[Senate Hearing 106-574]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 106-574
 
    PHONY IDS AND CREDENTIALS VIA THE INTERNET: AN EMERGING PROBLEM

=======================================================================



                                HEARING

                               before the

                               PERMANENT
                     SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 19, 2000

                               __________

      Printed for the use of the Committee on Governmental Affairs

                        U.S. GOVERNMENT PRINTING OFFICE
64-986 cc                       WASHINGTON : 2000
_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
         U.S. Government Printing Office, Washington, DC 20402





                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware       JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska                  CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine              DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi            MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania          JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
             Hannah S. Sistare, Staff Director and Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                 Darla D. Cassell, Administrative Clerk

                                 ------                                

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                   SUSAN M. COLLINS, Maine, Chairman
WILLIAM V. ROTH, Jr., Delaware       CARL LEVIN, Michigan
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio            RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico         MAX CLELAND, Georgia
THAD COCHRAN, Mississippi            JOHN EDWARDS, North Carolina
ARLEN SPECTER, Pennsylvania
          K. Lee Blalack, II, Chief Counsel and Staff Director
      Linda J. Gustitus, Minority Chief Counsel and Staff Director
                     Mary D. Robertson, Chief Clerk
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page

    Senator Collins..............................................     1
    Senator Levin................................................     4
    Senator Akaka................................................     5

                               WITNESSES
                          Friday, May 19, 2000

K. Lee Blalack, II, Chief Counsel and Staff Director, Permanent 
  Subcommittee on Investigations, Washington, DC.................     8
David C. Myers, Special Agent, Identification Fraud Coordinator, 
  Division of Alcoholic Beverages and Tobacco, Department of 
  Business and Professional Regulation, State of Florida, 
  Jacksonville, Florida..........................................    13
Thomas W. Seitz, user of counterfeit identification documents 
  obtained from the Internet, convicted felon currently awaiting 
  sentencing in the U.S. District Court for the Middle District 
  of Florida.....................................................    15
Brian L. Stafford, Director, U.S. Secret Service, Washington, DC.    24

                     Alphabetical List of Witnesses

Blalack, K. Lee, II:
    Testimony....................................................     8
Myers, David C.:
    Testimony....................................................    13
    Prepared statement...........................................    31
Seitz, Thomas W.:
    Testimony....................................................    15
    Prepared statement...........................................    36
Stafford, Brian L.:
    Testimony....................................................    24
    Prepared statement...........................................    38

                              Exhibit List

* May Be Found In The Files Of The Subcommittee

 1. GIdentification and credential montage.......................    47

 2. GConnecticut Driver's Licenses--one authentic, one fake......    48

 3. Gidsolution.com Web site.....................................    49

 4. GTemplate for State of Maine driver's license................    51

 5. GK. Lee Blalack's fake driver's license prepared with 
  template from State of Maine driver's license identified above 
  in Exhibit 4...................................................    52

 6. GTim Catron's fakeidzone.com home page.......................    53

 7a. GAuthentic Victory Memorial Hospital birth certificate......    54

 7b. GTim Beachum's Victory Memorial Hospital birth certificate..    55

 8a. GTim Beachum's Kent State University Certificate............    56

 8b. GTim Beachum's Ohio Resident Activity Coordinator Training 
  Project Certificate of Attendance..............................    57

 9. GFake Oklahoma driver's license..............................    58

10. GMexican 311 E-mail..........................................    60

11. GPowerpoint presentation of Special Agent David C. Myers, 
  Identification Fraud Program Coordinator, Division of Alcoholic 
  Beverages and Tobacco, Department of Business and Professional 
  Regulation, State of Florida...................................    61

12. GThomas Seitz documents......................................    89

13. GPage from PromasterCards Web site...........................    90

14. GMay 19 and 30, 2000 Internet postings of PromasterCards.....    91

15. GSEALED EXHIBIT: Permanent Subcommittee on Investigations 
  Deposition of Tim Beachum, April 5, 2000.......................     *

16. GSEALED EXHIBIT: Permanent Subcommittee on Investigations 
  Deposition of Brett Skye Carreras, April 13, 2000..............     *

17. GQuestionnaire sent by Permanent Subcommittee on 
  Investigations to various Web site operators and replies 
  received from Tim Beachum, Tim Catron, Josh Dansereau, and 
  Jeremy Martinez................................................    93

18. GAffidavit of Tim Catron.....................................   113

19. GAffidavit of Josh Dansereau.................................   115

20. GStatement for the Record of the Federal Bureau of 
  Investigation..................................................   117

21. GStatement for the Record of the Social Security 
  Administration.................................................   120

22. GE-mail: ``Authentic Confidential New ID's--Driver's 
  License!!!''...................................................     *

23. Gcoolcards.com: ``CoolCards--Postcards from the Net''........     *

24. Gtheidshop.com: Order page terms and conditions..............     *

25. GMessage Board: Risingson ``advice,'' 10/13/99...............     *

26. GWill & Ed E-mail correspondence re: technology..............     *

27. GMessage Board, Webhost posts, 10/13/99, re: use of words 
  ``novelty'' and ``educational''................................     *

28. Gexcite Web search results for ``fake id,'' 4/12/00..........     *

29. Gcarreras.net: ``Premium Files''.............................     *

30. Gfakeidone.com: Home Page....................................     *

31. Gtheidshop.com: ``PVC Plastic Id's''.........................     *

32a. Gprestigious-images.com: `` `Official' College Diploma 
  Template''.....................................................     *

32b. GFake ID Zone Kits..........................................     *

33. Galt.2600.fake-id message board, Webdiaster post, 3/22/00, 
  re: Ohio templates.............................................     *



    PHONY IDS AND CREDENTIALS VIA THE INTERNET: AN EMERGING PROBLEM

                              ----------                              


                          FRIDAY, MAY 19, 2000

                                   U.S. Senate,    
              Permanent Subcommittee on Investigations,    
                  of the Committee on Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:33 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan 
Collins, Chairman of the Subcommittee, presiding.
    Present: Senators Collins, Levin, and Akaka.
    Staff Present: K. Lee Blalack, II, Chief Counsel and Staff 
Director; Mary D. Robertson, Chief Clerk; Kirk E. Walder, 
Investigator; Eileen M. Fisher, Investigator; Brian C. Jones, 
Investigator; Adam Thomas, Intern; Barbara Cohoon, Intern; 
Linda Gustitus, Minority Chief Counsel; Michael Handley, 
Congressional Fellow; Felicia Knight (Senator Collins); Blake 
Thompson and Brad Tennison (Senator Cochran); Karin Rodgers 
(Senator Specter); Nanci Langley (Senator Akaka); Marianne 
Upton, Jessica Porvas, and Elaine Paulionis (Senator Durbin).

              OPENING STATEMENT OF SENATOR COLLINS

    Senator Collins. The Subcommittee will come to order.
    Today, the Permanent Subcommittee on Investigations will 
explore a new and disturbing trend, the use of the Internet to 
manufacture and market counterfeit identification documents and 
credentials. This hearing is the culmination of a 5-month 
investigation by the Subcommittee that examined more than 60 
Web sites which either distributed fake identification 
documents or the computer templates that allow customers to 
manufacture authentic-looking IDs in the seclusion of their own 
homes.
    The high quality of the counterfeit identification 
documents that can be obtained through the Internet is truly 
astounding. As you will see from Exhibit 1,\1\ which is on the 
monitor, with very little difficulty, my staff was able to use 
Internet materials to manufacture convincing IDs that would 
allow me to pass as a member of the U.S. Army Reserves--I note 
that my staff made me an E-4, not a general---- [Laughter.]
---------------------------------------------------------------------------
    \1\ See Exhibit 1 which appears in the Appendix on page 47.
---------------------------------------------------------------------------
    Senator Collins [continuing]. As a reporter, as a student 
at Boston University, or as a licensed driver in virtually any 
State--Florida, Michigan, Wyoming, to name just a few of the 
identities that I could easily assume.
    During the past decade, government agencies have added 
numerous security features to identification documents, such as 
holograms and bar codes, to prevent such counterfeiting. Yet, 
the Internet sites that sell fake IDs appear to have kept pace 
by duplicating many of these security features.
    Displayed on the monitor is a comparison between an 
authentic driver's license provided by the State of Connecticut 
on the top and a fake Connecticut license that was created 
using a template obtained from the Internet.\1\ As you will 
see, just like the real Connecticut license, the fake with my 
picture on it includes a signature written over the picture and 
an adjacent shadow picture of the license holder. The State of 
Connecticut added both of these sophisticated security features 
in order to reduce counterfeiting.
---------------------------------------------------------------------------
    \1\ See Exhibit 2 which appears in the Appendix on page 48.
---------------------------------------------------------------------------
    Unfortunately, some Web sites sell fake IDs complete with 
State seals, holograms, and bar codes to replicate a license 
virtually indistinguishable from the real thing. Thus, 
technology now allows Internet site operators to copy authentic 
identification documents with an extraordinary level of 
sophistication and then mass produce those fraudulent documents 
for their customers.
    These counterfeit identification documents are relatively 
easy to manufacture. With only a modest understanding of the 
Internet and $50 worth of supplies purchased from an arts and 
crafts store, one can design authentic-looking identification 
documents within a few hours or even minutes.
    The Web sites investigated by the Subcommittee offered a 
vast and varied product line, ranging from driver's licenses 
for virtually any State to military identification cards to 
Federal agency credentials, including those of the FBI and the 
CIA. Other sites offered to produce Social Security cards, 
birth certificates, diplomas, and press credentials.
    Because this is a relatively new phenomenon, there are no 
good data on the size of this new Internet industry or the 
growth that it has experienced. The Subcommittee's 
investigation, however, found that some Web site operators have 
evidently made hundreds of thousands of dollars through the 
sale of phony identification documents and other bogus 
credentials. One Web site operator told a State law enforcement 
official that he sold approximately 1,000 fake IDs every month 
and generated about $600,000 in annual sales.
    Many of these Web sites are by no means subtle in their 
advertising. As you can see from the posterboard,\2\ a site 
called idsolution.com informs its customers that it is ``the 
leading source for all your identification needs.'' It urges 
customers to click on the link for a new identity kit, which is 
described as a complete package that allows you to really 
become someone else.
---------------------------------------------------------------------------
    \2\ See Exhibit 3 which appears in the Appendix on page 49.
---------------------------------------------------------------------------
    When you click on the new identity kit, you are directed to 
another page of the Web site that offers five fraudulent 
identification documents for $125. The new identity kit 
includes an American or Canadian birth certificate, a FedEx 
employee identification card bearing the customer's photograph, 
complete with holograms and even a magnetic swipe, three bills 
from AT&T, TCI Cable, and a utility, all of which includes the 
name and address supplied by the customer. The site even offers 
a guarantee that the authenticity of these documents will be 
unmistakable from their original counterparts.
    Subcommittee investigators attempted to contact 
idsolutions.com in late January, but it did not respond to our 
request for information. idsolutions.com ceased to operate 
shortly thereafter and we believe that the owners of this Web 
site have now gone underground to evade our investigation.
    This highlights one of the principal challenges presented 
by these Web sites. Unlike a business with a physical address, 
a Web site operator can simply shut down the site once they are 
discovered, disappear, and then return to the Internet sometime 
later under a completely different name, making the job of law 
enforcement officials all that much more difficult.
    For the criminal who has just stolen someone's identity, 
these sites offer an attractive service. For a relatively low 
price, the crook can get a State's driver's license using the 
victim's name and date of birth but showing the criminal's 
photograph, or the thief can obtain a fraudulent birth 
certificate using the stolen identity, then fabricate some 
utility bills purporting to show his or her address, and then 
use these documents to trick the Department of Motor Vehicles 
into issuing a real driver's license.
    Subcommittee staff examined several sites that sell 
templates which a criminal could use by downloading it onto his 
computer and using it to make fake IDs again and again. Each 
time, the criminal appropriates a new identity. Our 
investigation found that driver's licenses are the most 
commonly fabricated identification document. These fake 
driver's licenses appear to serve as gateway documents that 
allow criminals access to other bona fide identification 
materials.
    Identity theft is a growing problem that these Internet 
sites encourage. Fake IDs, however, facilitate a broader array 
of criminal conduct. The Subcommittee's investigation found 
that some Internet sites were used to obtain counterfeit 
identification documents for the purpose of committing other 
crimes, ranging from the very serious offense such as bank 
fraud to the more prevalent problem of underage teenagers 
buying alcohol or gaining access to bars. And indeed, as the 
Director of the Secret Service will tell us later, a false ID 
is almost always an essential element in financial crimes.
    The Internet is a revolutionary tool of commerce and 
communication that benefits us all, but many of the Internet's 
greatest attributes also further its use for criminal purposes. 
While the manufacture of false IDs by criminals is nothing new, 
the Internet allows those specializing in the sale of 
counterfeit identification to reach a far broader market of 
potential buyers than they ever could by standing on a street 
corner in the shady side of town. They can sell their products 
with virtual anonymity through the use of E-mail and free Web 
hosting services and by providing false information when 
registering their domain names.
    Similarly, the Internet allows criminals to obtain fake IDs 
from the seclusion of their own homes, substantially 
diminishing the risk of apprehension that attends purchasing 
counterfeit documents on the street.
    At today's hearing, the Subcommittee hopes to shed much 
needed light on the growing and alarming use of the Internet to 
manufacture and distribute false identification documents. We 
will hear from both State and Federal law enforcement 
officials, including the director of the U.S. Secret Service, 
which is one of the key law enforcement agencies responsible 
for enforcing Federal laws prohibiting the distribution of 
counterfeit IDs.
    These witnesses will be joined by a convicted felon who 
used the Internet to obtain a fake birth certificate and the 
names and Social Security numbers of several individuals, I 
might add, from public government Web sites, and then produced 
documents to commit identity theft and bank fraud. I look 
forward to hearing from all of our witnesses today.
    I would now like to call on the distinguished Ranking 
Minority Member, Senator Levin, for any comments he might have.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Madam Chairman, first, let me congratulate 
you for taking the initiative to bring the attention of the 
Subcommittee, the Congress, and the country to a growing 
problem, and that is the use of the Internet to obtain 
documents which can be used for improper purposes very, very 
easily and very widely.
    Although most of us recognize the extraordinary, positive 
capabilities and potential of the Internet, we have also become 
increasingly aware of and concerned about the use of the 
Internet for unlawful purposes. The worldwide appeal of and the 
access to the Internet carries with it both tremendous benefits 
and real risks. While it enables us to bring useful, beneficial 
information to every part of the globe, it also allows anyone 
on any continent to bring offers of illegal activity directly 
into a person's home. Wherever there is a computer connected to 
the Internet, there is the possibility of and the opportunity 
for misconduct. We are just beginning to observe and understand 
all of the implications of global access, and the proliferation 
of sites that promote fake identification is one such example.
    The range and accessibility of various false ID products 
using the Internet is extensive. Using generally available 
search engines, my staff got literally thousands of hits by 
searching the Internet under the term ``fake identification.'' 
While recognizing many of these hits represent the same actual 
Web site, there are conservatively, as the Chairman said, 
dozens of readily accessible sites which are active in 
providing false identification over the Internet.
    Documents from fake driver's licenses, Social Security 
cards, and birth certificates to false passports and law 
enforcement credentials, including Secret Service agent IDs, 
are all readily available by a click of the mouse. These false 
IDs can be used for benign purposes, such as playing a trick on 
a friend or a family member, but they can also be used and are 
more often now being used to carry out improper or criminal 
activities--to obtain fraudulent loans, to evade taxes, to 
establish a new identity, to steal another individual's 
identity, to defraud Federal and State Governments, to 
misrepresent one's residence or place of birth or age for any 
variety of purposes.
    The Secret Service, the Social Security Administration, and 
other Federal agencies have an interest in addressing these 
activities. My own home State of Michigan has recently 
established a High Tech Crime Unit in the Attorney General's 
office in order to focus on this type of activity.
    The sale and promotion of false identification is more than 
a few young people obtaining false IDs for the purpose of 
underage drinking. Selling false identification over the 
Internet is a serious matter and a growing problem. With 
continuing technological growth, it is going to grow further 
and faster unless the tools for enforcement and deterrence are 
brought to bear and unless any loopholes in the law are closed.
    This hearing will allow us to understand better the 
problems so that we might begin to move toward some meaningful 
solutions, and again, I want to commend our Chairman for 
calling this hearing, for her initiative in investigating this 
matter, and I want to thank the PSI staff for the hard work in 
preparing for this hearing.
    Senator Collins. Thank you, Senator Levin.
    I am pleased to welcome Senator Akaka, who has joined us, 
for any opening remarks that he might have.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Madam Chair and Ranking 
Minority Member, Senator Levin, for calling attention to 
another significant Internet-related privacy concern. The 
manufacture and use of false identification is a growing and 
vastly underpublicized problem.
    The number of commercial Web sites advertising the sale of 
templates for making fake IDs and official documents is really 
striking. It is little wonder that incidents of identity theft 
and associated fraud have skyrocketed, in recent years. With 
the proliferation of commercial online information brokers, 
virtually anyone with a computer and modem now has the ability 
to search and quickly retrieve a wide range of personal 
information about others. The ease of access to this vast store 
of information facilitates ID theft and fraud at a fairly 
sophisticated level, with high expectation of success and 
little fear of detection. It is surprising that there are 
currently no laws regulating the publication of personal 
information in online databases.
    Identification templates sold indiscriminately by Internet 
vendors includes driver's licenses for all 50 States, birth 
certificates, Social Security cards, military IDs, special 
agent and law enforcement IDs, professional licenses, college 
diplomas, and many others. A permit to carry a concealed weapon 
can even be obtained in this manner.
    It is important to note that the possession and/or use of 
false identification for purposes of misrepresentation is a 
Federal crime and a crime in virtually every State. Yet, 
paradoxically, the sale and manufacture of IDs for the 
ostensible purpose of novelty use is significantly 
unrestricted.
    I am proud to say that my State of Hawaii has been 
proactive in this area through enactment of tough laws. In 
Hawaii, the use of a fictitious name or having in one's 
possession a reproduction, imitation, or facsimile of a 
driver's license is a crime punishable by a $1,000 fine and 1 
year imprisonment.
    Although I believe that statutory restrictions on 
information sharing should not be more restrictive than 
absolutely necessary to safeguard public and private interests, 
the unwarranted invasion of personal privacy posed by 
unregulated and indiscriminate information sharing is clearly 
unacceptable. I support ongoing efforts to create a 
comprehensive Federal policy guaranteeing individuals a right 
to control the collection and distribution of their personal 
information.
    Is the practice of marketing and selling fake IDs a 
legitimate business practice consistent with constitutional 
protections that serve a greater societal good or a highly 
questionable practice that clearly facilitates fraud and other 
illegal practices? Well, I look forward to hearing the 
testimony of today's witnesses to help answer these questions.
    Madam Chairman, I also have a longer statement that I would 
like to submit for the record, and thank you so much for this 
opportunity.
    Senator Collins. Thank you, Senator Akaka. Your statement 
will be included in the hearing record.
    [The prepared statement of Senator Akaka follows:]

             PREPARED STATEMENT OF SENATOR DANIEL K. AKAKA
    Thank you Chairman Collins and Ranking Minority Member Levin, for 
calling attention to yet another significant Internet related privacy 
concern. The manufacture and use of false identification is a growing 
and vastly under-publicized problem. The availability of high quality 
fake IDs via. the Internet is a small but important component of the 
much larger problem Congress has in protecting personal privacy, 
striking a proper balance of maintaining an open public record system, 
and ensuring freedom of speech and open commerce. It is undeniable that 
the computerization of publicly available data in recent years has 
heightened the importance and difficulty of balancing the divergent 
needs of access and privacy. Our private lives are now exposed in ways 
we never could have anticipated. I support the President's recently 
announced initiative to formulate comprehensive legislation to enhance 
financial and medical privacy, providing consumers the right of 
affirmative consent before sensitive information about them can be 
shared with others. I am pleased to note that Hawaii is in the 
forefront of enacting enhanced privacy legislation, and is one of the 
few states in the nation that now requires consumer consent prior to 
the release or exchange of their private insurance information.
    The issue of privacy has not escaped public attention. Last fall 
the Wall Street Journal surveyed its subscribers about the most serious 
issue facing America in the twenty-first century. The top concerns were 
not the economy, education, or illegal drugs, it was loss of personal 
privacy. In another poll, the American Association of Retired Persons 
(AARP) found an overwhelming majority (93 percent) believes that any 
personal information they give during a business transaction should 
remain the property of the consumer and not be shared with other 
businesses without the permission of the consumer.
    The Internet has had a profound impact--both good and bad--on our 
quality of life. It has literally revolutionized the world, stimulated 
our incredibly robust economy in heretofore unimaginable ways, 
increased efficiency, lowered costs, added convenience, and will no 
doubt serve as a primary stimulus for future scientific and economic 
breakthroughs. Unfortunately, the dark side of the Internet serves as a 
counterbalance, to remind us that evolving technology can also serve to 
our detriment. The information industry has grown dramatically every 
year, and shows no sign of slowing down. The Internet has the capacity 
to be the most effective data-collector known to man. The privacy 
problem is therefore likely to become more acute as more and more 
sensitive insurance and medical information is collected and exchanged 
over the Net. Although I believe statutory restrictions on information 
sharing should not be more restrictive than absolutely necessary to 
safeguard public and private interests, the unwarranted invasion of 
personal privacy posed by unregulated and indiscriminate information 
sharing is clearly unacceptable. I support ongoing efforts to create a 
comprehensive federal policy guaranteeing individuals the right to 
control the collection and distribution of their personal information.
    The number of commercial Web sites advertising the sale of 
templates for making fake or IDs and official documents is striking--it 
is little wonder the incidence of identity theft and associated fraud 
has skyrocketed. In recent years, with the proliferation of commercial 
``on-line'' information brokers, virtually anyone with a computer and 
modem now has the ability to search and quickly retrieve a wide range 
of personal information about others, including: names; addresses; 
social security numbers; telephone numbers (published and unpublished); 
dates of birth; relative names and addresses; neighbor names and 
addresses; criminal records; civil records; tax liens; real estate 
holdings; bank account numbers and balances; stock holdings; credit 
card account numbers and individual credit card transactions; long 
distance phone records; cellular phone records; pager records; 800 
number records; motor vehicle records; driving records; aircraft and 
water craft ownership; credit histories; medical histories; where you 
shop and what you buy. Indeed, the profile of an individual which can 
be compiled using information stored in databases can be so complete as 
to constitute a near complete invasion of privacy. The ease of access 
to this vast store of information facilitates ID theft and fraud, at a 
fairly sophisticated level, with a high expectation of success and 
little fear of detection. It is surprising that there are currently no 
laws regulating the publication of personal information in online 
databases
    Identification templates sold indiscriminately by Internet vendors 
include drivers' licenses for all 50 states, birth certificates, social 
security cards, military IDs, Special Agent and Law enforcement IDs, 
professional licenses, permits to carry concealed weapons, college 
diplomas and many others. It is important to note that the possession 
and/or use of false identification for purposes of misrepresentation 
are a crime in virtually all states. In Hawaii for example, displaying, 
lending, use of a fictitious name, or possessing a reproduction, 
imitation, or facsimile of a driver's license is a crime punishable by 
a $1000.00 fine and one year imprisonment. Federal statutes also impose 
criminal penalties for the production and use of false identification 
in some instances. Yet paradoxically, the sale and manufacture of IDs 
for the ostensible purpose of ``novelty use,'' is significantly 
unrestricted.
    Although Internet vendors post disclaimers that the fake IDs they 
sell are for recreational purposes only, these disclaimers serve as 
little more than thinly veiled attempts to indemnify vendors from legal 
responsibility for the most likely use of such items, that is, to 
facilitate underage purchase of tobacco products and alcohol, and to 
provide the means and instrumentality of identity theft and fraud. A 
relative novice with ill intent can easily acquire realistic ID 
templates, obtain publically available information about anyone he 
chooses, and follow specific Web based ``how to'' instructions for 
manufacturing fake IDs in another persons name.
    Congress and the administration have aggressively petitioned 
industry to change policies and practices found to be overly intrusive 
or harmful to consumers, and have enacted laws as necessary to close 
loop holes. It is important to note that the Federal Trade Commission 
(FTC) and Direct Marketing Association (DMA) has worked together to 
provide comprehensive on-line guidance and information regarding a wide 
range of consumer privacy concerns including identity theft. 
Nevertheless, the rapid evolution of technology and increased 
availability of public information often outpaces efforts by industry 
or government to predict problems or to react quickly and appropriately 
once problems surface. Public awareness and vigilance are key to 
ensuring individual privacy needs are met. We need to ask ourselves if 
the practice of marketing and selling fake IDs is a legitimate business 
practice, consistent with constitutional protections that serves a 
greater societal good, or a highly questionable practice that clearly 
facilitates fraud and other illegal practices. I look forward to 
hearing the testimony of today's witnesses to help answer these 
questions.

    Senator Collins. We will also include in the hearing record 
written statements that we have received from the FBI and the 
Social Security Administration. Without objection, these 
statements will be included in the written hearing record.\1\
---------------------------------------------------------------------------
    \1\ See Exhibits 20 and 21 which appear in the Appendix on pages 
117 and 120.
---------------------------------------------------------------------------
    Our first witness this morning is Lee Blalack, the 
Subcommittee's Chief Counsel and Staff Director. His testimony 
will provide an overview of the Subcommittee's extensive 
investigation of the Internet's role in the manufacture and 
marketing of counterfeit documents. I would note that the 
Subcommittee staff has worked very hard on this and I look 
forward to hearing Mr. Blalack's presentation.
    Our second witness will be Special Agent David C. Myers, 
who is the Special Agent in Charge of the Identification Fraud 
Unit for the Florida Division of Alcoholic Beverages and 
Tobacco. Special Agent Myers is a 20-year law enforcement 
veteran who has also served as a felony investigator for the 
Florida Highway Patrol and as a city police officer. A 
certified expert in electronic interception, Special Agent 
Myers has been involved in hundreds of felony investigations of 
identification counterfeiting, including Internet 
identification sales and identity theft.
    Our third witness on this panel this morning is Thomas 
Seitz. Mr. Seitz recently pleaded guilty to bank fraud and is 
awaiting sentencing in the U.S. District Court for the Middle 
District of Florida. Mr. Seitz was apprehended by law 
enforcement officials in New Jersey after he used false 
identification documents that he acquired on the Internet to 
illegally obtain checks for approximately $60,000 in connection 
with several fraudulent car loans.
    Pursuant to Rule 6, all witnesses who testify before the 
Subcommittee are required to be sworn in, and at this time, I 
would ask that the witnesses please stand and raise their right 
hands.
    Do you swear that the testimony you are about to give to 
the Subcommittee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Blalack. I do.
    Mr. Myers. I do.
    Mr. Seitz. I do.
    Senator Collins. We will be using a timing system today. 
Please be aware that approximately 1 minute before the red 
light comes on, you will see the lights change from green to 
orange, which will give you an opportunity to conclude your 
remarks. We are not going to be that strict on time today, but 
if you could try to keep within the allotted time, that would 
be helpful. Your written testimony will be included in the 
hearing record in its entirety.
    Mr. Blalack, I will ask you to proceed.

   TESTIMONY OF K. LEE BLALACK, II, CHIEF COUNSEL AND STAFF 
DIRECTOR, PERMANENT SUBCOMMITTEE ON INVESTIGATIONS, WASHINGTON, 
                               DC

    Mr. Blalack. Thank you, Chairman Collins, Senator Levin, 
Senator Akaka, and members of the Subcommittee. Last November, 
Chairman Collins instructed the Subcommittee staff to examine 
the availability of counterfeit identification documents and 
credentials on the Internet and the criminal uses to which such 
phony documents can be put. Over the last 5 months, 
Subcommittee staff have devoted hundreds of hours to surfing 
the Internet as part of an effort to understand this little 
known but growing cadre of Web sites that offer fake 
identification materials. In furtherance of the investigation, 
the Subcommittee issued 11 subpoenas for documents and 
depositions and interviewed over 40 witnesses. My testimony 
today will provide a brief summary of that investigation and 
its findings.
    The Subcommittee staff began this inquiry by using Internet 
search engines to develop a list of Web sites that offer fake 
identification documents. After reviewing over 60 Web sites, we 
focused our investigative efforts on 15 sites that purported to 
sell fraudulent identification documents or the means for 
customers to create those documents themselves.
    The Subcommittee staff then commenced an undercover 
operation in which we ordered--using the fictitious name 
``Keith Wilson''--products offered by several of these Web 
sites. Through these undercover purchases, the Subcommittee 
acquired several high-quality false identification products, 
including a counterfeit driver's license for the State of 
Oklahoma, templates that could be used to produce fake driver's 
licenses from numerous States, authentic-looking birth 
certificates, and documents that could be used to fabricate 
credentials for employment.
    Based upon this undercover operation and information 
obtained from the Web sites of these companies, the 
Subcommittee staff narrowed its focus to three major operators 
of Web sites that manufacture and/or market phony IDs. The 
first site is fakeid.net, which is operated by Brett Carreras, 
a 21-year-old student at Loyola University in Baltimore, 
Maryland. Mr. Carreras started his site on July 28, 1998. His 
site offers top-quality templates or computer files that allow 
customers to manufacture their own fake identification 
documents.
    For instance, this is a file from Mr. Carreras's site that 
depicts a template for a previous version of a driver's license 
from the State of Maine.\1\ We found that someone with a 
computer can use this template to manufacture a counterfeit 
license that is of very high quality. Indeed, at my request, 
Subcommittee staff used Mr. Carreras's template to create this 
fake Maine driver's license bearing my picture and did so in 
only a few minutes.\2\
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    \1\ See Exhibit 4 which appears in the Appendix on page 51.
    \2\ See Exhibit 5 which appears in the Appendix on page 52.
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    In return for computer access to these templates, Mr. 
Carreras charged his customers a monthly fee of $14.95. Billing 
records obtained by the Subcommittee indicate that in the 2 
months between mid-October 1999 and mid-December 1999, Mr. 
Carreras received 621 orders and generated over $8,000 in sales 
revenue.
    Earlier this year, Mr. Carreras announced that he intended 
to open two more Web sites called illegalimmigrant.com and 
fakeid.com. Mr. Carreras advertised illegalimmigrant.com as a 
site that would specialize in ``identity documents, such as 
passports, Social Security cards, green cards, SSN lists, 
generators . . . resident alien cards, birth certificates, . . 
. and many more.''
    The Subcommittee staff was unable to obtain additional 
information about Mr. Carreras and his Web sites because he 
declined to respond to the Subcommittee's interrogatories after 
invoking his Fifth Amendment right against self-incrimination. 
Mr. Carreras also refused to answer any substantive questions 
at a Subcommittee deposition on the grounds of his Fifth 
Amendment rights.
    The second site is fakeidzone.com, which began operations 
on October 2, 1998. It is operated by Tim Catron, who resides 
in Lawrence, Kansas. Mr. Catron sells a computer disk that 
includes templates for various types of fraudulent 
identification documents. Mr. Catron charges from $19.95 to 
$39.95 for the disk. Billing records obtained by the 
Subcommittee indicate that over a 2-month period in late 1999, 
Mr. Catron received 652 orders and generated revenue of over 
$12,000.
    As this page from Mr. Catron's site indicates,\1\ the disk 
contains a fake ID kit that includes ``college transcripts you 
customize, college diplomas, new birth certificates, green 
cards, Social Security cards, updated driver's licenses, plus 
more.'' The site adds that, ``We provide you with templates and 
step-by-step instructions on what you need to create fake IDs 
so real you could fool your own mother.''
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    \1\ See Exhibit 6 which appears in the Appendix on page 53.
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    As with Mr. Carreras, Mr. Catron refused to give deposition 
testimony to the Subcommittee after invoking his Fifth 
Amendment right against self-incrimination.
    The third site is bestfakeids.com, which is operated by Tim 
Beachum, a resident of Virginia Beach, Virginia. According to 
the deposition testimony of Mr. Beachum, he purchased the 
materials for his site from Mr. Catron and began operations on 
May 25, 1999. Mr. Beachum charges $39.97 for essentially the 
same fake ID kit that is sold by Mr. Catron. Mr. Beachum 
estimates that in the 1 year that his site has been 
operational, he has sold over 1,100 kits and earned almost 
$28,000 from the site.
    Not only does Mr. Beachum's site offer driver's licenses, 
but he sells a birth certificate from an actual hospital in 
Waukegan, Illinois. During his deposition, Mr. Beachum claimed 
that he modified the birth certificate so that it would be 
distinguishable from the real certificate issued by the 
hospital. Subcommittee staff contacted Victory Memorial 
Hospital in Waukegan and obtained a copy of a birth certificate 
that it issued prior to 1990. As these two exhibits show,\2\ 
the phony birth certificate sold by Mr. Beachum, which is on 
the left, is virtually identical to the authentic birth 
certificate that the hospital formerly used on the right. Mr. 
Beachum also sold fake press passes that he promoted with 
fictitious testimonials from individuals who had purportedly 
used the credentials to gain access to restricted events, such 
as concerts.
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    \2\ See Exhibits 7a. and 7b. which appear in the Appendix on pages 
54 and 55.
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    The Internet offers many exciting opportunities for 
commerce but, as our investigation has shown, it can also offer 
inventive criminals more effective tools to engage in illegal 
conduct. After reviewing the activities and products of these 
Web sites, we believe that several general findings can be 
made.
    First, many Internet sites offer a wide variety of phony 
identification documents and some of these sites offer 
extremely high-quality counterfeits that include security 
features such as holograms designed to make the documents 
appear authentic. In fact, most of these sites market their 
products by touting the ability of the fraudulent IDs to pass 
as authentic.
    Second, this marketing strategy is inconsistent with the 
disclaimers posted on some Web sites which claim that the phony 
IDs are for ``novelty'' purposes only. For instance, Mr. 
Beachum's site offers these two Activity Coordinator 
Certificates, which were supposedly issued by Kent State 
University on the left and Ohio Health Care Association on the 
right.\1\ At his Subcommittee deposition, Mr. Beachum testified 
that he never intended for his customers to actually use these 
certificates to get a job. Indeed, his site includes a 
disclaimer that states, ``All information on this Web site is 
for entertainment and educational purposes only.''
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    \1\ See Exhibits 8a. and 8b. which appear in the Appendix on pages 
56 and 57.
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    However, Mr. Beachum's marketing shows that he expects and 
even encourages his customers to pass off these phony documents 
as legitimate credentials. His Web site states as follows: 
``Receive access to authentic downloadable certification 
certificates to get you a job as an Activity Coordinator. Why 
should you pay $1,000 for a couple of certificates just to 
learn how to plan activities for individuals?''
    And, just in case the customer is not sure how to use these 
fraudulent documents, Mr. Beachum gives them some helpful 
hints: ``We have received tons of E-mail from people wanting 
documents that could help them get jobs. . . . When you use the 
following certificates to apply for a job, you should use them 
together. On the first blank line, place your full birth name. 
On the last line place the date that the certificate was 
issued. Make sure that the date is the same on both 
certificates.''
    We do not know whether anyone has used these certificates, 
but we do know that Mr. Beachum sold them for that purpose. His 
marketing vividly illustrates how many of these sites attempt 
to shield themselves from criminal liability through the use of 
disclaimers that are patently disingenuous efforts to mask 
their intent to sell illegal products.
    We found that these Web site operators are quite ingenious 
in their efforts to evade the law. Exhibit 9,\2\ Chairman 
Collins, is an Oklahoma counterfeit driver's license that we 
purchased in part of our undercover operation from a Web site 
known as theidshop.com. With your permission, Chairman Collins, 
I would like to enter this fake license into the hearing record 
and submit it to the Subcommittee for inspection.
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    \2\ See Exhibit 9 which appears in the Appendix on page 58.
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    Senator Collins. Without objection, it will be included.
    This is an example of how these Web site operators get 
around the disclaimer, is that correct?
    Mr. Blalack. That is correct, Chairman Collins. As you can 
see, as required by Federal law, the document appears to have 
the words ``Not a Government Document'' printed diagonally in 
red ink across the front and back. But, as you can see, this 
disclaimer is easily removed by cutting the top portion of the 
lamination and simply removing the actual identification 
document and, hence, the disclaimer.
    Senator Collins. So, in effect, this license is sold in a 
laminated document that has the required disclaimers on it, but 
all one has to do is to remove it from the plastic pouch----
    Mr. Blalack. That is exactly right.
    Senator Collins [continuing]. And then the disclaimer is no 
longer appearing anywhere on the fake ID?
    Mr. Blalack. That is exactly right, Chairman Collins. And 
if that was not simple enough for some people, there are even 
message boards like this one here, Exhibit 10,\1\ that instruct 
customers how to remove the disclaimer. It says, ``OK, the 
IDShop sends their ID in a white envelope, exactly as they 
describe on their Web page. When you open this envelope, the ID 
has a laminated wrap, extending well over the edge of the ID. 
It also has printed `Not A Government Document' printed across 
the lamination in red. This slip is easy to remove with 
scissors, and takes less than a minute.''
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    \1\ See Exhibit 10 which appears in the Appendix on page 60.
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    Incidentally, this site is operated by a young man named 
Robert Sek, who recently had his operation shut down by the 
Secret Service and Texas authorities. Law enforcement 
authorities seized from his apartment a computer, photographic 
quality printer, ID making machine, printed identification 
cards, and a safe containing holograms and approximately 
$25,000 in cash. Pending the criminal investigation, Mr. Sek 
refused--through his attorney--to discuss his activities with 
Subcommittee staff.
    Our third finding is that the Internet has greatly 
facilitated the manufacture and sale of counterfeit 
identification documents by allowing sellers to mass market 
high-quality fake IDs with virtual anonymity. This has, in 
turn, presented significant obstacles to effective law 
enforcement.
    Mr. Catron's Web site illustrates the challenges that these 
Internet sites present to law enforcement. When he registered 
his Web site on the Internet, he attempted to disguise his true 
location of his operation by listing an address and telephone 
number in the Philippines, and an E-mail address that appeared 
to originate from another small country in the South Pacific. 
We eventually discovered that Mr. Catron directed payments from 
his site to an address in Pittsburgh, Kansas. And, we finally 
obtained Mr. Catron's actual location in Lawrence, Kansas, 
after enlisting the U.S. Marshals Service to serve him with a 
subpoena.
    Mr. Catron's tactics, including the use of private mail 
receiving agencies and multiple anonymous E-mail accounts, 
allowed him to market his products to a wide audience with very 
little overhead cost and minimal risk of criminal exposure.
    Chairman Collins, in conclusion, our investigation found 
that a significant number of Web sites offer a wide range of 
counterfeit identification documents, and that some of these 
sites offer phony documents of shockingly high quality. 
Moreover, we found that the distribution of these counterfeit 
materials is growing because of the expanding technology of the 
Internet. This new technology could very well result in a flood 
of phony identification documents and counterfeit credentials 
if steps are not taken to curb this emerging problem. It will 
be no easy task to maintain the integrity of the identification 
documents on which both the government and the private sector 
rely.
    Chairman Collins, this concludes my prepared remarks. I 
would be pleased to answer any questions that you and the 
Subcommittee might have regarding the staff's investigation.
    Senator Collins. Thank you.
    We will next hear from Mr. Myers, and I want to thank Mr. 
Myers for all of the assistance he has given the Subcommittee 
with our investigation. You may proceed with your testimony.

 TESTIMONY OF DAVID C. MYERS,\1\ SPECIAL AGENT, IDENTIFICATION 
FRAUD COORDINATOR, DIVISION OF ALCOHOLIC BEVERAGES AND TOBACCO, 
 DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, STATE OF 
                 FLORIDA, JACKSONVILLE, FLORIDA

    Mr. Myers. Thank you. The Florida Division of Alcoholic 
Beverages and Tobacco under the Florida Department of Business 
and Professional Regulation has established the Fraudulent 
Identification Enforcement Program. This program has been 
established to obtain the most current intelligence on 
counterfeit identification. Other duties include technical 
review of ID scanning equipment, enforcement of counterfeit 
identification operations, possession of false ID enforcement, 
counterfeit identification detection training for law 
enforcement, and investigation of Internet sites that sell 
false IDs.
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    \1\ The prepared statement of Mr. Myers appears in the Appendix on 
page 31.
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    In the past 12 months, our training has been conducted to 
over 96 local, State, and Federal law enforcement agencies. 
Eleven arrests were made for sales and manufacturing of 
counterfeit IDs, with 33 Internet sites removed from the Web. 
Our intelligence gathering and training is the key to 
successful enforcement.
    Over the past 4 months, over 300 arrests were made by our 
agency for possession of false identification. During this 
time, over 5,000 counterfeit IDs were obtained, and as you can 
see, there is a very large problem.
    These IDs were also, when the subjects were arrested, 
identified as purchased from the Internet. A large percentage 
of counterfeit IDs we seize were purchased from the Internet. 
With these high-quality identification cards, detection has 
become very difficult. Many counterfeiters have advised that 
the templates they use to create identification were received 
from the Internet. These counterfeit IDs were not only used to 
purchase alcohol and tobacco by underage persons, but may also 
be used in bank fraud and identity theft.
    Internet sales of false identification has increased 
dramatically. Identification is available on the Internet for 
all 50 States and many government agencies. With the use of 
current technology, high-quality identification cards and 
driver's licenses can be produced with easily accessible 
equipment. These high-quality identification cards can be 
purchased by anyone, in any name, with any date of birth.
    Our main concern is protection of the public, industry, and 
saving the lives of our young people. I will show you a segment 
from our training program.\2\ This is a common site which sells 
counterfeit identification that operates behind the word 
``novelty.'' This is one site that was operated by Josh 
Dansereau, which sold thousands of false identification cards. 
Fake passports are also very common and can be purchased off 
the Internet for virtually any country in the world.
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    \2\ See Exhibit 11 which appears in the Appendix on page 61.
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    Some sites, like this one, sell all the information that 
you need on software to assist you in generating your own 
identification within your own home.
    This site offers helpful hints on how to create false 
identification, including templates, birth certificate 
information, and bar coding which is used as a security feature 
by most States with the issuance of a driver's license.
    Fakeidzone sells a complete kit on how to create high-
quality ID on your own home computer.
    As you can see, this Canadian site even sells police and 
FBI identification.
    Many Internet sales sites recruit high school and college 
students to sell identification on school campuses.
    This site, theidshop, operated by Robert Sek, at one time 
was the most popular site on the Internet. It was a million-
dollar business. Though the operator of the site was located in 
Texas, we were able to communicate with him through his 
attorneys and our attorneys to prevent his sales of false 
identification to people within the State of Florida.
    This is a restricted chat page where people discuss new 
ways to create counterfeit identification and avoid police. You 
have to have a special password in order to get into this chat 
page.
    Here are some samples of counterfeit IDs sold on the 
Internet. Arizona--note the license on the left. It is a true 
and original license. The counterfeit licenses are on the 
right. If you will note--some of the licenses even have the 
hologram that are used by the State of California to protect 
their security, as well as by Colorado and Florida. Even the 
exact type of plastic and magnetic strip that is embedded in 
the plastic are used on these counterfeits, representing 
Georgia and Indiana. As you can see, it is difficult to 
determine the counterfeit from the original. New York--even the 
exact same paper that the State of New York uses, which is 
unique, is used on these counterfeit identification documents.
    This is a Michigan license that even has a working magnetic 
stripe. This is a security feature that many States use to keep 
the license known as an original. It is a very important 
feature. Some identification cards are so--the counterfeits are 
so accurate that we cannot tell whether they are counterfeit or 
original by looking at the face. We use the magnetic encoded 
information to determine whether or not the license is 
counterfeit or original. Now that we are finding some that have 
a counterfeit magnetic strip, it makes it very, very difficult 
for law enforcement to determine the counterfeit from the 
original.
    Here are some samples of holograms found on the Internet. 
Holograms are a security feature used by most States to 
restrict the counterfeiting of identification documents.
    Law enforcement depends on ID. Without proper ID, we cannot 
do our job. Here is an operation we raided in Miami Beach where 
thousands of IDs were made. The equipment you see is basically 
the same type and style, uses the same printing materials as 
those used by most motor vehicle departments. The Internet was 
the backbone of this operation. The subject operated two 
stations almost 24 hours a day to create identification cards 
making, not just IDs for government agencies, but also certain 
security passes for airports and passes to get into restricted 
areas on government locations.
    This young man, Josh Dansereau, was operating three 
different Web sites selling false ID until his arrest by our 
agency. These are some examples of licenses that he produced. 
With just basic equipment, you can easily make a 6-figure 
salary. This is some of the equipment that was used by Mr. 
Dansereau, basically the same equipment that is in the average 
home. Here are 85 fake IDs ready to mail. These were in the 
home of Mr. Dansereau when we entered it. This equals 
approximately $7,000 of income in one mailing for Mr. 
Dansereau.
    Identification is the backbone of society. Our office is 
always ready to answer any questions that you may have. Thank 
you.
    Senator Collins. Thank you, Special Agent Myers.
    Mr. Seitz, would you please proceed.

     TESTIMONY OF THOMAS W. SEITZ,\1\ USER OF COUNTERFEIT 
IDENTIFICATION DOCUMENTS OBTAINED FROM THE INTERNET; CONVICTED 
FELON CURRENTLY AWAITING SENTENCING IN THE U.S. DISTRICT COURT 
               FOR THE MIDDLE DISTRICT OF FLORIDA

    Mr. Seitz. Thank you, Chairman Collins. My name is Thomas 
Seitz. I am originally a resident of the State of New Jersey. I 
am presently incarcerated at the Baker County Correctional 
Facility in Macclenny, Florida. I am 23 years old and I am 
currently serving a prison sentence imposed by the State of New 
Jersey after I was convicted and sentenced to 3 years for 
committing the crimes of theft by deception, forgery, and 
uttering a forged instrument. I have also plead guilty to bank 
fraud and I am awaiting sentencing by the U.S. District Court, 
Middle District of Florida.
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    \1\ The prepared statement of Mr. Seitz appears in the Appendix on 
page 36.
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    I appreciate the opportunity to testify before the 
Subcommittee. I hope that I can show its members how relatively 
easy it is for someone to engage in obtaining information from 
the Internet, including such personal information such as 
Social Security numbers. Moreover, I hope to show how easy it 
is to craft phony identification using that information and 
obtain significant amounts of money with very little effort.
    I consider myself to be fairly well versed in the use of 
computers. I worked with computers since the sixth grade and I 
was employed as a network engineer. I obtained via the Internet 
names, Social Security numbers, and addresses of people by 
accessing files maintained as public records on the Securities 
and Exchange Commission Web site. Although at first I did not 
have the intent to defraud anyone, I started searching the 
Internet again and determined that there were a large number of 
sites that offered the means to make false identification and 
the opportunity presented itself.
    I used a computer at the library in Old Bridge, New Jersey, 
and accessed various Web sites that offered documents for 
downloading, including birth certificates and driver's 
licenses. Some were free, so I found one that offered a New 
Jersey birth certificate and I downloaded it. I utilized 
computer software to add the information that I wanted, and 
after I obtained a blank W-2 form from the IRS Web site, I took 
the completed documents with the fake identity information to 
the New Jersey Department of Motor Vehicles and obtained in 
short order a genuine New Jersey photo identification card. I 
feel that if I wanted to take the time and the effort, I could 
have easily used the same documents to obtain a genuine New 
Jersey driver's license.
    During the time that I was searching the Internet for fake 
identification Web sites, I frequently came across disclaimers 
on the individual sites stating, ``For novelty use only.'' I 
cannot think of any reason why a statement like that would be 
there. It did not deter my actions in any way.
    I also made a fake driver's license by altering mine, using 
various computer programs, including Adobe Photoshop. After I 
had these documents, I went on the Internet and obtained car 
loans using the identity of people I found on the Web. When 
these loans were approved and I received checks, I went to the 
car dealers to attempt to purchase new vehicles with the false 
identification. For the most part, it was very easy. The new 
car dealers want to sell cars and pay very little attention to 
the details of identification.
    I got cold feet the first time and I left, but the second 
time, the car dealer just accepted the fake ID, took the 
insurance binder I had previously secured, and a short time 
later, I was driving one of the most expensive vehicles off the 
lot. I eventually was discovered after the car dealer submitted 
the paperwork to DMV and they determined that the numbers of 
the fake driver's license were not valid. I realize what I did 
was illegal, but I also must say it was not very difficult to 
accomplish.
    In conclusion, I found that there was a readily available 
supply of fake identification providers on the Internet. Anyone 
with some computer skills can download these templates for fake 
identification and produce some very high-quality documents. I 
feel that if Web sites, especially the U.S. Government Web 
sites, were prohibited from providing specific personal 
identifiers on the Web, such as Social Security numbers, that 
would make activities such as mine a lot more difficult. That 
is all.
    Senator Collins. Thank you, Mr. Seitz. I would like to 
begin with you and ask you some questions about the phony 
documents that you created and used. I would like to have 
Exhibit 12 displayed.\1\ It is my understanding you are 
familiar with these exhibits.
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    \1\ See Exhibit 12 which appears in the Appendix on page 89.
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    Mr. Seitz. Yes.
    Senator Collins. This exhibit contains the three documents 
that you used to commit your crimes. The name and address and 
Social Security number of a Richard Clasen is on two of these 
documents. Who is he and how did you happen to choose his 
identity?
    Mr. Seitz. Richard Clasen is a--he is a ranking executive 
with a company called EFI Electronics. I discovered his 
information and Social Security number, name, place of 
employment, and home information, it was his address and his 
phone number, from the Securities and Exchange Web site. 
Quarterly reports must be filed with the SEC, and that 
information is public. They publish that right on their Web 
site and he was just a random person off of there.
    Senator Collins. So he was not someone whom you knew 
personally?
    Mr. Seitz. Oh, no.
    Senator Collins. And all you had to do was go to a Web site 
that actually was maintained by the Federal Government and you 
were able to obtain this individual's--not only his name and 
his address, which one might expect--but his Social Security 
number and his telephone numbers, is that correct?
    Mr. Seitz. Correct.
    Senator Collins. Have you used any other Web sites 
maintained by the Federal Government as a source of these kind 
of identifiers, the personal information?
    Mr. Seitz. Well, I also found that Congressional Web site--
I am not too sure of the exact address--they put up--they 
publish the military nominations for promotions. I know they 
list the Social Security numbers, as well, of dozens, if not 
hundreds, of individuals.
    Senator Collins. What we found in our investigation, after 
finding out about what you had been able to do with government 
Web sites, is that the Congressional Record no longer includes 
the full Social Security number of those military officers who 
are up for promotion. But the back editions, which are still 
available on some Web sites, do still contain that kind of 
information.
    Mr. Seitz. Correct. As of the last time I checked, you were 
just using the last four digits. But the previous Congressional 
Records still contained the full numbers.
    Senator Collins. So this suggests to me that in addition to 
our need to look at strengthening the laws and going after more 
aggressively those who run these private Web sites, that we 
need to review the Web sites maintained by Federal agencies to 
make sure that they are not a source of information that could 
be used easily to commit identity fraud.
    Mr. Seitz. Correct.
    Senator Collins. The third document I want to draw your 
attention to is the green document on the bottom of the 
exhibit. Now, is this the counterfeit birth certificate that 
you created from the template that you obtained from the 
Internet?
    Mr. Seitz. Yes, it is.
    Senator Collins. The document says on it, ``Do not accept 
this certificate unless the seal of the city is affixed 
hereon.'' Did you have any trouble getting or making the seal?
    Mr. Seitz. No. The reason I chose the City of New Brunswick 
as the one to download and use as a template is because it 
mirrors my birth certificate. I was born in the City of New 
Brunswick and it was something I had to compare, so it was 
fairly easy to create a plausible, or a fictitious document.
    Senator Collins. And the seal was already on the downloaded 
document, is that correct?
    Mr. Seitz. Yes.
    Senator Collins. Is the white document in the middle of the 
page the W-2 form that you also downloaded from the IRS Web 
site?
    Mr. Seitz. Correct. The IRS provides blank tax forms for 
almost all the forms that they have. It was just a matter of 
downloading it, inserting it in the printer, and finding the 
correct font in which to print on, and it came out, as you can 
see, it comes out pretty plausible.
    Senator Collins. Why did you choose this document? What was 
your intent? What were you going to do with the W-2?
    Mr. Seitz. Well, as you said earlier, the birth certificate 
is sort of the key. That is the preferred document of identity 
that most agencies, DMV and other government agencies, like to 
see. That, coupled with a second form, the W-2, enabled me to 
go to the New Jersey Department of Motor Vehicles and present 
those documents and they would, in turn, give me the top 
document there, which is a genuine photo identification card.
    Senator Collins. So what you did is you took the W-2 form 
which you had downloaded from the Internet and filled out, the 
phony birth certificate, which you also got from the Internet 
and filled out, and then took that to the Department of Motor 
Vehicles in New Jersey and got an actual driver's license, but 
with wrong data on it, correct?
    Mr. Seitz. Correct.
    Senator Collins. Did anyone question either of the 
documents that you brought to DMV?
    Mr. Seitz. Not at all.
    Senator Collins. I understand that you searched several Web 
sites during your search for false identification documents. 
Was this a lengthy process? Did it take you a long time to find 
the kinds of computer templates that were suitable for your 
purposes?
    Mr. Seitz. No. As Mr. Blalack earlier said, it is very 
simple. It is a matter of putting ``fake identification'' into 
a search engine and clicking on links that it returns to you. 
It takes a matter of minutes to find the sites.
    Senator Collins. And was it difficult once you downloaded 
the template to actually make the hard copy, the physical copy 
of the documents?
    Mr. Seitz. No, it was not. It was very simple. Once I had 
obtained the--I guess the correct paper or the correct media to 
print it on--it was a matter of minutes.
    Senator Collins. If you had not been able to do this as 
easily, would you have tried to find another source of false 
IDs outside of the Internet?
    Mr. Seitz. Probably not. I am very familiar with computers 
and it was just something that I came across. To tell you the 
truth, I have never--I do not know any other places to go get 
fake identification as good as on the Internet.
    Senator Collins. As I was listening to you, that is exactly 
the point that occurred to me. It is probable you would not 
even know where to get a set of false identification documents. 
But because of your expertise with the computer and because of 
the ease with which you were able to locate these sites, 
download the information that you need, and then produce the 
documents, it was probably much more tempting to do so and much 
easier to do so.
    Mr. Seitz. Correct. It was familiar.
    Senator Collins. In addition to the ease with which you 
could get these documents, were there other reasons why you 
chose the Internet as the source?
    Mr. Seitz. For its anonymity. As you said before, I can 
surf the Internet from my home, and from the library. No one 
knows who I am.
    Senator Collins. Were you afraid that you might be detected 
as you searched?
    Mr. Seitz. No, because as I stated in my opening statement, 
I used a library, a public library. I used the computer in a 
public library to conduct my search. Dozens of people use the 
computers there every day and they also do not necessarily keep 
logs of who is using the computer. I had no fear of detection 
as I was searching.
    Senator Collins. And arguably, using the library's computer 
was much safer than using your own computer in your home as far 
as the ability of law enforcement to trace you.
    Mr. Seitz. Correct.
    Senator Collins. In your written testimony, you said that 
you frequently encountered disclaimers, and you mentioned this 
in your oral statement, as well, as you searched the Internet 
for false identification documents. Did you notice if a 
disclaimer was posted on the Web site from which you obtained 
the false birth certificate?
    Mr. Seitz. I cannot remember if there was one on that 
specific site. I do remember encountering them on several 
sites, but on the one with the birth certificate, no.
    Senator Collins. Did you think that the Web site operators 
were truly trying to discourage illegal use of their documents 
as you searched these sites?
    Mr. Seitz. No, I do not. They are pretty much trying to 
cover themselves, in my opinion, because they do not 
necessarily go out of their way to say, go use this for an 
illegal purpose, but the disclaimer, they are probably, in my 
opinion, trying to cover themselves. It does not discourage 
anyone.
    Senator Collins. Thank you, Mr. Seitz.
    Agent Myers, you mentioned in your written statement that 
you have seen a significant growth in the use of high-quality 
identification documents and you believe that is because they 
are available on the Internet. In your statement, you had some 
statistics on the percentage that you thought of false IDs were 
attributable to the Internet and also the growth. Could you 
give us that information, to give the Subcommittee an estimate 
of the percentage of false IDs that you see that you believe 
the Internet is the source for?
    Mr. Myers. Yes. In my position as the State ID Fraud 
Coordinator with the Division, I receive thousands and 
thousands of IDs every year, usually in bags of 100 to 200 
almost every week from either agents in the field, other law 
enforcement agencies, even some banks have sent me some false 
identification. It is my job to go ahead and look at the 
identification, gather the intelligence to find out, is it 
false and counterfeit, and what security features they have 
been able to reproduce in this type of false identification.
    We have found within the past few months such high-quality 
counterfeit identification that it is virtually undetectable. I 
have specialized electronic equipment that I use and we have 
developed in order to determine counterfeit from original when 
we cannot see it with our own human eye. Things like holograms, 
bar coding, micro printing, all of these are found on the new 
counterfeit identification cards.
    We found approximately 2 years ago during an operation that 
we do every year on false identification approximately 1 
percent, or a little less than 1 percent, came off the 
Internet. Last year, we found that a little less than 5 percent 
of the counterfeits came off the Internet. This year, we have 
determined there was approximately 30 percent of the 
counterfeit and false identification that we seized came from 
the Internet.
    Senator Collins. So in just a 2-year period, the percentage 
of false IDs that you have seen for which the Internet is the 
source has gone from 1 percent to about 30 percent?
    Mr. Myers. Yes, Senator Collins. Also, we believe that by 
next year, we are going to find at least 60 to 70 percent of 
the IDs that we are going to be seizing coming from the 
Internet.
    Senator Collins. So this is clearly an exploding problem 
and the Internet is becoming a very troublesome source of very 
high-quality IDs.
    Mr. Myers. Yes.
    Senator Collins. And in general, are the IDs that have been 
produced using templates from the Internet higher quality than 
the IDs that you used to see because of the ability to 
incorporate the kinds of security features that you have 
mentioned?
    Mr. Myers. Much better. The graphics that can be produced 
on the computer, they can be electronically transmitted to 
anyone in the world in that same quality. Normally, what people 
would use would be a poorer quality of printing and colored 
paper and lamination procedures. Now, with the technology that 
is available, they can actually laser scan the entire document, 
including its hologram, and make it appear to be a true 
hologram and just electronically send it to anyone who 
purchases the access.
    Senator Collins. Many States, such as Connecticut, have 
added the kinds of security features that you talked about in 
your presentation, and in the case of Connecticut, for example, 
one of the security features is the shadow picture and the bar 
code. But my staff was able to replicate that in a way that 
makes it virtually indistinguishable from a real Connecticut 
license. Is that the problem you are seeing, that it is 
impossible for States to modify and add enough security 
features to keep pace with the ability of scam artists to 
duplicate exactly the same kind of security feature?
    Mr. Myers. Well, the problem we have, there are over 200 
active State identification cards and driver's licenses due to 
the fact that most States have an ID card and driver's license 
and have valid older formats also. So in order for a law 
enforcement person to be able to recognize all these features 
in areas like Florida, where we have a lot of out-of-State 
people, it is almost impossible to have everyone at the expert 
status in order to identify these all types of legal 
identification.
    Some of the features on the license that you showed, such 
as the what we call a ghost image picture, those were very, 
very difficult to reproduce in years past due to the technology 
that we had at that time. Now, it is very simple. Things like 
bar codes and even 2-dimensional bar codes that some States are 
going to are easily generated off the Internet. There are 
several sites that assist you in generating these security 
features.
    Senator Collins. And even the magnetic stripe on the back 
has been able to be duplicated so that if this license were put 
through a machine, it would actually show a true driver's 
license, is that correct, too, in some cases?
    Mr. Myers. That is correct. It is very rare for us to find 
an electronically encoded mag stripe, but we have found a small 
portion of those.
    Senator Collins. Given the growth of phony IDs over the 
Internet and the difficulty that most law enforcement officials 
would have in discerning that this is not a real ID, what is 
the answer? Do law enforcement officials have the proper 
training and the tools that they need? Are laws tough enough?
    Mr. Myers. Our agency focuses on the training issue. We 
find that very, very few law enforcement agencies train their 
people on the detection of false identification. Even I, as a 
former State trooper, received very, very little training on 
our own Florida driver's license.
    We have been focusing on very detailed 4- and 8-hour 
classes for law enforcement people to determine certain 
counterfeit characteristics where they can make that 
determination. The issue of false identification is becoming 
very, very popular and with the growth of intelligence and 
information we are gathering, our training programs have to be 
updated virtually every month to come up with new technologies 
that are being used.
    Senator Collins. One of the problems that the Subcommittee 
investigated is that law enforcement officials tend to focus on 
combating the crime that is committed with the false ID rather 
than focusing on shutting down Web sites that are selling 
illegal, bogus identification. Later today, we will hear the 
director of the Secret Service point out, as he has in his 
written testimony, that some form of false ID is a prerequisite 
for many financial crimes.
    Since this is so, does not this fact suggest that a 
crackdown by law enforcement on the Internet sites that we have 
highlighted would, in turn, prevent other crimes from 
occurring, such as bank fraud and identity theft, if we went to 
the source of these documents?
    Mr. Myers. For every manufacturer of counterfeit 
identification that we raid and make arrests on, we feel that 
we are preventing tens of thousands of counterfeit IDs from 
hitting the streets. Some of it may be an alcohol issue. A lot 
of it is bank issues, identity theft, and many, many other 
crimes. We depend on identification for virtually every type of 
transaction that we deal with in today's society.
    Our main focus is to look at these counterfeiting 
locations, because as you said, to find the crime, then locate 
the identification, is basically a long, drawn-out process when 
it would be much easier to locate those that are manufacturing 
the identification, especially on the Internet. Probably the 
biggest impact that we have seen on the Internet, as I monitor 
it and have for many years is the work that was done by your 
own Subcommittee's investigators. They had a dramatic impact on 
those on the Internet. Not even knowing your investigation was 
going on, I could see that the activity on the Internet as it 
related to false ID was going through some changes.
    Senator Collins. We have noticed that a lot of the Web 
sites that we identified early on are no longer in existence, 
but my fear is that once we complete our work in this area, 
that unless law enforcement starts being more aggressive in 
shutting down these Web sites, that they will just pop back up 
again.
    Mr. Myers. That is correct. We anticipate that any of those 
that were not arrested, and most were not due to certain 
problems with statutes, these people will be right back, and we 
have found in many cases that we have even arrested people for 
it, then we find them back on the Internet.
    Senator Collins. Just a couple more questions for you. One 
is that we found that there are, in addition to false IDs, 
there are also documents that are phony that imply a person has 
completed a course or has been trained, for example, as a 
nurse's aide. That troubles me because that implies that 
another potential problem that we may have is the use of these 
phony credentials by people to get jobs for which they are not 
qualified and potentially that is a threat to public health and 
safety.
    Similarly, the presence on the Internet of credentials for 
law enforcement officials I find frightening. The idea that 
someone could duplicate a police officer's ID or an FBI 
credential to gain access to someone to harm them, which may 
have happened in a case in the South that we are proceeding 
with, also adds a new and very ominous dimension.
    I know we have talked a lot this morning about bank fraud 
and identity theft, but would you agree that other very serious 
crimes are a potential threat due to these credentials and law 
enforcement IDs being available via the Internet?
    Mr. Myers. That is very true, and what we have found, there 
are several Web sites, some of them harder to find than others, 
that will sell university degrees from universities and 
colleges around the United States. When law enforcement does a 
background check to hire someone, we do not just accept that 
diploma or degree. We require transcripts. And as we looked on 
the Internet, we found several of these sites also sold 
transcripts to go along with these documents, making it very, 
very difficult to determine the difference between true and 
false information. Sometimes they will use someone's name that 
actually graduated from these colleges, which a phone call 
check would confirm that the person did go there and did 
lawfully graduate.
    The issue with law enforcement identification and 
credentials is a major issue. It has not been looked at very 
well. Most law enforcement credentials are much easier to copy 
and to counterfeit than driver's licenses. Most driver's 
licenses in most States have multiple security features. Most 
law enforcement identification is merely a picture stuck on a 
card and laminated.
    Senator Collins. That is a very good point. Ironically, 
these driver's licenses have far more security features in them 
than the credentials for law enforcement officials that we 
found on the Internet, which were, as you point out, generally 
just a picture on a piece of paper with some information. They 
were extremely easy to duplicate compared to the driver's 
licenses with more security features.
    One final question for you. As a general rule, have you 
found any validity to the claim that these Internet site 
operators make that they are selling these phony identification 
documents or credentials solely for novelty or entertainment or 
educational purposes?
    Mr. Myers. That issue has come up quite a bit. There are 
certain Federal laws, like the ``Not a Government Document'' 
disclaimer. The laws in the State of Florida are very specific, 
which allows us to bypass those particular issues. If they 
issue a identification document with just a date of birth, they 
are required to meet certain guidelines.
    The word ``novelty'' we find on a large percentage of 
identification cards that come off the Internet. It may be 
printed so small that you need a magnifying glass to read it, 
or it may be just part of the disclaimer that comes across. I 
know of no lawful purpose for someone to use a supposed novelty 
ID, and in hundreds and hundreds of cases that we have 
investigated, we find that the word ``novelty'' is right on the 
license somewhere. It is just no one can take the time or has 
the ability to even detect it.
    Senator Collins. The Subcommittee investigators also found 
that the novelty claim, even when printed on a license, was not 
indelible as the law requires and, in fact, was easily erased 
with a pencil eraser in many cases, or in the example I gave 
previously, the phony ID is enclosed in a laminated pouch from 
which the license can easily be used and, thus, no more 
disclaimer.
    Mr. Myers. That is correct.
    Senator Collins. Thank you very much, Mr. Myers.
    Mr. Blalack, just one final question for you. The 
Subcommittee, in the course of its investigation, made 
purchases from several of these Internet Web site operators. In 
a few cases, the Subcommittee's check was cashed but no product 
was provided, is that correct?
    Mr. Blalack. That is correct, Chairman Collins.
    Senator Collins. This strikes me as the ultimate scam 
because someone who is purchasing a phony ID and gets ripped 
off by the Web site operator is very unlikely to file a 
complaint with the police.
    Mr. Blalack. That is exactly right, and in fact, Chairman 
Collins, one of these individuals we actually were able to make 
contact with and admitted that they had not sent the product 
and had advertised for the Web site intending not to provide 
the product because they had been ripped off themselves and 
were just trying to get their money back, so I think that is 
very accurate.
    Senator Collins. I would note the Subcommittee is turning 
over those cases to the proper law enforcement authorities, but 
I bet we are the only one who has been ripped off by those Web 
sites who will file a complaint with the police.
    Thank you very much to all of you. Your testimony was very 
helpful.
    I would now like to welcome our final witness of the 
morning, Brian Stafford, the director of the U.S. Secret 
Service. Mr. Stafford was appointed director in 1999 after 29 
distinguished years with the Secret Service, including many 
years as a field agent. Mr. Stafford will testify regarding the 
proliferation of Internet crime and how the Internet 
facilitates identity theft and other serious crimes through the 
increasingly common use of false identification documents 
acquired online.
    Mr. Stafford, I would like to welcome you this morning. We 
look forward to hearing your testimony. Pursuant to Rule 6, all 
witnesses are required to be sworn in, so I would ask that you 
stand and raise your right hand.
    Do you swear that the testimony that you are about to give 
to the Subcommittee will be the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Stafford. I do.
    Senator Collins. Thank you. Please proceed.

   TESTIMONY OF BRIAN L. STAFFORD,\1\ DIRECTOR, U.S. SECRET 
                    SERVICE, WASHINGTON, DC

    Mr. Stafford. Thank you, Madam Chairman. It is a pleasure 
for me to be here and for you to afford the Secret Service the 
opportunity to testify before this Subcommittee concerning the 
subject of false identification documents on the Internet and 
the Secret Service's efforts to combat this crime. I would like 
to thank the Chairman for your leadership in this area. The 
marketing of false identification documents on the Internet is 
a growing problem that requires the attention of law 
enforcement at all levels.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Stafford appears in the Appendix 
on page 38.
---------------------------------------------------------------------------
    As a law enforcement bureau within the Department of 
Treasury, the Secret Service was created in 1865 to investigate 
and suppress counterfeit monetary instruments that affect the 
integrity and well-being of the Nation's financial 
infrastructure. In this role, the Secret Service has seen an 
expansion of its investigative authority commensurate with the 
evolution of payment systems, from paper to plastic and, most 
recently, to e-commerce.
    The theft of personal information and other related data, 
often available through electronic media, has led to a 
significant increase in the production of false identification 
and the assumption of people's financial identity in the 
proliferation of financial crimes. Additionally, the Secret 
Service has witnessed the Internet become a tool for organized 
criminal groups to conduct these financial frauds through the 
production of false identification, the compromise of personal 
account information, and the ability to commit these crimes in 
a relatively anonymous environment.
    Today, some form of false identification is a prerequisite 
for nearly all financial crimes. False identification provides 
criminals with the anonymity needed to conduct a myriad of 
fraud schemes.
    To respond proactively to this growing problem, the Secret 
Service created a counterfeit instrument database. This 
database enables us to link cases of common origin through the 
forensic and investigative analysis of counterfeit financial 
instruments and identification documents. We are also enhancing 
our partnerships with both the law enforcement and financial 
communities through the use of our counterfeit check database. 
This database is available to the financial community as well 
as local, State, and Federal law enforcement officers, thereby 
expediting the exchange of investigative information.
    As the Internet continues to evolve, the ability for the 
criminal element to obtain false identification and compromise 
our financial systems from afar makes it imperative for law 
enforcement to combine personal resources and investigative 
expertise through the formulation of financial crimes task 
forces in cities on a national and international level. Task 
forces are not a new concept. In fact, the Secret Service 
started its first 11 financial crimes task forces in 1983. 
These initial 11 task forces are still in effect and we have 
expanded with 17 additional task forces, focusing primarily on 
financial crimes and organized criminal groups who are making 
use of the Internet.
    The Internet has also led to information collection as a 
common byproduct of the newly emerging e-commerce. Internet 
purchases, credit card sales, and other forms of electronic 
transactions are being captured, stored, and analyzed by 
entrepreneurs intent on increasing their market share. It is 
estimated that there are currently more than 1,000 data 
warehouses. The ability to obtain online personal information 
coupled with the sale of false identification has allowed 
financial crimes to flourish on the electronic highway.
    We have investigated numerous cases where criminals have 
used other people's identities to purchase everything from 
computers to homes. Financial institutions must remain 
vigilant, or they will fall victim to the criminal who attempts 
to obtain a loan or cash a counterfeit check using false 
identification.
    The United States financial community makes $3.5 billion in 
electronic payment transactions per year utilizing various 
telecommunications systems. The financial community, private 
citizens, and private industry have migrated to the use of the 
Internet to conduct electronic commerce. The United States is 
moving to an electronic commerce society with a vastly 
decreased reliance on paper currencies. This migration to e-
commerce has revolutionized the way business is conducted and 
is the forerunner to the truly global economy.
    The Secret Service has responded to this type of fraudulent 
activity in several ways. In 1988, the Secret Service created 
the Electronic Crimes Special Agent Program. This is a group of 
highly trained special agents assigned to our field offices 
throughout the United States and abroad are tasked with the 
examination and collection of electronic evidence. These agents 
are routinely utilized in assisting Federal, State, and local 
law enforcement in combating a host of computer and Internet-
related fraudulent activities.
    This program is unique within the law enforcement community 
in that it utilizes only special agents who are trained and 
conversant with the elements of the violations under 
investigation. It permits the agents to be part of the search-
and-arrest teams, allowing them immediate examination of the 
computer evidence and often leading to additional pertinent 
investigative leads. All examinations are conducted and 
documented within 10 days. And lastly, these agents provide a 
proactive and immediate response rather than seizing evidence 
and awaiting laboratory results.
    In addition, the Secret Service continues to work with the 
G7 and G8 high-tech subgroup to address jurisdictional concerns 
and international obstacles in an effort to effectively deal 
with international criminal organizations.
    Some very positive steps are being taken to address the 
misuse of false identification documents and to combat identity 
theft. The Secret Service will always encourage both business 
and law enforcement to work together to develop an environment 
in which personal information is securely guarded. The 
emotional toll on the lives of those whose identities have been 
compromised cannot be fully accounted for in dollars and cents. 
Everyone is responsible for protecting personal information.
    We do not believe in nor are we in the business of 
inhibiting the free flow of information so vital to a free 
society. We do, however, believe that those identified as 
misusing personal identification for criminal purposes should 
be subject to punishment commensurate with the crime.
    Madam Chairman and Members of the Subcommittee, I would 
like to personally thank you for raising the awareness of the 
current problem of the Internet as a vast and growing 
marketplace for false identification fraud and identity fraud. 
I will be keeping you up to date on the Federal response to 
this emerging problem. On behalf of the men and women of the 
Secret Service, I would like to thank you for your continued 
support of the Secret Service and law enforcement.
    This concludes my prepared statements and I would be happy 
to answer any questions you may have.
    Senator Collins. Thank you very much, Mr. Stafford.
    During the course of the Subcommittee's investigation, we 
talked with law enforcement officials all over the United 
States who confirmed what we heard from Agent Myers this 
morning, that the manufacture of very high-quality IDs is a 
growing problem and most of these investigators were able to 
link it to the availability of the high-quality templates on 
the Internet. Has your experience been similar? Are you seeing 
bogus IDs that are much more sophisticated than ever before and 
are you able to link that increase and the sophisticated nature 
of the IDs to the Internet?
    Mr. Stafford. Yes, I agree with everything you said. In 
almost every arrest we make in the area of financial crimes, 
whether it be bank fraud, credit card fraud, telecommunications 
fraud, computer fraud, there is usually a component of false 
identification. Most of the false identifications either come 
from, as you mentioned, the template on the Internet or they 
actually come from true identities that are scanned and then 
desktop publishing is utilized and it is ultimately placed on 
the Internet, where, as you know, a button can be pushed and it 
can be sent anywhere in the world.
    Senator Collins. Then if we were able to crack down on Web 
sites that were providing these false identification templates 
or documents, is it not likely that we would see a 
corresponding decrease in financial crimes?
    Mr. Stafford. That would be likely if it was possible to 
crack down on these numbers, but I would question whether we 
can do that. As I know you are aware, there are over 14 million 
Web sites right now on the Internet and they are adding 
approximately 10,000 a day. For any entity, including the 
Secret Service, and I have a lot of confidence in our people, 
but for any one to be able to monitor that, would be extremely 
difficult.
    Senator Collins. Well, the SEC, the Securities and Exchange 
Commission, has volunteers, a cadre of volunteers that surf the 
Net looking for securities scams. We have held hearings on 
securities scams on the Internet previously and the SEC 
obviously did not have the staff and the resources to have an 
ongoing effort with its own staff, but it put together a group 
of volunteers who regularly surf the Internet to identify those 
kinds of questionable sites.
    Does the Secret Service do any kind of monitoring of the 
Internet to look for sites that are selling and marketing false 
identification documents?
    Mr. Stafford. No, we do not. We do not monitor specifically 
for false identification. We feel that we prioritize and focus 
our investigations primarily on crimes that involve false 
identification, primarily our core violations. We feel that 
through prioritizing, through addressing large dollar amount, 
high-impact cases that affect our community, whether it be 
credit cards or bank fraud or bank loans, all of which possess 
some form of counterfeit or fraudulent identification, that we 
can make an impact even with our limited funding and resources 
in this area.
    We do have a very good relationship with the Internet 
service providers and we have been very successful when certain 
Web sites come to our attention in negotiating and talking to 
the Internet service providers, and they usually will shut them 
down voluntarily.
    Senator Collins. I would certainly agree that bank fraud 
and identity theft are far more serious crimes than the 
manufacture of false IDs, but, in fact, it is the manufacture 
of the phony IDs that allows the bank fraud or the identity 
theft to occur. One of the troubling findings of this 
investigation is that law enforcement officials, perhaps 
understandably, have focused on the crime committed with the 
phony IDs, but if we could somehow crack down on the 
manufacture and marketing of those IDs, some of the subsequent 
crimes would never be committed.
    Mr. Seitz said today, for example, that if it had not been 
so easy for him to manufacture false IDs on the Internet, he 
never would have known even another source to get a false ID 
and, thus, he never would have committed the bank fraud with 
which he is now charged and in jail.
    Mr. Stafford. Well, I agree with everything you are saying, 
Madam Chairman. It is a good idea to have volunteers search the 
Net and have hearings like this which make people aware of this 
huge issue. If we could eliminate some of these sites, it would 
drastically help with some of the other high impact, high-
dollar financial crimes investigations.
    The problem is, there are so many sites that policing may 
not be the answer. I am not sure standardizing or enhancing 
some of the security features and identification would help to 
solve the problem. I think probably the answer is research and 
development, maybe biometrics, and go in that direction versus 
trying to police all these false identification problems.
    There are prosecution problems with these low dollar amount 
cases. It is very difficult, particularly on the Federal level, 
to come up with thresholds that would meet prosecutable 
guidelines and sentencing guidelines. We met with the Federal 
Sentencing Commission a few weeks ago and are asking them to 
enhance and strengthen some of the sentencing guidelines.
    Senator Collins. Do we need tougher laws? Do we need to 
increase the penalties for these kinds of crimes?
    Mr. Stafford. The statutes as they exist are pretty good 
right now. As you are aware, and I would like to thank you, in 
1998, the Identity Theft Act was passed and you voted for that. 
It did put some strength in that law of identity theft by not 
just making it illegal to possess or produce but actually to 
assume somebody's identity. So right now, the statutes are 
fine. I would rather zero in on some of the--what happens 
afterwards, and as I mentioned, we are working on that 
aggressively as far as strengthening the sentencing guidelines.
    Senator Collins. There is no doubt that the identity theft 
law passed in 1998 is a very helpful tool, but a lot of the law 
that pertains to false IDs was passed in, I think, 1982, and 
there are legal experts who have told us that there is some 
question about whether they need to be modernized to make it 
clear that it applies to documents downloaded from a computer, 
that the use of the word ``document'' in the 1982 law could be 
interpreted as not applying to a computer template, for 
example. I would like to ask you to work with the Subcommittee 
to review the basic laws applying to false IDs to see if they 
do need to be updated and strengthened.
    Mr. Stafford. We will and we do need to continue to address 
those issues. As technology evolves, oftentimes legislation is 
required, as it was in 1998.
    Senator Collins. I applaud the work that you are doing with 
the sentencing guidelines so that judges understand that this 
is a serious crime, but I do think we also need to work to 
deter the crimes from occurring in the first place by having 
tougher penalties, by having some high-profile prosecutions of 
people that might well deter others from setting up these Web 
sites.
    I would like to show you one that is particularly blatant. 
During the course of the Subcommittee's investigation, we 
discovered a Web site, and I have had it blown up on the 
posterboard, called PromasterCards, and it offers phony 
identification documents.\1\ This is a page from 
PromasterCard's Web site which openly boasts that it is 
breaking the law. As you can see, it says, ``We are openly 
admitting that we are breaking State, Federal, and several 
European laws by providing IDs that are exact replicas in every 
detail of the current IDs provided from the countries on our 
list.''
---------------------------------------------------------------------------
    \1\ See Exhibit 13 which appears in the Appendix on page 90.
---------------------------------------------------------------------------
    Now, we obviously were very interested in talking to the 
operators of PromasterCards, but we were never able to do so 
because they are located beyond our borders and, thus, not 
subject to our legal process. But, in fact, you can see that 
this Web site boasts that it moved from the United States 
because of troubles with law enforcement. It states, ``We have 
now moved our Web site to the United Kingdom but continue to 
process orders from our clients from around the world from our 
studios in the New York area. In the next few months, we expect 
to be shut down again, but we will bound back as always from 
another part of the Net.''
    How do we combat this problem, given the ability of a Web 
site to operate from another country, or to pretend that it is 
operating from another country, or to shut down and open up the 
next day under a different identity? Is this part of the 
challenge that you face?
    Mr. Stafford. Yes, it is a huge challenge and particularly 
when they shut down before we can get to them and then open up 
someplace else with a different name and a different identity. 
It creates even more of a challenge when they migrate overseas. 
As you know, we do not have, and we may be asking for, 
legislation for extraterritorial legislation for white collar 
crime. We have it for counterfeiting right now, but we do not 
have it for this. It would be very difficult unless there was a 
mutual assistance treaty. Also, you need similar laws and 
criminals must break the law in the country in which they 
reside also in order to extradite them back.
    So I think for those criminals that are migrating overseas, 
answer is to seek additional legislation, specifically 
extraterritorial legislation where, if we could find them, we 
could bring them back and prosecute them.
    Senator Collins. Is there any sort of international law 
enforcement effort underway now to deal with this problem?
    Mr. Stafford. Yes, in the Secret Service alone, we have 
task forces in England, Germany, Lagos, and Nigeria. We have 
permanent personnel in 16 other countries.
    Senator Collins. My final question to you deals with Mr. 
Seitz's experience in which he used government Web sites as a 
source of the personal data that he then entered into the phony 
identification documents that he downloaded from the Web. Do 
you think the Federal Government needs to do a better job of 
making sure that Federal agencies are not putting personal 
identification information on the Web sites that are readily 
available to the public?
    Mr. Stafford. Yes, I do.
    Senator Collins. Is there any effort underway that you are 
aware of on that?
    Mr. Stafford. Yes, there is.
    Senator Collins. Could you tell me about it?
    Mr. Stafford. There have been some very high-profile cases 
lately in the news about exactly what you are talking about. I 
believe that everybody involved, including those of us in the 
government, have become very aware of what can happen with a 
lot of that personal identification. The safeguards are very 
important. We all have to be responsible for safeguarding that 
information, including those of us in the Federal Government.
    We conducted a national summit on identity theft about 2 
weeks ago in the Department of Treasury. Also, on our Web site, 
there are a lot of recommendations, on what not only government 
can do but what we can do as individuals.
    Senator Collins. Director Stafford, I very much appreciate 
your testimony this morning and your pledge to work with the 
Subcommittee so that together we can come up with an effective 
means to at least stop the growth of this problem. Is there 
anything further that you would like to recommend to us?
    Mr. Stafford. Nothing, other than I would just like to add 
that I believe having hearings like this are extremely 
beneficial. Your leadership in this area is extremely 
beneficial and I would just like to thank you again for the 
opportunity to be here and to speak on some of these issues.
    Senator Collins. Thank you very much. I am glad I asked you 
if you had anything to add. Thank you for your testimony and 
your cooperation.
    I would like to thank all of the witnesses who testified 
today. The testimony has been very helpful to the Subcommittee 
as we continue our efforts to combat this burgeoning problem. 
The wide availability of false identification and credentials 
on the Internet poses a serious new threat to the integrity of 
government operations that depend upon identification. For 
example, many government benefit programs require 
identification of beneficiaries to make proper payments under 
these programs. In addition, law enforcement, and an untold 
number of security operations rely on identification documents 
to grant persons access to government property, information, 
and secured areas.
    The private sector is equally dependent on proper forms of 
identification for commercial activities. As the testimony we 
have heard this morning indicates, counterfeit identification 
is a common tool and, indeed, a prerequisite for many financial 
crimes.
    If the government and private sector are to have confidence 
in the integrity of the identification documents on which they 
rely, we must somehow strive to stay ahead of the technology 
that allows these Web sites to flourish. I am very concerned 
about the ease with which these high-quality phony documents 
could be distributed. My staff, while extremely talented, is 
not comprised of computer experts, and yet with very little 
time and just buying materials readily available at an arts and 
crafts store, they were able to duplicate and manufacture an 
unending number of very convincing phony IDs.
    After hearing the testimony today, I am more convinced than 
ever that we need a crack-down by all levels of law enforcement 
on this area and that we need to evaluate very closely whether 
Federal law and penalties are sufficient to deter the 
proliferation of these Web sites.
    During the course of this investigation, the Subcommittee 
received assistance from a number of officials, officers, and 
individuals. I would like to thank all of the agencies 
involved. I also want to thank the staff of the Republican 
Conference for their help today with all the technical aspects 
of our presentation.
    And finally, I would like to thank the Subcommittee staff 
who worked very diligently on this investigation during the 
past 5 months, particularly Lee Blalack, Rena Johnson, Kirk 
Walder, Leo Wisniewski, Eileen Fisher, and Mary Robertson. 
Again, I want to thank my staff for its hard work.
    The Subcommittee is now adjourned.
    [Whereupon, at 11:11 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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