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When ‘Familiar Fraud’ Leads to Identity Theft

Many people tend to think of an identity thief as a criminal behind a computer in a foreign country, but the truth is that for some people, the culprit behind their identity woes is someone they know—in some cases, very well.

Identity theft victims are increasingly finding that the person who compromised their personal information is a spouse, friend, neighbor, sibling, coworker or in-house employee, such as a babysitter or a cleaning service. In other cases, a college roommate or a caregiver in an assisted living facility could be the culprit. Privacy experts regard these instances as cases of "familiar fraud."

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Last year, 550,000 fraud and identity theft victims reported that they had their information compromised by someone they knew, according to Javelin Strategy & Research data pulled for CNBC.com and published in an article.

The article's author, Kelli B. Grant, highlights the story of Tracy, a health-care worker in Kentucky, whose name has been withheld for privacy. Tracy's Social Security number was used to open several new credit cards in her name, racking up $1,500 in purchases and pushing one account past its credit limit and onto collections. The person behind all of this, surprisingly, was her husband.

"He knew my birthday. He had my Social Security number. He even had a copy of my driver's license stored on his computer," Tracy, who became aware of the first fraudulent account after receiving an alert from the bank about a missed payment, told CNBC.com. (The couple has since divorced.)

Al Pascual, director of fraud and security at Javelin, believes that familiar fraud cases are tied to the economy. When there are tough economic times, familiar fraud rises, and when the economy is more stable, they tend to decline. In 2011, for example, familiar fraud impacted 0.64 percent of the population, whereas 0.35 percent were affected last year, he told CNBC.com.

Children are often common targets for this type of fraud, since identity theft can go unnoticed for years. In the article, another woman named Axton Betz-Hamilton discovered she was a victim of identity theft during her sophomore year of college. When she moved off campus, her electric company said they needed a $100 deposit because of her credit score. Once she received her credit report, it was filled with 10 pages of credit-card accounts and debts sent to collections.

A couple years later, after the passing of her mother, Betz-Hamilton learned that the statements and applications for the fraudulent accounts were hidden among her mother's possessions. Apparently, her mother had compromised the identity of her daughter. Betz-Hamilton's father and grandfather were also victims.

Familiar fraud is particularly detrimental since it can go on so long without being detected. Familiar fraudsters are more likely to know a victim's answers to security questions and can often easily intercept mail so that the victim remains unaware.

Privacy experts encourage that everyone takes proactive measures to increase the security of their personal information. This includes using a locked safe to store important documents, as well as password-protected computers and shredding sensitive files. Also, continually monitor all accounts. Sure, a spouse may know personal information, such as a Social Security number, but by consistently monitoring all accounts and credit reports, it's easier to detect suspicious behavior.

In addition, while children typically don't have a credit report, credit offers addressed to them in the mail signal that they could have become an identity theft victim. When this happens, a parent should request reports from the three credit reporting agencies immediately.

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