Identity Theft and Tax Fraud
State officials have confirmed that the South Carolina Department of Revenue’s website was hacked several times between late-August to mid-October. The hackers took 3.6 million Social Security numbers and 387,000 payment card records. The Social Security numbers were not encrypted, but all but 16,000 of the credit card numbers were.
Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse, said South Carolina’s is the largest hacker-related data breach he knows of involving a state government. There have been many larger attacks involving private companies and the federal government.
Stolen identity data is in rising demand from tax fraudsters. Stolen names, addresses and Social Security numbers are used to generate faked tax returns for which the refunds get directed to a debit card account which the thief controls. The debit card can then used to make cash withdrawals at an ATM.
Last July, the Treasury Inspector General for Tax Administration issued a report showing that the IRS failed to prevent 1.5 million potentially fraudulent tax returns from being processed in 2011, resulting in refunds to identity thieves of more than $5.2 billion. The Inspector General estimated that the IRS could issue $21 billion in fraudulent tax refunds as a result of identity theft over the next five years.
Also last summer we rolled out a fraud mitigation solution which identifies, analyzes and eliminates identity misuse by fraudsters as they are attempting to open new accounts or gain services. Our solution interprets fraudulent activity patterns in real-time by monitoring suspicious activities across an entire network of financial services organizations and other related industries.
While it’s not yet clear how the hackers got into South Carolina’s website, we know there are steps the individuals and businesses can take to prevent being victims of identity theft and fraud. For more information, contact one of our specialists.
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