Identity Theft

What Is Identity Theft?

Identity theft occurs when someone uses another person's personal information without permission to commit fraud or other crimes. The information might include a name, Social Security number, bank account details, or credit card numbers. The thief may open new accounts, take out loans, file tax returns, or make purchases in the victim's name, often leaving the victim to deal with the resulting debts and a damaged credit score.

How It Works

Thieves obtain personal data in several ways. Common methods include phishing emails and fake websites that trick people into sharing details, data breaches at companies that store customer records, stolen mail or wallets, and purchases of information on illicit online markets. Some criminals also collect details from social media posts to guess security answers.

Once they have enough information, they may:

• Open credit cards or loans in the victim's name
• Take over existing accounts by changing passwords or contact details
• File fraudulent tax returns to claim refunds
• Use a stolen identity to obtain medical care or employment

Why It Matters to Investors

Identity theft can affect investment accounts as well as bank and credit accounts. A thief who gains access to a brokerage account may try to move funds or change account settings. Investors can reduce this risk by using strong, unique passwords, enabling multi-factor authentication, reviewing statements and credit reports regularly, and being cautious about unsolicited requests for personal information.

Recovering From Identity Theft

Victims typically notify the affected financial institutions, place a fraud alert or credit freeze with the major credit bureaus, and report the crime to the appropriate government agency. In the United States, the Federal Trade Commission operates IdentityTheft.gov, which helps victims create a recovery plan. Acting quickly generally limits the damage.