Identity theft-related Fraud is a booming part of the criminal economy, accounting for about 1.4 million of the overall fraud reports that the FTC received from consumers in 2020. Those big numbers are impressive, but the impact of Identity theft doesn’t really hit home until you take an up-close look at the various ways it can affect you, personally.  Consider, for example, the use of identity theft in Welfare fraud.  That might not be something you’ve ever considered (“I don’t get benefits!”), but it’s a surprisingly far-reaching threat. 

The Broader Costs of Benefits Fraud

When you think about the costs of identity theft, what comes to mind first?  For some people, it might be the time and money you’ll be out of pocket while you recover from a case of stolen identity, or the stress you’ll experience during the process. 

If you think about it a little longer, you might focus on what such fraud costs businesses and financial institutions.  Those losses have to be covered, after all, which means higher prices and higher fees for everyone.  The same holds true, only more so, when identity theft is leveraged to claim government benefits, and it’s a growing issue. 

The pandemic made us all more aware of this, with news stories estimating the cost of benefits fraud at potentially hundreds of billions of dollars.  Admittedly, pandemic relief is a special case, and the highest estimates often come from people selling anti-fraud solutions, but that’s still a lot of tax dollars going astray.  Aside from the direct financial loss, those are billions of dollars that now can’t go where they’re needed.

The Personal Costs of Benefits Fraud

Welfare frauds affect everyone collectively.  They can also impact you individually in a number of ways, such as the following: 

Your Taxes

You might be shocked to receive a 1099, for example, for benefits received under your name and Social Security number.  Alternatively, you might receive a letter from the IRS flagging your return for unreported benefits income.  You’ll be able to straighten it out over time, but it will certainly raise your stress levels. 

Legal Complications

A more directly threatening outcome is that you yourself might become the subject of a fraud investigation.  On paper at least, you’ve claimed benefits while continuing to work.  Again, an investigation should clear you eventually, but that’s little comfort while it’s actually happening. 

Inability to Claim in the Future

The most obvious hazard of an identity thief claiming benefits in your name is that you would then have trouble if you ever needed to claim benefits in your own right.  You might not think that’s ever going to become an issue (“I’m pretty stable”), but life — sadly — is just filled with unpleasant surprises. The 2008–2009 recession, the lockdowns of the early pandemic, and more “routine” crises like a natural disaster or the collapse of a major employer have all caused financial havoc for previously-solvent people in recent years. 

Are You at Risk of Welfare Fraud? 

Benefits fraud is just one of many ways criminals can monetize identity theft, and identity theft can happen to pretty much anyone (brazen scammers reportedly claimed pandemic benefits under the names of Ohio Governor Mike DeWine and California Senator Dianne Feinstein, for example). So yes, you’re at risk. 

What’s also concerning is that some identity thieves target especially vulnerable demographics, including minors, the elderly and dependent adults with medical, cognitive or developmental issues.  They’re ideal targets for scammers because their credit records receive little scrutiny, and they are unlikely to pay close attention to their accounts.  It’s a double threat, because people in these populations may be more likely to need benefits at some point.

In short, if you’re responsible for anyone else, you need to be aware of risks to their identities as well. 

Spotting the Signs of Identity Theft

There are a number of common signs of identity theft in general, and an equally well-established canon of methods for spotting them.  Key steps include the following: 

• Monitoring your account statements diligently
• Reviewing your credit report regularly (Each of the “Big Three” reporting agencies will give you a free report each year, and sometimes you’ll be entitled to additional free reports.)
• Checking whether your phone number, email or passwords have been compromised in a breach
• Using Spokeo to search your own name, to see whether your information has been misappropriated 
• Signing up for any fraud or account alerts your financial service providers may offer
• Subscribing to an identity theft protection service like Spokeo Protect, which will tell you if key information (like your SSN) has been offered for sale on the Dark Web

Taking these steps, both for your own identity and for the identities of your dependents, can help turn up any identity theft and fraud before it causes too much damage. 

Recognizing identity theft-related Welfare fraud, specifically, can be more challenging.  Typically, the only direct ways to find out are the ones mentioned above: communications from the IRS, getting investigated for benefits fraud, or having a claim rejected.  Given this difficulty, it makes more sense to put your emphasis on prevention and risk mitigation. 

How to Protect Against Identity Theft (and Welfare Fraud)

There’s nothing you can do to prevent identity thieves from committing Welfare fraud once they’ve got your information, so the best approach is to do what you can to keep your information secure.  There are two paths to that goal: locking down what you can and reducing your overall visibility.  If you find analogies helpful, picture how the military uses armor where it’s practical but stealth and camouflage where it’s not. 

Things you can do to lock down your information (and your dependents’ information): 

• Set up a mySocial Security account, if you don’t already have one.  This government service forestalls identity thieves who might obtain your SSN, and it allows you to verify your earnings (so you won’t get a surprise when your 1099 arrives).  Do this for your dependents, too. 
• Set up a credit lock or freeze with the major credit reporting agencies.  It means they won’t report your credit history to any potential creditors, making it harder for identity thieves to profit from you.  You’ll need to reach out and have it suspended any time you do apply for credit, but that’s a relatively minor inconvenience (and it really helps protect minors and the elderly, who typically don’t apply for credit). 
• Apply for an Identity Protection PIN from the IRS.  Like a credit freeze, it doesn’t directly prevent identity theft (or Welfare fraud) but, by making tax fraud much harder for scammers, it minimizes the profit they can make and the damage they can cause. 
• Pay attention to physical security.  Watch for shoulder surfers when you’re using your devices in public, lock up sensitive documents in your home (and don’t discard them without shredding), and don’t leave your devices unattended.
• Give the same attention to passwords and logins.  Most people use a small handful of passwords across multiple sites and apps, just because it’s hard to remember more.  That’s the digital equivalent of leaving a spare key under your doormat: a really, really bad idea.  Get yourself a password manager to handle the remembering, and use a separate strong password for each site or app.  Where you have the option of adding a second form of authorization (like a text, or face recognition), use it. 

Then there are indirect forms of protection, which mostly boil down to reducing the visibility of your online identity, or “digital footprint.”  To put it a different way, it means cutting back on the amount of your information that’s in widespread circulation.  A few leading ways to do that include the following:   

• Tweaking your privacy settings on social media.  You don’t need to outright delete your accounts or make them private, just make sure every random person can’t see every post.  Keep the personal stuff to friends and family only, and maybe audit your followers every once in a while to prune out the dubious ones. 
• Closing unused accounts, wherever possible.  Seriously, if you signed up for a free account to read one article five years ago, do you really need that one?  Search yourself on Spokeo, using the name search, reverse email lookup and reverse phone number lookup to find as many associated profiles as you can.  Then make your rounds and close the ones you’re no longer using. 

You Are Your Own Last Line of Defense

Criminals and identity thieves are a resilient, resourceful bunch: As the security situation changes, they change with it.  Data breaches and the resulting credential stuffing attacks are still a threat, but more and more criminals are going “straight to the source” and targeting individuals directly.  Security research firm Javelin Strategy’s 2021 Identity Fraud Survey estimated annual losses at $56 billion, of which $13 billion came from traditional identity fraud sources (like data breaches), but a whopping $43 billion originated with direct-to-consumer scams. 

In other words, it’s ultimately up to you to maintain good security habits and an attitude of healthy skepticism.  Don’t click that link, hang up on the self-identified IRS rep who wants your SSN, and don’t get involved with that too-good-to-be-true cryptocurrency “investment opportunity.” Just making a habit of keeping up to date on the latest scams (and warning your nearest and dearest about them) is among the most important steps you can take, and — unlike so much in life — it’s one that’s entirely under your own control.

Sources

US Federal Trade Commission: New Data Shows FTC REceived 2.2 Million Fraud Reports From Consumers in 2020

Criminal Defense Lawyer (NOLO): Welfare Fraud

Identity Theft Resource Center: The Identity Theft Resource Center’s 2021 Consumer Aftermath Report Reveals Impacts on COVID-19 Identity Crime Victims

Axios: Half of the Pandemic’s Unemployment Money May Have Been Stolen

Dayton Daily News: Unemployment Fraud So ‘Widespread’ it Even Happened to DeWine and Husted

San Francisco Chronicle: Scammer Uses Dianne Feinstein’s Name to Claim Unemployment Benefits in California, Feds Say

Have I Been Pwned?: Check if Your Email or PHone is In a Data Breach

Social Security Administration: How You Can Help Us Protect Your Social Security Number and Keep Your Information Safe

CloudFlare: What is Credential Stuffing? 

Javelin Strategy: 2021 Identity Fraud Study: Shifting AnglesUS Federal Trade Commission: Avoiding and Reporting Scams