity theft

The three D's of identity theft teach businesses how to reduce the risk of identity fraud, helping to protect employee privacy and avoid data breaches.

Deter

• Provide employees with a password managing tool
  
• Educate employees on how to notice and avoid clicking links in phishing emails
  
• Carefully dispose of sensitive financial documents (bank statements, etc.)
  
• Ensure that employees know not to give out PINs or other identifying information to anyone

Detect

• Double-check all bank and credit card statements monthly
  
• Encourage a credit report check at least once a year and train your employees on how to spot signs of trouble

Defend

• If your employees are victims of identity theft, they should immediately notify their manager
  
• Place a Fraud Alert on your credit reports
  
• File a report with the police if necessary
  
• Report your complaint to the Federal Trade Commission
  
• Work with an award-winning Identity Theft Protection Service to make sure your identity and reputation are 100% restored to their pre-theft state.

Identity theft protection services

The Department of Justice works to combat identity theft in the U.S., passing legislation to prosecute offenders and bring justice to victims. Federal prosecutors work with agents from the Federal Bureau of Investigation, the United States Secret Service, and the United States Postal Inspection Service to track down and prosecute identity thieves. However, in most cases, federal agencies can only prosecute criminals after the case, leaving many victims to deal with the fallout.

Therefore, identity theft protection services are critical to ensuring employees are protected before, during, and after incidents of identity theft. From as little as a cup of coffee, you can get protection for your employees that includes services to mitigate risks, reduce fallout and cover their financial losses.

Get Identity and Privacy Protection that Match the Risk

In today's modern world, the sharing of personal information is a prerequisite for hundreds of important digital services. This makes it near impossible to ensure that individual’s identity is always 100% safe, but there are ways ways to improve security with privacy and identity protection. Identity protection is an attractive solution, but to truly address the risks to employees or members, organizations need to carefully examine the options available. Proactive privacy protection can complement traditional identity monitoring. As the nature of identity theft has changed, the protection available has not, leaving individuals more vulnerable to identity theft than ever. Speak to one of our advisors to find out how we can help yourself, your employees and members safeguard their privacy and identity today.