As April 18th looms, I’m pondering what has changed from last year, not simply regarding my personal finances and exemptions, but for government agencies responsible for tax collection and all consumers who have been, or will be, impacted by identity theft.
In an effort to stave off identity thieves, the IRS recently suspended the “Data Retrieval” feature on its free online application for Federal Student Aid. The suspension of the Data Retrieval Tool was a precaution "following concerns that information from the tool could potentially be misused by identity thieves." As the largest tax agency in our country, the IRS has significant challenges as it faces an evolving identity theft related threat. It’s a valiant fight, but it doesn’t stop with the IRS; state departments of revenue face the same threats. Fraudsters are probing our tax system looking for weaknesses to exploit. If the IRS shores up a weakness, it’s not hard to envision a thief turning his attention to a state looking to exploit the same gap.
All-Time High Data Breaches Threaten More Tax Fraud
Data breaches aren’t helping this problem, making it relatively easy to obtain stolen identities that can be used to attack online applications. In fact, according to the Identity Theft Resource Center, the number of U.S. data breaches tracked in 2016 hit an all-time record high of 1,093. This represents a substantial hike of 40 percent over the then-record high of 780 reported in 2015. Not all exposed personal identity information, but those that did are giving the bad guys the data they need to attack. It’s an interconnected system. Our cybersecurity must be strengthened to limit access to the stolen identity data thieves use to perpetrate identity theft related tax fraud.
My colleague Colin Carvey recently pointed out that fraud has remained a step ahead of digital adoption:
“It’s clear digital fraud is becoming more sophisticated and dangerous as Internet dependency and interconnectivity evolves. However, it’s important to note that fraudsters have been at play online since information was first shared in that channel. And with more good consumers moving online for everything from loan originations to insurance quotes and tax return filings, those with malicious intent are well positioned to exploit these trends. Therefore, adjusting your risk strategies is critical to account for the influx of online consumer data.”
Equip Your Agency to Identify Fraudulent Taxpayers
I couldn’t agree more with his assessment. There are ways to help agencies equip themselves to enable online systems to effectively discern good taxpayers from fraudsters in real time, allowing them to verify and authenticate identities and confidently keep the business of government moving.
An agency can equip itself to combat identity-related tax fraud with a comprehensive approach using three core components of identity management – used individually or as a holistic solution:
- Identity Verification verifies consumer-provided information using multiple sources of highly predictive consumer and fraud data.
- Digital Verification assesses the risk of a transaction from initial interaction, whether online or mobile.
- Authentication deploys one of two authentication modes dynamically, based upon the risk of any single transaction.
TransUnion provides this type of solution by bringing together vast data and analytics, combining insights on consumers, their digital devices, transaction behaviors and known associations, all in an effort to produce a more comprehensive assessment of risk. We call this suite of solutions IDVisionSM.
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