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Public Knowledge Center > Identity Theft |
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Business Identity Theft
Businesses themselves are not immune to identity thieves, in fact quite the contrary. In this form of the crime, thieves may obtain credit cards, obtain services and supplies, and open accounts in the business' name. Often by the time the theft is discovered, many thousands of dollars of expenses have been accrued and the business' credit rating may be negatively impacted. Identity Theft against a small business can be devastating to both the business and the owner.
Small businesses are particularly vulnerable to this form of the crime because, in many cases, the business' credit and the business owner's credit are one and the same. The business owner may be providing a personal guarantee for a business loan or line of credit, or may be using his or her own personal credit accounts to directly finance the business. A small business' ability to continue to operate can be severely affected if a loan were called early due to "credit risk", denied altogether at a critical stage, or if the interest rates on its key credit accounts were dramatically increased due to application of the "universal default clause". If the business can no longer operate, the business owner's ability to generate money to pay his or her own bills is subsequently also at risk.
In other forms of business Identity Theft, thieves may impersonate the business to clients and customers with the intent of defrauding them, such as in the case of "phishing" (fraudulent and deceptive emails that request customer account information which appear to originate from the business), and "pharming" (the use of computer security exploits to trick users into visiting bogus websites under the control of criminals.) These activities generate doubt and security concerns among the business' customers, whether or not the customer is actually defrauded in this manner.
In other cases, thieves may contact suppliers and convince them that they legitimately represent the business in order to place fraudulent orders or have pirated products produced, as in the recent case involving giant computer and electronics manufacturer, NEC Japan.
A Real Life Example of an Incident of Business Identity Theft
In May of 2006, a private investigation conducted by international risk management and investigations firm, Investigative Risk, uncovered a sophisticated ring of criminals that had established a complete NEC-branded company.
By the time that the operation was finally shut down, this bogus company, operating in Hong Kong, China, and Taiwan, had more than 50 factories producing a complete line of counterfeit NEC products, including computer keyboards, computer peripherals, CDs, and DVDs. The bogus company was even reportedly developing its own MP3 players and home entertainment systems.
The persons operating the factories utilized counterfeit NEC identification, and several of the buildings brazenly displayed NEC signs. Products were shipped in NEC labeled boxes, and the company even went so far as to charge royalties to other companies to license the products that it produced. The counterfeit NEC products produced by this company were reportedly discovered being sold throughout China, Taiwan, Southeast Asia, the Middle East, North Africa and Europe.
As some small measure of consolation, according to NEC, the counterfeit products were deemed to be "of generally good quality". Had they been of significantly inferior quality, the operation may have eroded consumer confidence in legitimate NEC products, causing further losses beyond the financial aspects of diverted sales. If a well-known, international manufacturing company such as NEC Japan could be victimized in this manner, how easy would it be for a smaller, lesser-known company to become a victim of Business Identity Theft - and at what cost?
©Copyright 2008 by Michael Barnett. All rights reserved. Unauthorized use, copying, or distribution without permission is prohibited.
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