US banking tegulators, the Federal Reserve Board of Governors and so-called "thrift institution" regulators, have instructed banks to develop procedures to promptly advise federal officials and customers of suspected cases of identity theft. This growing type of fraud costs consumers millions, even billions of pounds - the true figure is unknown. In the USA, based on 2002 figures, bank identity theft costs businesses US$50bn and consumers over US$5bn, according to USA official estimates.
The US banking regulators are instructing banks to create procedures to respond to and address security breaches that involve sensitive customer information. These are to include procedures "to notify customers about unauthorised activity that might cause 'substantial harm' to them. If the bank determines that misuse of its information about a customer has occurred or is reasonably possible, it should notify the affected customer as soon as possible ...". The objective is that banks act with vigilance and speed where customer information had been stolen or lost. Banks may delay notification if that would interfere with a criminal investigation but they must still notify their primary federal regulator of suspected identity fraud, even if customers are not advised.
Most identity theft arises from loss or theft of data, not only, or even necessarily, from the banks themselves. Banks have historically shared data with third parties. Banks sell, share and exchange data and data components with a wide range of organisations, including other banks, credit card and credit rating agencies. Some of these transactions are conducted through data brokers. Once the information is legitimately in the hands of third parties, should those third parties advise the banks if loss or theft of data occurs? Unless they are banking or financial institutions, third parties are unlikely to be regulated.
Perhaps there should be greater restrictions on exchange or other third party transactions in data from which identity theft may be fabricated? Should credit agencies licensing terms encapsulate more extensive review of their data security procedures? Should data brokers be subject to licensing that in part has a dependency on external evaluation of their data security competencies? As identity theft grows, and public concern escalates, the answer must be a resounding yes!
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