This study, published on December 14, 2004, presents the FDIC's findings on unauthorized access to financial institution accounts and how the financial industry and its regulators can mitigate these risks.
Executive Summary And Findings
Background and Focus of Study Identity theft is one of the fastest growing types of consumer fraud. The Federal Trade Commission (FTC) has estimated that, during 2003, almost ten million Americans discovered they were the victims of identity theft, with a total cost to businesses and consumers of over $50 billion. This study focuses on a subset of identity theft that is of particular concern to financial institutions insured by the FDIC and to the institutions' customers: unauthorized access to and misuse of existing asset accounts primarily through phishing and hacking, hereinafter referred to as account hijacking.
Prevalence and Impact of Account Hijacking While precise statistics on the prevalence of account hijacking are difficult to obtain, recent studies indicate that unauthorized access to checking accounts is the fastest growing form of identity theft. Another recent study has estimated that almost 2 million U.S. adult Internet users experienced this fraud during the 12 months ending April 2004. Of those, 70 percent do their banking or pay their bills online and over half believed they received a phishing e-mail. Consumers are attributing risk to their use of the Internet to conduct financial transactions, and many experts believe that electronic fraud, especially account hijacking, will have the effect of slowing the growth of online banking and commerce.
Findings Fraudsters are taking advantage of the reliance on single-factor authentication for remote access to online banking, and the lack of e-mail and Web site authentication, to perpetrate account hijacking. Financial institutions and government should consider a number of steps to reduce online fraud, including:
Upgrading existing password-based single-factor customer authentication systems to two-factor authentication.
Using scanning software to proactively identify and defend against phishing attacks. The further development and use of fraud detection software to identify account hijacking, similar to existing software that detects credit card fraud, could also help to reduce account hijacking.
Strengthening educational programs to help consumers avoid online scams, such as phishing, that can lead to account hijacking and other forms of identity theft and take appropriate action to limit their liability.
Placing a continuing emphasis on information sharing among the financial services industry, government, and technology providers.