Ramblings & ephemera

The real solution to identity theft: bank liability

From Bruce Schneier’s “Mitigating Identity Theft” (Crypto-Gram: 15 April 2005):

The very term “identity theft” is an oxymoron. Identity is not a possession that can be acquired or lost; it’s not a thing at all. …

The real crime here is fraud; more specifically, impersonation leading to fraud. Impersonation is an ancient crime, but the rise of information-based credentials gives it a modern spin. A criminal impersonates a victim online and steals money from his account. He impersonates a victim in order to deceive financial institutions into granting credit to the criminal in the victim’s name. …

The crime involves two very separate issues. The first is the privacy of personal data. Personal privacy is important for many reasons, one of which is impersonation and fraud. As more information about us is collected, correlated, and sold, it becomes easier for criminals to get their hands on the data they need to commit fraud. …

The second issue is the ease with which a criminal can use personal data to commit fraud. …

Proposed fixes tend to concentrate on the first issue — making personal data harder to steal — whereas the real problem is the second. If we’re ever going to manage the risks and effects of electronic impersonation, we must concentrate on preventing and detecting fraudulent transactions.

… That leaves only one reasonable answer: financial institutions need to be liable for fraudulent transactions. They need to be liable for sending erroneous information to credit bureaus based on fraudulent transactions.

… The bank must be made responsible, regardless of what the user does.

If you think this won’t work, look at credit cards. Credit card companies are liable for all but the first $50 of fraudulent transactions. They’re not hurting for business; and they’re not drowning in fraud, either. They’ve developed and fielded an array of security technologies designed to detect and prevent fraudulent transactions.

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