[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
IDENTITY THEFT PENALTY ENHANCEMENT ACT, AND THE IDENTITY THEFT
INVESTIGATION AND PROSECUTION ACT OF 2003
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CRIME, TERRORISM,
AND HOMELAND SECURITY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
ON
H.R. 1731 and H.R. 3693
__________
MARCH 23, 2004
__________
Serial No. 74
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://www.house.gov/judiciary
______
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WASHINGTON : 2003
____________________________________________________________________________
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COMMITTEE ON THE JUDICIARY
F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina HOWARD L. BERMAN, California
LAMAR SMITH, Texas RICK BOUCHER, Virginia
ELTON GALLEGLY, California JERROLD NADLER, New York
BOB GOODLATTE, Virginia ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
WILLIAM L. JENKINS, Tennessee ZOE LOFGREN, California
CHRIS CANNON, Utah SHEILA JACKSON LEE, Texas
SPENCER BACHUS, Alabama MAXINE WATERS, California
JOHN N. HOSTETTLER, Indiana MARTIN T. MEEHAN, Massachusetts
MARK GREEN, Wisconsin WILLIAM D. DELAHUNT, Massachusetts
RIC KELLER, Florida ROBERT WEXLER, Florida
MELISSA A. HART, Pennsylvania TAMMY BALDWIN, Wisconsin
JEFF FLAKE, Arizona ANTHONY D. WEINER, New York
MIKE PENCE, Indiana ADAM B. SCHIFF, California
J. RANDY FORBES, Virginia LINDA T. SANCHEZ, California
STEVE KING, Iowa
JOHN R. CARTER, Texas
TOM FEENEY, Florida
MARSHA BLACKBURN, Tennessee
Philip G. Kiko, Chief of Staff-General Counsel
Perry H. Apelbaum, Minority Chief Counsel
------
Subcommittee on Crime, Terrorism, and Homeland Security
HOWARD COBLE, North Carolina, Chairman
TOM FEENEY, Florida ROBERT C. SCOTT, Virginia
BOB GOODLATTE, Virginia ADAM B. SCHIFF, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
MARK GREEN, Wisconsin MAXINE WATERS, California
RIC KELLER, Florida MARTIN T. MEEHAN, Massachusetts
MIKE PENCE, Indiana
J. RANDY FORBES, Virginia
Jay Apperson, Chief Counsel
Elizabeth Sokul, Counsel
Katy Crooks, Counsel
Bobby Vassar, Minority Counsel
C O N T E N T S
----------
MARCH 23, 2004
OPENING STATEMENT
Page
The Honorable Howard Coble, a Representative in Congress From the
State of North Carolina, and Chairman, Subcommittee on Crime,
Terrorism, and Homeland Security............................... 1
The Honorable Robert C. Scott, a Representative in Congress From
the State of Virginia, and Ranking Member, Subcommittee on
Crime, Terrorism, and Homeland Security........................ 2
The Honorable John Conyers, Jr., a Representative in Congress
From the State of Michigan, and Ranking Member, Committee on
the Judiciary.................................................. 4
The Honorable Adam B. Schiff, a Representative in Congress From
the State of California........................................ 4
WITNESSES
Mr. Timothy Coleman, Counsel to the Assistant Attorney General,
Criminal Division, U.S. Department of Justice
Oral Testimony................................................. 7
Prepared Statement............................................. 9
Mr. Larry D. Johnson, Special Agent in Charge, Criminal
Investigative Division, United States Secret Service
Oral Testimony................................................. 12
Prepared Statement............................................. 14
Mr. Robert F. Ryan, Senior Director, Government Relations,
TransUnion
Oral Testimony................................................. 17
Prepared Statement............................................. 20
Mr. Louis P. Cannon, President, District of Columbia Lodge #1,
and Chairman, Federal Officers' Committee of the Grand Lodge,
Fraternal Order of Police
Oral Testimony................................................. 28
APPENDIX
Material Submitted for the Hearing Record
Prepared statement of Mr. Louis P. Cannon, President, District of
Columbia Lodge #1, and Chairman, Federal Officers' Committee of
the Grand Lodge, Fraternal Order of Police..................... 41
Prepared statement of the Honorable Sheila Jackson Lee, a
Representative in Congress From the State of Texas............. 43
Speech Given by United States Supreme Court Justice Anthony M.
Kennedy at the American Bar Association annual meeting, August
9, 2003........................................................ 49
IDENTITY THEFT PENALTY ENHANCEMENT ACT, AND THE IDENTITY THEFT
INVESTIGATION AND PROSECUTION ACT OF 2003
----------
TUESDAY, MARCH 23, 2004
House of Representatives,
Subcommittee on Crime, Terrorism,
and Homeland Security
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:05 a.m., in
Room 2141, Rayburn House Office Building, Hon. Howard Coble
(Chair of the Subcommittee) presiding.
Mr. Coble. Good morning, ladies and gentlemen. The
Subcommittee will come to order.
Mr. Bobby Scott, the distinguished gentleman from Virginia
and the Ranking Member of the Subcommittee is en route. But
since everyone is in place, I think we will go ahead and start
even though it is a little after the starting time.
The Subcomittee on Crime, Terrorism, and Homeland Security
will hold its first hearing on H.R. 1731, the ``Identity Theft
Penalty Enhancement Act,'' and H.R. 3693, the ``Identify Theft
Investigation and Prosecution Act of 2003.''
This hearing examines the growing problem of identity theft
in this country and what additional steps Congress, law
enforcement, businesses and individuals can do to address the
problem.
There has been a great deal of focus on this issue in
Congress in recent years. H.R. 1731 and H.R. 3693 propose some
additional steps Congress can take to minimize the threat of
identity theft to the individual American companies and the
security of our country.
H.R. 1731 would establish penalties for aggravated identity
theft when the theft is related to or in furtherance of certain
other criminal acts.
H.R. 3693 would provide $100 billion to the Department of
Justice to investigate and prosecute identity theft crimes.
This hearing will examine the need for these bills as well
as additional legislative proposals Congress should consider to
address the growing problem of identity theft.
Identity theft and identity fraud are terms used to refer
to all types of crimes in which an individual's personal or
financial data is misused typically for economic gain or to
facilitate another criminal activity. Identity crime is not
directed at any one demographic. It affects all types of
individuals regardless of age, gender, nationality or race.
In 1998, Congress enacted the Identity Theft and Assumption
Deterrence Act directing the Federal Trade Commission to
establish the Federal Government's central repository for
identity theft complaints and to provide victim assistance and
consumer education.
In 2002, the FTC received 161,819 victim complaints of
compromised personal information. The FTC's statistics for 2003
determined that a total of 4.6 percent of survey participants
indicated they were victims of some type of identity crime in
the past year.
Identity crimes include identity theft, credit card fraud,
bank fraud, check fraud, false identification fraud and
passport visa fraud. Identity crimes can be associated with a
variety of other crimes such as mail theft and fraud, money
laundering, immigration fraud, narcotics and weapons
trafficking, and terrorism.
According to the FTC, theft, including lost or stolen
wallets or the theft of a victim's mail was the most commonly
mentioned way of obtaining the victim's personal information.
Approximately 25 percent of identity theft victims reported
that their information was obtained through such theft.
Approximately 50 percent of the identity theft victims said
they did not know how the person who misused their personal
information obtained it.
These victims who did know the person who obtained their
information, the FTC found that 23 percent indicated that the
person responsible was someone who worked at a company or
financial institution that had access to the victim's personal
information. According to 13 percent of the victims, their
information was compromised during a store purchase or
purchases by mail, internet or telephone. Approximately 4
percent of the victims cited stolen mail as the point of
compromise, and 14 percent of all victims claim their
information was compromised by other means including family
members and workplace associates.
Since September 11, 2001, the Federal and State officials
have taken notice of this crime because of the potential threat
to security, but the cost to the consumers and corporations is
equally alarming. The FTC estimates the loss to businesses and
financial institutions due to identity theft to be
approximately $47.6 billion. The cost to individual customers
are estimated to be approximately $5.5 billion. Additionally,
victims have a difficult time consuming and expensive task of
repairing a damaged credit record or history as well as their
reputation.
As identify crime increases, we must find new ways to
combat this compromise of personal information. Today, we will
discuss additional steps that may be taken to address this
continuing problem of identity theft. I want to thank the
witnesses who were able to be here today and look forward to
their testimony.
And now I am pleased to recognize the distinguished
gentleman from Virginia, the Ranking Member, Mr. Bobby Scott.
Mr. Scott. Thank you Mr. Chairman. And I am pleased to join
you in convening the hearing on H.R. 3693, the ``Identity Theft
Investigation and Prosecution Act of 2003,'' of which we are
both cosponsors, and H.R. 1731, the ``Identity Theft Penalty
Enhancement Act,'' cosponsored by Representatives Carter and
Schiff, a Member of this Subcommittee.
The two bills represent different approaches on the impact
of the problem of identity theft. H.R. 3693 simply provides the
money to dedicate resources to enforce existing law.
In its Identity Theft Survey Report issued last year, the
Federal Trade Commission indicated that when asked what could
be done to help fix problems that victims experienced as a
result of identity theft, the action most frequently cited by
the victims was to improve the investigation by law enforcement
after the crime has been committed. Specific proposals
mentioned include a stronger commitment to catching the thief
or thieves, better follow-up and communication with the victim
and increased assistance from law enforcement.
H.R. 1731 provides for mandatory penalties or enhancements
for a host of identity-theft related crimes.
The FTC survey released last September showed that 27.3
million Americans had been victims of identity theft in the
previous 5 years, including 9.9 million last year alone.
According to the survey, last year's identity theft losses to
businesses and financial institutions totaled nearly $48
billion while consumer victims reported about $5 billion in
out-of-pocket losses and expenses.
The FTC survey reported only 26 percent of all victims
contacted law enforcement agencies; only 17 percent of victims
who suffered only the misuse of existing credit cards bothered
to contact local law enforcement officers. That is why identity
thieves operate with impunity using credit card or other stolen
ID until it is cancelled and then moving on to the next victim.
Yet ironically, identity thieves are more susceptible to
being caught than criminals in general because there is a
significant paper trail left with their crimes. And that is
what H.R. 3693 does--is developed to do. It provides the tools,
the equipment, the training, manpower and needs to fill this
gap and give more victims the confidence that they need to
report the identity theft to law enforcement.
If properly investigated and prosecuted, there is an
opportunity for a high rate of success on convictions. And once
identity thieves are aware of the new order and the likelihood
of prosecution instead of little likelihood of prosecution,
they are less likely, in my judgment, to steal, and the
practice will greatly be curtailed.
Now the approach in H.R. 1731 is different. We have,
unfortunately, in that bill the same problems with mandatory
minimums that we have seen in other legislation. The bill
continues the tendency of Congress to violate the sense of
proportionality and rationality in sentencing, which the
Sentencing Guideline System and Sentencing Commission was
designed to deal with sentencing in a proportional and fair
manner.
Now, it imposes mandatory minimum sentences on a whole host
of identity related crimes, many of which have nothing to do
with theft. For example, the bill provides it to be a crime to
represent that you are a citizen if you are not. That is not
necessarily identity theft, but I suppose that we should
increase the maximum allowable sentence for that crime, because
some cases might warrant a more harsh sentence.
We should have a sense of proportionality and allow the
judges to make the determination in individual cases with the
sentencing guidelines.
While penalty enhancement for identity theft is
appropriate, it is not appropriate in the manner of the bill
that underlying crime warranting a 1-year sentence gets the
same penalty enhancement as a crime warranting a 20-year
sentence.
The prospect of adding a 2-year mandatory minimum to an
offender who is willing to risk a 15- to 20-year sentence is
not likely to have much of a deterrent effect.
Again, I favor penalty enhancements, but I do believe the
impartial judge with all the facts and circumstances of the
case and the offender before him with the adversarial
presentation of the facts and evidence in the case is a better
measure for the appropriate sentence than the mandatory minimum
in that bill.
So I look forward to the testimony of the witnesses on this
important issue, and I look forward to working with you, Mr.
Chairman, as we try to reduce the problem of identity theft.
Mr. Coble. I thank the gentleman. And we have with us the
Ranking Member of the full Committee, the gentleman from
Michigan, and also the sponsor of the other bill, Mr. Schiff,
the gentleman from California.
Mr. Conyers, would you like to give an opening statement?
Mr. Conyers. If I could, thank you, Mr. Chairman, and
strike the requisite number of words.
I just wanted to welcome our witnesses and particularly
Officer Cannon from the Fraternal Order of Police. We have been
working together in this Committee for many years.
Well, what do we have here? We have the classic case of
California conservatives wanting to put not one mandatory
sentence in but three. Can you beat that? Finally, the Congress
acts and what do we do? We overreact.
We want 5-year mandatory, 2-year mandatory and no
probation. We, as legislators, now become the judge and make
sure we remove some more judicial discretion from the judge in
one of the bills.
Now, you know, it is about time we get down to business on
this thing. That is no way to run a ship. We have got to start
off first with a Coble-Scott bill that recognizes the problem,
but three mandatory sentences and a removal of judicial
discretion all in one little bill is a little bit overarching.
So I am happy to join the Chairman; the gentleman from
Virginia; the gentleman from Massachusetts, Mr. Frank;
gentleman from Texas, Mr. Frost; the gentlelady from Illinois,
Ms. Schakowsky; the gentlelady from California, Ms. Lee; the
gentleman from Ohio, Mr. Kucinich, in what I hope will be the
bill that comes out of the Committee or some reasonable
compromise thereto.
And I thank the Chairman for allowing me this opportunity.
Mr. Coble. Thank the distinguished gentleman from Michigan.
The distinguished gentleman from California, would you like
to be heard before we hear from our witnesses, Mr. Schiff?
Mr. Schiff. Yes, Mr. Chairman. I want to thank you for
holding the hearing today on the serious issue of identity
theft, including the hearing on H.R. 1731, the ``Identity Theft
Penalty Enhancement Act,'' legislation that I join Mr. Carter
in introducing.
I want to thank Ranking Member Bobby Scott and Ranking
Member John Conyers for their work to combat identity theft as
well and for the additional legislation that is the subject of
the hearing today.
Identity theft topped the list of consumer complaints filed
with the FTC for the last 4 years in a row. In September 2003,
the FTC released a comprehensive survey concluding that a
staggering 27.3 million Americans have been victims of identity
theft in the last 5 years, costing consumers and businesses an
estimated $53 billion in 2002 alone.
Formal reports of identity theft filed with the FTC are
also on the rise. Earlier this year, the FTC reported that
almost 215,000 cases of identity theft were reported in 2003, a
huge increase from the previous 2 years. In fact, the home
States of several Members of the Subcommittee are at the top of
the list of identity theft victims in 2003, with Texas ranking
number four and Florida ranking number five.
My own home State of California ranks number three in the
number of victims of identity theft per capita, with over
37,000 complaints reported by consumers costing over $40
million last year. Nationally, California cities crowd the top
10 list of metropolitan areas with the highest per capita rates
of identity theft reported. The Los Angeles Long Beach
metropolitan area that includes my district is particularly
prone to such crimes ranking number two nationally with over
13,000 victims.
This problem is not new. In fact, I can recall, in the late
80's and early 90's when I was with the U.S. Attorney's Office,
having many of these cases in our office and prosecuting one
myself. And when we obtained the search warrant to search the
briefcase belonging to the defendant, we found, in this one
briefcase, applications for employment with a savings and loan
in one State, W-2s from a Montgomery Ward in a second State
and, most interesting, the complete faculty list of Brandeis
University with the Social Security numbers of all of the
faculty.
These rings of identity theft are often extensive, and this
was several years ago. The problem has only grown to epidemic
proportions since then. Identity theft wreaks havoc on the
lives of millions of hard-working Americans now. A victim of
identity theft usually spends a year-and-a-half working to
restore his or her identity and good name.
Many of my constituents--and I know my colleagues as well--
have urged Congress to act quickly and effectively to crack
down on this growing problem.
All forms of identity theft are problematic, but the
stealing of one's identity for the purpose of committing other
serious crimes, including murder and terrorism, is especially
egregious and demands even stronger action. For this reason, I
have joined my colleague, Mr. Carter, in introducing the
Identity Theft Penalty Enhancement Act, legislation that will
make it easier for prosecutors to target those identity thieves
who steal an identity for the purpose of committing other
serious crimes.
The bill stiffens penalties to deter such offenses and
strengthens the ability of law enforcement to go after identity
thieves and prove their case. The legislation also makes
changes to close a number of gaps identified in current Federal
law.
Identical legislation was introduced by Senators Feinstein
and Kyl, passing unanimously in the Senate in January of 2003.
The bill is also supported by the Justice Department and the
FTC.
With advances in technology and the Internet, identity
theft has been transformed from a basic street crime involving
a stolen wallet or stolen pin number into a sophisticated
crime. Nationwide computer networks have given hackers the
ability to access a large number of identities that can be
quickly shared with large organized networks or criminals.
Homeland security concerns have certainly heightened the
need to protect against identity theft given the potential ease
with which a terrorist can assimilate to and move about in our
society with stolen identity documents. One such example is the
case of a Massachusetts health club worker who stole the
identities of at least 21 members of the health club and
provided their names and financial details to Abdel Ghani
Meskini, an al-Qaeda operative who later pled guilty to
conspiracy for his role in attempting to blow up the Los
Angeles International Airport in 1999 in the so-called
Millennium Plot. Meskini was able to use the stolen information
and open bank accounts in New York City and Boston.
In order to protect our homeland and protect the good
credit and reputations of hard-working Americans, the time for
strong legislation cracking down on identity theft is now.
And I want to thank the Chairman for oversight of these two
bills pending before us and urge my colleagues to support the
strong and important legislation.
Mr. Coble. I thank the gentleman.
Permit me to say a word prior to introducing our witnesses.
Folks, there is nothing that annoys me any more severely than
to see unscrupulous, dishonest persons benefiting and becoming
unjustly enriched at the expense of innocent third parties. And
this is what happens when this identity theft wheel begins to
turn.
I think we have two good bills here. I am a cosponsor of
Mr. Scott's bill. I told Bobby when I signed on, I said, ``I
like the bill, but I am little uneasy about the price tag.''
but he knows that price tags bother me generally.
But I think you and Mr. Schiff and Mr. Carter have done a
good job as well.
I am pleased we are here today and I appreciate the
interest as evidenced by the others in the hearing room.
Our first witness is Timothy Coleman. Mr. Coleman serves as
counsel to Assistant Attorney General Christopher Wray of the
Criminal Division of the U.S. Department of Justice where he
advises the AAG on corporate fraud and other white-collar crime
issues and works closely with the Department of Fraud section,
the Enron Task Force and the President's Corporate Fraud Task
Force.
Mr. Coleman served for 6 years as Assistant U.S. Attorney
in the Southern District of New York and was a member of that
office's Securities and Commodities Fraud Task Force. He is a
1990 graduate of Georgetown Law School. Prior to entering
Government service, he was in private practice at Cravath,
Swaine & Moore in New York.
Our next witness is here today on behalf of the U.S. Secret
Service. Mr. Larry Johnson serves as a special agent in charge
for the Secret Service Criminal Investigative Division. He is
responsible for the oversight of the Secret Service's criminal
investigations, both domestic and overseas, which manages the
electronic crime programs and initiatives, including the
specialized training of agents in computer forensics and the
development and implementation of the Secret Service's
Electronic Crimes Task Force.
Our third witness, Mr. Robert Ryan is a senior director of
TransUnion responsible for monitoring Federal and State
legislation impacting TransUnion. Mr. Ryan currently serves on
the Government Relations Working Group of the Consumer Data
Industry Association, on the Board of Directors of the
Coalition For Sensible Public Records Access, on the Advisory
Board of the Information Policy Institute and on the Technology
Policy Committee of the U.S. Chamber of Commerce.
Mr. Ryan received his Bachelor of Science Degree in
Psychology from Loyola university in Chicago and completed the
Executive Education Program at the University of Michigan in
1996. Mr. Ryan has also served in the U.S. Army Reserve, rising
to the rank of captain.
And he joined TransUnion in 1971 as a consumer relations
manager and has held numerous positions during his tenure, most
recently as director of product development and management.
Our final witness representing the Fraternal Order of
Police, properly known on the Hill as FOP--I assume Mr. Cannon,
you will regard that as a complimentary term. Mr. Cannon is
retired from the Washington, D.C., Metropolitan Police
Department and currently inspector with the U.S. Mint Police.
He is the current State Lodge President of the District of
Columbia Lodge Number One of the Fraternal Order of Police and
also serves as the chairman of the Federal Officers Committee.
Mr. Cannon, we appreciate your having responded at the last
minute. Another one of our witnesses couldn't be here, and you
agreed to fill in, and we appreciate that.
Good to have all of you with us. We have your written
statements. Gentlemen, as we have told you, we have asked you
before, and I want to reiterate this, if you can confine your
statements to the 5-minute rule, we would be appreciative. We
have hogs to slop and cows to juice around here, as we say in
the rural South, and I am sure you all do as well. Now your
warning will be that red light that will appear in the monitor
in front of you. When the red light illuminates, you know you
are in trouble with Mr. Scott and me. But if you could confine
your statement to 5 minutes, we would be appreciative.
And Mr. Coleman, we will begin with you.
STATEMENT OF TIMOTHY COLEMAN, COUNSEL TO THE ASSISTANT ATTORNEY
GENERAL, CRIMINAL DIVISION, U.S. DEPARTMENT OF JUSTICE
Mr. Coleman. Good morning. Mr. Chairman and distinguished
Members of the Subcommittee, thank you for inviting me to
testify on behalf of the Department of Justice on legislation
that will help us deal more effectively with the important
issue of identity theft.
Identity theft is one of the most widespread and growing
types of criminal activity in the United States today. Millions
upon millions of Americans have had their identities hijacked
and used for criminal purposes. Already this morning, several
Members of this Subcommittee have cited some of the statistics
showing the magnitude of this problem, so I will just mention a
couple more.
In 2002, nearly 10 million Americans were victims of
identity theft. Over the past 3 years, the number of identity
theft complaints has tripled. And the most recent statistic on
the volume of identity theft cases is really staggering: As of
December of last year, 2003, the Federal Trade Commission was
receiving an average of 5,200 calls every week on its Identity
Theft Telephone Hotline and another 800 complaints every week
over the Internet.
Mr. Chairman, the numbers don't tell the whole story. Like
Representative Schiff, as a Federal prosecutor, I have had a
number of opportunities to witness first-hand the damage that
identity thieves wreak on their victims, victims who are
innocent and hard-working Americans, victims who have to suffer
through the nightmare of having their credit and their good
names ruined, victims who are forced to spend untold hours
trying to repair their credit history and get their good names
back.
Ever since the enactment of the Identity Theft and
Assumption Deterrence Act in 1998, the Department of Justice
has coordinated a nationwide, Federal, State and local law
enforcement effort to combat this problem. For example, in
2002, the Attorney General announced a nationwide sweep of
Federal identity theft prosecutions that involved 24 separate
U.S. attorneys offices in 24 judicial districts around the
country. We joined with the Secret Service, the Postal
Inspection Service, the Federal Trade Commission and other
agencies to sponsor a series of 11 regional seminars to train
State and local law enforcement agents on identity theft, and
we are continuing to assist other law enforcement agencies to
further their efforts and ours in attacking this problem.
I am pleased to testify today in strong support of H.R.
1731, the ``Identity Theft Penalty Enhancement Act.'' H.R. 1731
builds on and strengthens the important identity theft
legislation that was enacted by Congress in 1998. Now that
legislation, which is codified at 18 U.S.C. 1028(a)7, is one of
the most important weapons in the arsenal of every Federal
prosecutor, but we need more fire-power on the front lines to
combat the continuing problem of identity theft.
Let me extend the Department's gratitude to you, Mr.
Chairman, and to Representative Carter for your leadership on
this issue and for your prompt action on this legislation. We
strongly support this bill, and we urge its swift enactment.
With the benefit of 6 years of experience under the 1998
legislation, H.R. 1731 includes targeted enhancements to
existing law that would arm Federal prosecutors to fight
identity theft more effectively. The bill would accomplish
three principal and very important goals. Number one, it would
define a class of offenses as aggravated identity theft, which
would include the most serious and harmful forms of this
activity.
Second, it would provide for more severe penalties in cases
of identity theft, resulting in sentences that are more
appropriate to the egregious nature of these cases and act as a
more effective deterrent to would-be identity thieves.
And third, it would simplify and streamline the proof
requirements for cases that are defined as aggravated identity
theft, which sometimes have been very difficult to prosecute
under the 1998 legislation. The Department strongly supports
those enhancements. They would enable us to ensure that the
most serious cases of identity theft are prosecuted effectively
and punished appropriately and would enable us to work more
effectively with our law enforcement and regulatory partners to
reduce the incidents of identity theft.
That concludes my prepared remarks, and I will be pleased
to answer any questions that the Members of the Subcommittee
may have.
[The prepared statement of Mr. Coleman follows:]
Prepared Statement of Timothy Coleman
Mr. Chairman and distinguished Members of the Subcommittee, I am
pleased to testify on behalf of the Department of Justice on the topic
of identity theft. As Counsel to Assistant Attorney General (AAG)
Christopher Wray in the Criminal Division at the Department of Justice,
I advise the AAG on white collar crime issues, including identity
theft. Previously, I worked for 6 years as an Assistant U.S. Attorney
in the Southern District of New York, where I prosecuted dozens of
cases of identity theft and other white collar crimes. As a federal
prosecutor, I have had many opportunities to witness, first-hand, the
damage that identity thieves wreak on their victims. Identity theft is
one of the fastest growing crimes in the United States today. According
to a survey conducted for the Federal Trade Commission (FTC) in 2003,
nearly 10 million Americans had become victims of identity theft in the
preceding year. Identity theft complaints to the FTC have nearly
tripled in the past three years, from 86,212 complaints in 2001 to
214,905 complaints in 2003. Identity theft now accounts for 42 percent
of all consumer complaints that the FTC receives--more than any other
category of consumer fraud. I understand that as of December 2003, the
FTC was receiving a weekly average of 5,200 calls on its identity theft
telephone hotline, and another 800 complaints of identity theft over
the Internet.
Additional data gathered by the General Accounting Office (GAO)
paint a similar picture. In March 2002, the Government Accounting
Office completed a report in which it concluded that all available
sources of information confirm that ``the prevalence of identity theft
is growing'' and that the monetary losses to industry from identity
theft continue to mount. Numbers, however, do not tell the whole story.
Identity theft inflicts substantial damage, not only on the economy,
but also on hardworking Americans, who must expend the effort to undo
the damage done to their credit records and their good names.
H.R. 1731
Let me first turn to H.R. 1731, the ``Identity Theft Penalty
Enhancement Act.'' I am pleased to testify in strong support of this
important legislation. The Department first endorsed the approach of
this legislation in 2002, as part of a two-pronged initiative to combat
identity theft. The first prong was a coordinated, nationwide ``sweep''
to prosecute cases involving identity theft. This sweep resulted in 73
criminal prosecutions against 134 individuals in 24 judicial districts.
The underlying criminal violations involved in these cases run the
gamut from credit card fraud to theft of employee benefits to murder.
These cases were the result of the close and ongoing cooperation among
federal, state, and local law enforcement agencies, including the
Federal Trade Commission (FTC), the Secret Service, the Postal
Inspection Service, the FBI, the Office of the Inspector General of the
Social Security Administration, the IRS's Criminal Investigation
Division, as well as a range of state and local agencies.
Since that sweep, United States Attorneys' Offices across the
country have continued their aggressive pursuit of identity theft
cases. Acting through an interagency working group on identity theft,
the Department has worked hard to coordinate enforcement efforts in
this area. The FTC, working with the Secret Service, has provided
invaluable assistance in developing an identity theft case referral
program that helps in identifying significant cases that warrant
further investigation.
At the same time, it is clear that the sentencing of identity theft
offenders can be widely disparate. For example, one variety of identity
theft that United States Attorneys' Offices are actively prosecuting
are so-called ``phishing'' schemes--the use of emails and websites
designed to look like those of legitimate companies' websites and
emails in order to persuade people to disclose their personal or
financial data. In some cases, where prosecutors can trace victim
losses to the operation of the ``phishing'' scheme, they may be able to
obtain more substantial sentences. If it is not possible to trace those
losses, however, convicted defendants in phishing schemes may receive
little or no imprisonment. In one case, which was prosecuted in the
Western District of Washington, the defendant, despite having conducted
a phishing scheme in which he masqueraded as the Microsoft Network
(MSN), received only a sentence of probation.
The second prong of the Department's initiative was to strongly
endorse legislation to enhance substantially the penalties for identity
theft. Accordingly, in 2002, the Attorney General and Senator Feinstein
jointly announced the outline of the legislation that is before you
today. H.R. 1731, would greatly help to ensure that the Department has
the tools it needs to prosecute effectively, and punish appropriately,
the most serious forms of identity theft.
H.R. 1731 builds upon, and strengthens, the important identity
theft legislation enacted by the Congress in 1998. The current federal
identity theft statute is codified at 18 U.S.C. Sec. 1028(a)(7). That
provision makes it unlawful to ``knowingly transfer[] or use[], without
lawful authority, a means of identification of another person with the
intent to commit, or to aid or abet, any unlawful activity that
constitutes a violation of Federal law, or that constitutes a felony
under any applicable State or local law,'' provided that the
identification document in question was, or appears to be, issued by
the United States or that the offense involved the use of the mails or
affected interstate or foreign commerce. The existing statute has a
sweeping substantive breadth that reaches all identity thefts that have
a federal interest--even those involving State law felonies. This
breadth makes it an essential element of the federal criminal code and
an important weapon in the arsenal of every federal prosecutor.
However, and precisely because of its breadth, the existing statute
groups a large and disparate variety of misconduct into a single
category. For the same reason, it also imposes across-the-board proof
requirements that may be unduly restrictive in certain serious cases of
identity theft.
Section 2 of H.R. 1731 addresses these concerns by proposing a new
section 1028A to the criminal code. Section 1028A would define a class
of ``aggravated identity theft'' that includes the most serious and
harmful forms of this pernicious practice. The penalties for this newly
defined crime of ``aggravated identity theft'' are significantly
enhanced as compared to existing law, and the proof requirements are
simplified.
In defining ``aggravated identity theft,'' section 1028A--like the
existing statute--uses the concept of predicate offenses. That is,
identity theft generally is not committed for the sheer thrill of
impersonation; it is almost always done for the purpose of committing
another state or federal offense. Under H.R. 1731, the ``aggravated''
forms of identity theft are defined by the nature of the predicate
offense, and include all of the most serious predicate offenses, as set
forth in proposed section 1028A, subsections (a)(2) and (c). Thus,
anyone who uses another person's identity to commit one of the
enumerated serious predicate offenses will be guilty of ``aggravated
identity theft.'' Because virtually all of the most serious forms of
identity theft involve predicate criminal activity that is covered by
federal law--for example, bank fraud, wire fraud and mail fraud--H.R.
1731 does not include any State law predicate crimes in its definition
of ``aggravated identity theft.'' Compared to the general federal
identity theft statute, H.R. 1731 applies to a focused and narrower set
of predicate offenses.
In prescribing the penalties for this new offense, H.R. 1731 does
not rely upon the Sentencing Commission or the Sentencing Guidelines.
This approach is the most sensible one in light of the unusual nature
of identity theft--it is an entirely derivative offense, in that it is
virtually always committed in connection with some other crime. The
Sentencing Guidelines, however, are generally designed and intended to
be ``charge-neutral:'' in other words, the sentence depends on the
underlying ``relevant conduct'' and not on the particular offense
charged in the indictment. Thus, the Guidelines will generally ignore
the fact that two offenses have been charged (a derivative offense and
a predicate offense); the same sentence would be imposed in such a case
as would be imposed even if only the predicate offense had been
charged. Consequently, application of the Guidelines would mean that
there would be virtually no practical advantage to charging the
derivative criminal offense. Prosecutors would have to charge more
facts, and prove more facts, without obtaining any additional
punishment.
H.R. 1731 avoids this problem through the structure of its penalty
scheme. That scheme is modeled on the one used in 18 U.S.C. Section
924(c). That provision prohibits another derivative offense, using or
carrying a firearm during and in relation to a crime of violence or a
drug trafficking crime. Because an underlying predicate crime must be
proved--either a crime of violence or a drug trafficking crime--
application of the Guidelines would have collapsed the sentencing for
the Sec. 924(c) offense together with the underlying predicate offense.
Section 924(c) avoids this by instead providing for an additional
prescribed term of imprisonment over and above that imposed on the
underlying offense. Because ``aggravated identity theft'' is unusual in
that it is a derivative offense, like the conduct prohibited by
Sec. 924(c), a similar approach makes eminent sense here.
Accordingly, H.R. 1731 provides that, if a person commits
aggravated identity theft by stealing someone's identity in order to
commit a serious federal predicate offense, that person will be
sentenced to an additional two years' imprisonment over and above the
sentence for the underlying offense, as set forth in proposed section
1028A, subsections (a)(1) and (b)(2). If the predicate offense is a
terrorism offense, the additional punishment is increased to five
years, as set forth in the same proposed sections. H.R. 1731, however,
properly departs from the Sec. 924(c) model in one critical respect. In
1993, the Supreme Court held, in the case of Deal v. United States, 508
U.S. 129, that multiple counts under Sec. 924(c) that are charged in
the same indictment must run consecutively to each other. This
mandatory, cumulative ``stacking'' of sentences, if applied here, could
result in unduly severe and inflexible sentences. H.R. 1731 thus leaves
it to the discretion of the sentencing judge whether to run
consecutively or concurrently any multiple counts of aggravated
identity theft that are sentenced at the same time, as set forth in
proposed section 1028A, subsection (b)(4). In order to avoid
unwarranted disparities in the exercise of this discretion, the
Sentencing Commission is explicitly authorized to issue guidance
concerning whether and to what extent such multiple sentences should be
concurrent or consecutive. Id.
H.R. 1731 would also substantially simplify the proof requirements
for ``aggravated identity theft'' compared to the current identity
theft statute, 18 U.S.C. Sec. 1028(a)(7). Section 1028(a)(7) contains
multiple mental-state elements. In addition to proving all of the
elements of the predicate crime (including the scienter element),
prosecutors also must establish that the defendant ``knowingly''
transferred or used the identification ``with the intent to commit'' a
federal or state crime. H.R. 1731 would streamline the proof for
``aggravated identity theft,'' by requiring proof of only that level of
scienter that is already required by the underlying predicate offense
and the knowing use of another's identity. Moreover, because
``aggravated identity theft'' is defined with reference only to federal
predicate offenses, there is no need for any additional proof of a
federal jurisdictional connection. Accordingly, the additional federal
jurisdictional showing required under Sec. 1028(a)(7) is properly not
carried over into this new offense.
This new offense defined by section 2, with its streamlined proof
requirements and its enhanced penalty structure, will enable the
Department to ensure significant identity theft crimes are effectively
prosecuted and properly punished.
In addition to enacting a new offense of ``aggravated identity
theft,'' H.R. 1731 strengthens the existing 1998 identity theft law in
multiple ways. Section 3 of the bill closes several gaps in the
coverage of the existing identity theft prohibition (18 U.S.C.
Sec. 1028(a)(7)) and increases the penalties for certain violations of
that section. As currently drafted, section 1028(a)(7) punishes anyone
who ``knowingly transfers or uses, without lawful authority, a means of
identification of another person with the intent to commit, or to aid
or abet'' any violation of Federal law or any State or local felony.
This bill would amend this provision to prohibit, not just the
``transfer or use'' of someone else's identity information, but also
the possession of such information with the requisite criminal intent.
The bill would also add language to this provision that would
extend its coverage to those criminals who steal someone's identity
``in connection with'' another crime. The bill also amends section
1028(a)(7) to increase from three to five years the maximum term of
imprisonment for ordinary identity theft and for possession of false
identification documents. Lastly, section 3 of the bill would amend
section 1028(b)(4) to impose a higher maximum penalty for identity
theft used to facilitate acts of domestic terrorism. In doing so,
section 3 builds upon the USA Patriot Act's definition of ``domestic
terrorism'' and authorizes a 25-year maximum penalty for identity theft
committed to facilitate an act of domestic terrorism.
I understand that the Subcommittee is reviewing proposed additions
to H.R. 1731 that relate to issues raised by the Office of the
Inspector General of the Social Security Administration. These
proposals would add sections 371 and 641 of Title 18 and section 1011
of Title 42 to the list of predicate offenses for aggravated identity
theft, and would clarify the definition of the term ``value'' in
section 641 of Title 18. With only one exception, the Department has no
objection to those proposals. With respect to the inclusion of 18
U.S.C. Sec. 371, the Department believes that it would be more
consistent with the intent of this legislation to limit the inclusion
of section 371 to conspiracies to commit any of the other substantive
offenses listed in section 2 of the bill. Without this limitation, the
addition of section 371 would allow application of the aggravated
identity theft offense to any conspiracy covered by section 371,
including conspiracies to violate any offense against the United States
(even misdemeanors). This, in our view, would expand the reach of the
enhancement considerably beyond what the Attorney General and the
Administration have endorsed, and what we believe necessary to address
the most serious identity theft offenses.
Let me extend the Department's gratitude to you, Mr. Chairman, and
Representative Carter for your leadership on this issue and for your
prompt action on this legislation. We strongly support this bill and
urge its swift enactment.
h.r. 3693
I also want to address H.R. 3693, the ``Identity Theft
Investigation and Prosecution Act of 2003,'' which would authorize the
appropriation of $100,000,000 for the investigation and prosecution of
identity theft and related credit card and other fraud cases. I want to
express my appreciation to Representative Scott and the co-sponsors of
this bill for their interest in ensuring that federal law enforcement
can effectively pursue identity thieves. At the same time, I should
note that we believe that the Administration's budget request is
sufficient for the Department and other law enforcement agencies to
continue their vigorous pursuit of identity theft.
That concludes my prepared remarks. At this time, I would be
pleased to answer any questions you may have.
Mr. Coble. Thank you Mr. Coleman, and you beat the 5-minute
mark.
Mr. Johnson, you are recognized for 5 minutes.
STATEMENT OF LARRY D. JOHNSON, SPECIAL AGENT IN CHARGE,
CRIMINAL INVESTIGATIVE DIVISION, UNITED STATES SECRET SERVICE
Mr. Johnson. Good morning, Mr. Chairman, Ranking Member
Scott and Ranking Member Conyers and distinguished Members of
the Subcommittee on Crime, Terrorism, and Homeland Security.
Thank you for inviting me to testify on the subject of identity
theft and the penalty enhancement act and the role the Secret
Service has in these investigations.
As original guardian of our Nation's financial payment
systems, the Secret Service has a long history of protecting
American consumers and industry from financial fraud. With the
passage of new Federal laws in 1982 and 1984, the Secret
Service has provided primary authority for the investigation of
access device fraud, including debit card and credit card fraud
and parallel authority with other law enforcement agencies in
identity crime cases.
In recent years, the combination of the information
revolution, the effects of globalization and the rise of
international terrorism have caused the investigative mission
of the Secret Service to evolve dramatically. Explosive growth
of these crimes has resulted in the evolution of the Secret
Service into an agency that is recognized worldwide for its
expertise in the investigation of all types of financial
crimes.
Our efforts to detect, investigate and prevent financial
crimes are aggressive, innovative and comprehensive. As you are
aware, this Congress is currently considering legislation that
establishes increased penalties for aggravated identity theft,
that is, identity theft committed during and in relation to
certain specific felonies.
H.R. 1731 and S. 153 provide for an additional 2 years of
imprisonment for identity crime not to be served concurrently
to the punishment associated with other related felonies and 5
years imprisonment if at least one of the related felonies is
associated with terrorism. Additionally, the legislation
prohibits the imposition of probation.
While this particular legislation cannot be expected to
completely suppress identity theft, it does recognize the
impact theft has on consumers and the need to punish those
engaged in criminal activity for personal or financial gain.
The United States Secret Service believes this legislation
has merit as it is an additional tool that law enforcement can
utilize to the fullest extent in protecting our country's
critical and financial infrastructure and citizens of the
United States.
After 138 years in the Treasury Department, the Secret
Service was transferred last year to the Department of Homeland
Security with all our personnel, resources and investigative
jurisdictions and responsibilities. Today, those jurisdictions
and responsibilities require us to be involved in the
investigation of traditional financial crimes as well as
identity crimes and a wide range of electronic and high-tech
crimes.
Identity theft criminals seek the personal identifiers
generally required to obtain goods and services on credit, such
as Social Security numbers, names and dates of birth. Identity
crime involves the theft or misuse of an individual's financial
identifiers, such as credit card numbers, bank account numbers
and personal identification numbers.
With the proliferation of computers and the increase of the
Internet, high-tech identity criminals begin to obtain
information from company databases and Web sites. In some
cases, the information obtained is in the public domain while,
in others, it is proprietary and is obtained by means of
computer intrusion or means of deception such as Web spoofing
or phishing.
It has been our experience that criminal groups involved in
these types of crime routinely operate in a multi-
jurisdictional environment. This has created problems for local
law enforcement agencies who are first responders to their
criminal activities.
By working closely with other Federal, State, local law
enforcement agencies as well as international police agencies,
we are able to provide a comprehensive network of intelligence-
sharing, resource-sharing and technical expertise that bridges
judicial boundaries. The Secret Service Electronic Crimes Task
Force Program bridges the gap between conventional cyber-crimes
investigations and the larger picture of critical
infrastructure protection.
Secret Service efforts to combat cyber-based assaults that
target information and communication systems supporting the
financial sector are a large part and more comprehensive
critical infrastructure protection and counterterrorism
strategy. It is through our hard work in these areas of
financial and electronic crimes that we have developed
particular expertise in the investigation of credit card fraud,
identity theft, check fraud, cyber crime, false identification
fraud, computer intrusions, bank fraud and telecommunications
fraud.
While our task forces do not focus extensively on identity
crime, we recognize that stolen identifiers are often a central
component of other electronic or financial crimes.
Subsequently, our task forces have devoted considerable time
and resources to the issue of identity crime.
Mr. Chairman, that concludes my prepared statement.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of Larry D. Johnson
Good afternoon, Mr. Chairman. I would like to thank you, as well as
the distinguished Ranking Member, Mr. Scott, and the other members of
the subcommittee for providing an opportunity to discuss the subject of
identity crime, and the role of the Secret Service in these
investigations.
Identity crime is the theft or misuse of an individual's personal
or financial identifiers in order to gain something of value or to
facilitate other criminal activity. Types of identity crime include
identity theft, credit card fraud, bank fraud, check fraud, false
identification fraud, and passport/visa fraud. Equally as important is
that identity crimes are used to facilitate and fund violent crimes
such as narcotics and weapons trafficking, organized crime, mail theft
and fraud, money laundering, immigration fraud, and terrorism. Identity
crimes provide the anonymity for criminals to operate undetected and,
along with untraceable financing, to fund such criminal endeavors.
It is through our work in the areas of financial and electronic
crime that we have developed particular expertise in the investigation
of credit card fraud, identity theft, check fraud, cyber crime, false
identification fraud, computer intrusions, bank fraud, and
telecommunications fraud. Secret Service investigations typically focus
on organized criminal groups, both domestic and transnational.
As you are aware, Mr. Chairman, the House and the Senate are each
considering legislation that establishes increased penalties for
aggravated identity theft--that is, identity theft committed during and
in relation to certain specified felonies. H.R. 1731 and S. 153 provide
for an additional two years imprisonment for the identity crime, not to
be served concurrently to the punishment associated with the other
related felony or felonies, and five years imprisonment if at least one
of the related felonies is associated with terrorism. Additionally, the
legislation prohibits the imposition of probation.
While we are all aware that no legislation can be expected to
completely suppress identity theft, these efforts recognize the impact
identity theft has on consumers and the need to punish those engaging
in criminal activity for personal or financial gain. The Secret Service
believes this legislation has merit as an additional tool that law
enforcement can utilize in protecting our commercial and financial
infrastructures and the citizens of the United States.
In addition to providing the highest level of physical protection
to our nation's leaders, the Secret Service exercises broad
investigative jurisdiction over a wide variety of financial crimes. As
the original guardian of our Nation's financial payment systems, the
Secret Service has a long history of protecting American consumers and
industry from financial fraud. With the passage of legislation in 1982
and 1984, the Secret Service was provided authority for the
investigation of access device fraud, including credit and debit card
fraud, and parallel authority with other law enforcement agencies in
identity crime cases. In recent years, the combination of the
information revolution, the effects of globalization and the rise of
international terrorism have caused the investigative mission of the
Secret Service to evolve dramatically.
After 138 years in the Treasury Department, the Secret Service was
transferred in 2003 to the Department of Homeland Security with all of
our personnel, resources and investigative jurisdictions and
responsibilities. Today, those jurisdictions and responsibilities
require us to be involved in the investigation of traditional financial
crimes as well as identity crimes and a wide range of electronic and
high-tech crimes.
The burgeoning use of the Internet and advanced technology have
intensified competition within the financial sector. With lower costs
of information-processing, legitimate companies have found it
profitable to specialize in data mining, data warehousing and
information brokerage. Information collection has become a common
byproduct of newly-emerging e-commerce. Internet purchases, credit card
sales, and other forms of electronic transactions are being captured,
stored, and analyzed by businesses seeking to find the best customers
for their products.
All of this has led to a new measure of growth within the direct
marketing industry that promotes the buying and selling of personal
information. In today's markets, consumers routinely provide personal
and financial identifiers to companies engaged in business on the
Internet. They may not realize that the information they provide in
credit card applications, loan applications, or with merchants they
patronize are valuable commodities in this new age of information
trading. Consumers may be even less aware of the illegitimate uses to
which this information can be put. This wealth of available personal
information creates a target-rich environment for today's sophisticated
criminals, many of whom are organized and operate across international
borders. But legitimate business can provide a first line of defense
against identity crime by safeguarding the information it collects.
Such efforts can significantly limit the opportunities for identity
crime, even while not eliminating its occurrence altogether.
According to statistics compiled by the Federal Trade Commission
for calendar year 2003, 42% of the 516,740 victim complaints reported
involved at least one type of identity crime. The complaints were
broken down as follows (note that some complaints involved more than
one of the listed activities):
33% of complaints involved credit card fraud--i.e.,
someone either opened up a credit card account in the victim's
name or ``took over'' the victim's existing credit card
account;
21% of complaints involved the activation of
telephone, cellular, or other utility service in the victim's
name;
17% of complaints involved bank accounts that had
been opened in the victim's name, and/or fraudulent checks had
been negotiated in the victim's name;
11% of complaints involved employment-related fraud;
8% of complaints involved government documents/
benefits fraud;
6% of complaints involved consumer loans or mortgages
that were obtained in the victim's name; and
19% of complaints involved some type of miscellaneous
fraud, such as medical, bankruptcy and securities fraud.
Although financial crimes are often referred to as ``white collar''
by some, this characterization can be misleading. The perpetrators of
such crimes are increasingly diverse and today include both domestic
and international organized criminal groups, street gangs, convicted
felons and terrorists.
These criminals seek the personal identifiers generally required to
obtain goods and services on credit such as social security numbers,
names, and dates of birth. Identity crimes also involve the theft or
misuse of an individual's financial identifiers such as credit card
numbers, bank account numbers and personal identification numbers.
The methods of identity criminals vary. ``Low tech'' identity
criminals obtain personal and financial identifiers by going through
commercial and residential trash, a practice known as ``dumpster
diving.'' The theft of wallets, purses and mail is also widespread
practice employed by both individuals and organized groups.
With the proliferation of computers and increased use of the
Internet, ``high tech'' identity criminals can obtain information from
company databases and web sites. In some cases, the information
obtained is in the public domain while in others it is proprietary and
is obtained by means of a computer intrusion.
The method that may be most difficult to prevent is theft by a
collusive employee. Individuals or groups who wish to obtain personal
or financial identifiers for a large-scale fraud ring will often pay or
extort an employee who has access to this information through their
employment at workplaces such as a utility billing center, financial
institution, medical office, or government agency. The collusive
employee will access the proprietary data base, copy or download the
information, and remove it from the workplace either electronically or
simply by walking it out.
Once the criminal has obtained the proprietary information, it can
be exploited by creating false ``breeder documents'' such as a birth
certificate or social security card. These documents are then used to
obtain genuine, albeit false, identification such as a driver's license
and passport. Now the criminal is ready to use the illegally obtained
personal identification to apply for credit cards, consumer loans or to
establish bank accounts, leading to the laundering of stolen or
counterfeit checks or to conduct a check-kiting scheme. Our own
investigations have frequently involved the targeting of organized
criminal groups that are engaged in financial crimes on both a national
and international scale. Many of these groups are prolific in their use
of stolen financial and personal identifiers to further their other
criminal activity.
It has been our experience that the criminal groups involved in
these types of crimes routinely operate in a multi-jurisdictional
environment. This has created problems for local law enforcement
agencies that generally act as the first responders. By working closely
with other federal, state, and local law enforcement, as well as
international police agencies, we are able to provide a comprehensive
network of intelligence sharing, resource sharing, and technical
expertise that bridges jurisdictional boundaries. This partnership
approach to law enforcement is exemplified by our financial and
electronic crime task forces located throughout the country. These task
forces primarily target suspects and organized criminal enterprises
engaged in financial and electronic criminal activity that fall within
the investigative jurisdiction of the Secret Service.
Members of these task forces, which include representatives from
local and state law enforcement, prosecutors' offices, private industry
and academia, pool their resources and expertise in a collaborative
effort to detect and prevent electronic crimes. The value of this crime
fighting and crime prevention model has been recognized by this
subcommittee and by Congress as a whole, directing the Secret Service
(pursuant to the USA PATRIOT Act of 2001) to expand our electronic
crime task forces to cities and regions across the country. Recently,
four new Electronic Crimes Task Forces (ECTFs) were established in
Dallas, Houston, Columbia (S.C.) and Cleveland, and additional task
forces will be added this year.
The Secret Service is actively involved with a number of
government-sponsored initiatives. At the request of the Attorney
General, the Secret Service joined an interagency identity theft
subcommittee that was established by the Department of Justice. This
group, which is comprised of federal, state, and local law enforcement
agencies, regulatory agencies, and professional organizations, meets
regularly to discuss and coordinate investigative and prosecutorial
strategies as well as consumer education programs.
In a joint effort with the Department of Justice, the U.S. Postal
Inspection Service, the Federal Trade Commission (FTC) and the
International Association of Chiefs of Police (IACP), we are hosting
Identity Crime Training Seminars for law enforcement officers. In the
last two years we have held seminars for officers in Chicago, Dallas,
San Francisco, Las Vegas, Des Moines, Washington D.C., Phoenix, New
York, Seattle, San Antonio, Providence and Orlando. In the coming
months, we have training seminars scheduled in Raleigh, Buffalo and
Denver. These training seminars are focused on providing local and
state law enforcement officers with tools and resources that they can
immediately put into use in their investigations of identity crime.
Additionally, officers are provided resources that they can pass on to
members of their community who are victims of identity crime.
Operation Direct Action (ODA), an initiative led by the Secret
Service, targets organized criminal groups that are committing large
scale financial fraud, specifically credit card ``bust out'' schemes,
which may impact our nation's financial infrastructure. A credit card
``bust out'' scheme is a type of fraud where a criminal obtains
multiple credit card accounts and manipulates the lines of credit that
are established with each card. The criminal makes payments with
convenience checks issued by another card or with non-sufficient funds
checks drawn on one of his or her many bank accounts. The criminal is
taking advantage of the lag time that will occur between when his
accounts will be credited with the payment and when the issuing banks
determine that the checks were bad.
While our task forces do not focus exclusively on identity crime,
we recognize that stolen identifiers are often a central component of
other electronic or financial crimes. Consequently, our task forces
devote considerable time and resources to the issue of identity crime.
Another important component of the Secret Service's preventative
and investigative efforts has been to increase awareness of issues
related to financial crime investigations in general, and of identity
crime specifically, both in the law enforcement community and the
general public. The Secret Service has tried to educate consumers and
provide training to law enforcement personnel through a variety of
partnerships and initiatives.
For example, criminals increasingly employ technology as a means of
communication, a tool for theft and extortion, and a repository for
incriminating information. As a result, the investigation of all types
of criminal activity, including identity crime, now routinely involves
the seizure and analysis of electronic evidence. In fact, so critical
was the need for basic training in this regard that the Secret Service
joined forces with the IACP and the National Institute for Justice to
create the ``Best Practices Guide to Searching and Seizing Electronic
Evidence'' which is designed for the first responder, line officer and
detective alike. This guide assists law enforcement officers in
recognizing, protecting, seizing and searching electronic devices in
accordance with applicable statutes and policies.
We have also worked with these same partners in producing the
interactive, computer-based training program known as ``Forward Edge,''
which takes the next step in training officers to conduct electronic
crime investigations. Forward Edge is a CD-ROM that incorporates
virtual reality features as it presents three different investigative
scenarios to the trainee. It also provides investigative options and
technical support to develop the case. Copies of state computer crime
laws for each of the fifty states as well as corresponding sample
affidavits are also part of the training program and are immediately
accessible for instant implementation.
Thus far, we have distributed over 300,000 ``Best Practices
Guides'' to local and federal law enforcement officers and have
distributed, free of charge, over 20,000 Forward Edge training CDs.
In addition, we have just completed the Identity Crime Video/CD-ROM
which contains over 50 investigative and victim assistance resources
that local and state law enforcement officers can use when combating
identity crime. This CD-ROM also contains a short identity crime video
that can be shown to police officers at their roll call meetings which
discusses why identity crime is important, what other departments are
doing to combat identity crime, and what tools and resources are
available to officers. The Identity Crime CD-ROM is an interactive
resource guide that was made in collaboration with the U.S. Postal
Inspection Service, the FTC and the IACP. To date, over 40,000 Identity
Crime CD-ROMs have been distributed to law enforcement departments and
agencies across the United States.
The Secret Service has also assigned a special agent to the FTC as
a liaison to support all aspects of the Commission's program to
encourage the use of the Identity Theft Data Clearinghouse as a law
enforcement tool. The FTC has done an excellent job of providing people
with the information and assistance they need in order to take the
steps necessary to correct their credit records, as well as undertaking
a variety of ``consumer awareness'' initiatives regarding identity
theft.
It is important to recognize that public education efforts can only
go so far in combating the growth of identity crime. Because social
security numbers, in conjunction with other personal and financial
identifiers, are used for such a wide variety of record keeping and
credit related applications, even a consumer who takes appropriate
precautions to safeguard such information is not immune from becoming a
victim.
Mr. Chairman, it is apparent that identity crime must be combated
on all fronts, from the officer who receives a victim's complaint, to
the detective or Special Agent investigating an organized identity
theft ring. The Secret Service has already undertaken a number of
initiatives aimed at increasing awareness and providing the training
necessary to address these issues, but those of us in the law
enforcement and consumer protection communities need to continue to
reach out to an even larger audience. We need to continue to approach
these investigations with a coordinated effort--this is central to
providing a consistent level of vigilance and addressing investigations
that are multi-jurisdictional while avoiding duplication of effort.
With the support of this subcommittee, the Secret Service will continue
to work to protect the nation's consumers from identity theft
criminals.
Mr. Chairman, this concludes my prepared statement. Thank you again
for this opportunity to testify on behalf of the Secret Service. I will
be pleased to answer any questions at this time.
Mr. Coble. I thank the gentleman.
And we have been joined by the distinguished gentleman from
Texas, Mr. Carter, who, along with Mr. Schiff, sponsors H.R.
1731. Good to have you with us, Mr. Carter.
Mr. Ryan, you are recognized for 5 minutes.
STATEMENT OF ROBERT F. RYAN, SENIOR DIRECTOR, GOVERNMENT
RELATIONS, TRANSUNION
Mr. Ryan. Good morning, Chairman Coble, Congressman Scott
and Members of the Subcommittee.
My name is Bob Ryan, and I am Senior Director of Government
Relations for TransUnion. We are a leading global provider of
consumer report information, supported by 4,100 employees in 24
countries. I appreciate the opportunity to appear before you
today to discuss our role in assisting consumers and our
business customers in preventing and remediating identity theft
and additional steps that can be taken to fight identity theft.
Identity theft is a serious problem and TransUnion is part
of the solution. Since the 1990's, when we developed the first
application-fraud detection services for credit granters, we
have been helping our business customers detect and avoid
application fraud and thus reducing the number of consumers
affected by identity theft.
In the mid-1980's, we were the first consumer reporting
agency to develop special procedures to assist identity theft
victims, including expedited dispute verification processes.
In the late 1980's, we developed the innovation of a
security alert flag on credit reports to alert our customers to
use extra caution in opening new accounts.
In 1992, we were the first consumer reporting agency to
establish a special Fraud Victim Assistance Group within our
organization that is solely dedicated to identity theft
problems.
In 1997, we began immediate suppression of fraud related
information on a consumer's file upon their presentation of a
police report or other documentation confirming the fraud.
In March 2000, this process became an industry standard.
Our identity-fraud specialists work with consumers, with
industry and with Government agencies to remediate damaged
credit files as quickly as possible and to take preventative
steps that reduce further victimization and to cooperate with
law enforcement authorities in their investigations and
prosecutions of this crime.
Earlier this year, we introduced our latest service for
business and Government agencies supporting both verification
and authentication of an individual's identity. Our Fraud
Management Platform service provides access to a large array of
fraud-related information with analytics and technology to
support businesses and agencies of all sizes.
Congress has also taken important steps recently with
respect to identity theft. We applaud Congress for enacting
last year, December of 2003, the Fair and Accurate Credit
Transactions Act or the FACT Act, which makes permanent
important national standards in the credit reporting system and
includes a comprehensive set of provisions pertaining to
identity theft, many of which I describe in my written
statement.
Although the ink is barely dry on the FACT Act, let me
offer six suggestions as to further steps that Congress, law
enforcement and other holders of personal information can take
to combat identity theft.
First, Congress should enact H.R. 1731 and H.R. 3693 to
improve the weapons available to law enforcement to fight
identity theft.
Second, in enacting new legislation, Congress should set
uniform national standards in order to promote better consumer
education and better implementation by those who must comply
with new laws.
Third, in considering legislation which would restrict
access to personal information held by Government agencies or
in public records, Congress should provide for continued access
for consumer reporting agencies such as TransUnion. Our
continued access to this information strengthens the quality of
identity verification and authentication services that we are
able to provide to business, Government and law enforcement.
Fourth, law enforcement's efforts to coordinate
investigations and identity-theft databases should be
encouraged.
Fifth, we would like to see a single Federal law
enforcement agency become the principal issuer of identity
theft reports to individuals who become victims. Unfortunately,
forged identity theft reports are a problem today for credit
reporting agencies. A standardized form, which the FTC has
worked toward, but with appropriate safeguards against false
claims will make it easier and simpler for victims to trigger
their rights under the Fair Credit Reporting Act and will also
allow consumer reporting agencies and financial institutions to
verify the report.
Sixth and finally, we would like to see holders of personal
information notify each individual when his or her personal
information is improperly obtained by an unauthorized person
resulting in or likely to result in identity theft. We think
holders of personal information should work with one or more
consumer reporting agencies in these cases to coordinate the
posting of security alerts and to reimburse the agencies for
the costs of supporting the consumer in posting the alerts.
At TransUnion, we are proud of our leadership in the
development of processes and procedures to prevent and
remediate identity theft.
Mr. Chairman and Members of the Subcommittee, I sincerely
appreciate your invitation to testify today. We look forward to
being part of the solution of this terrible crime and I would
be pleased to answer any questions you have.
[The prepared statement of Mr. Ryan follows:]
Prepared Statement of Robert Ryan
Mr. Coble. Mr. Cannon.
STATEMENT OF LOUIS P. CANNON, STATE LODGE PRESIDENT, DISTRICT
OF COLUMBIA, LODGE NUMBER ONE, FRATERNAL ORDER OF POLICE AND
CHAIRMAN, FEDERAL OFFICERS COMMITTEE
Mr. Cannon. Good morning, Mr. Chairman, Ranking Member
Scott and Ranking Member Conyers, distinguished Members, Mr.
Schiff and Mr. Carter.
I am a 30-year law-enforcement veteran, having served with
the Metropolitan Police Department of Washington, D.C. and
currently holding the rank of inspector with the United States
Mint Police.
Nationally, the FOP is the Nation's largest law enforcement
organization, representing more than 311,000 rank and file law
enforcement officers in every region of the country. I am here
this morning at the request of Chuck Canterbury, National
President to the FOP to discuss two pieces of legislation, H.R.
1731, the ``Identity Theft Penalty Enhancement Act'' and H.R.
3693, the ``Identity Theft Investigation and Prosecution Act of
2003'' and also give this Subcommittee the views of FOP on the
rise of identity crimes in the United States.
The technology of the Information Age has allowed criminals
to commit traditional crimes in new ways; identity theft is one
such example. A criminal who obtains key pieces of personal
information--Social Security, driver's license numbers, for
example--can then commit fraud and other crimes by purchasing
credit, merchandise and services in the name of the victim.
Identity theft is the fastest growing crime in the United
States. The Federal Trade Commission found that complaints of
identity theft increased 87 percent between 2001 and 2002, and
over 161,000 complaints were received by the agency last year.
As cited by you, Mr. Chairman, the cost of these crimes is
high. The FTC estimates the loss to businesses and financial
institutions to be approximately $47.6 billion, and the cost to
individual consumers is estimated to be approximately $5
billion.
The FOP is very pleased to have played a leadership role in
the recent enactment of S. 1581, the ``Identity Theft Victims
Assistance Act,'' which was passed as a component of H.R. 2622,
the ``Fair and Accurate Credit Transactions Act'' and signed
into law in December of last year. This legislation gives law
enforcement officers the tools to better investigate identity
theft crimes by allowing victims to designate local law
enforcement as their agent in obtaining business records,
applications for credit, records of sales and other documents
relating to ongoing fraud. Access to such records will greatly
improve the speed and effectiveness of investigations into
these types of crimes.
Without a court order, most creditors are unwilling to
divulge information to law enforcement about open accounts
because of liability concerns and a good-faith desire to
protect the privacy rights of the account holder. The new law
provides that a new business may not be held liable for any
disclosure made in good faith to further prosecution of
identity theft. This is a huge step forward for law enforcement
because of the lack of timely information about the fraudulent
transaction delays the progress of the investigation and the
chances of closing the case.
The nature of the crimes makes it difficult for local and
State law enforcement to investigate these crimes effectively
or even take a report. For example, a victim in South Carolina
has his identity stolen while on vacation in Florida, and the
information is used to buy merchandise in New Jersey. Where was
the crime committed? South Carolina, where the victim resides?
Florida where the information was stolen? Or the point of
purchase in New Jersey? What if the fraudulent purchase was
made online?
Now, the Congress has addressed one of the hurdles on the
ability of law enforcement to collect the information it needs
to investigate such crimes. We believe further Federal funding
will enable us to aggressively investigate these cases and go
after these criminals.
Legislation like H.R. 3693 offered by the Ranking Member
and Chairman of this Committee would authorize $100 million to
the Department of Justice for the investigation and prosecution
of identity theft and identity fraud cases. The legislation
does not restrict how that money might be used, allowing law
enforcement to develop and fund its best approach, be it
equipment, multi-jurisdictional task forces or grants to State
and local agencies.
Similarly, Congress should consider enhancing the available
penalties to identity criminals as contemplated by H.R. 1731.
I would like to thank the Subcommittee for asking me to
appear today, and I would be happy to answer any questions you
might have.
[The prepared statement of Mr. Cannon can be found in the
Appendix.]
Mr. Coble. Thanks to all of you for your testimony.
Gentlemen, we impose the 5-minute rule against ourselves, so if
you can keep your answers concise that will enable us to
present more questions to you.
Mr. Coleman, H.R. 3369 proposes the Department of Justice
be ultimately authorized $100 million to combat identity crime.
Given the fact that identity theft is intertwined with so many
other crimes, how do you envision that these funds will be
utilized to address this problem, A? And B, did the President
request funds to combat identity theft in his budget proposal?
Mr. Coleman. Mr. Chairman, the Department of Justice has
been acting very aggressively against identity fraud for
several years. As I mentioned earlier, in 2002, the Attorney
General announced a nationwide sweep of identity theft cases
involving 24 separate judicial districts. We are working with
State and local law enforcement, as I mentioned earlier, in
regular training conferences to engage in the technology
transfer, to teach State and local law enforcement agents to
investigate and prosecute identity theft cases.
The U.S. attorneys offices around the country along with
the Criminal Division are working very aggressively to target
identity theft cases and to aggressively prosecute those cases.
We appreciate the support of law enforcement. We greatly
appreciate the proposed legislation contained in H.R. 1731,
which we believe is a tailored, targeted and appropriate
response to the growing problem of identity fraud.
We believe that the President's budget, the
Administration's budget, contains sufficient resources to
support the Department's effort against identity fraud and to
support all the efforts in our work with State and local law
enforcement, the U.S. attorneys offices, the Criminal Division
and working with regulatory agencies like the FTC, the law
enforcement agencies like the Secret Service. We greatly
appreciate the Subcommittee's support of these efforts.
Mr. Coble. What was the President's request in his budget
for this?
Mr. Coleman. Mr. Chairman, I don't know that is there a
specific figure in the President's budget that is earmarked or
somehow identified to identity theft.
Mr. Coble. Mr. Johnson, after having reviewed the two bills
before us, would you offer changes, additions or removals, from
either of the two bills that would make them more appropriate
in your mind?
Mr. Johnson. Mr. Chairman, not at this time would we
recommend any changes. The Secret Service believes that the
legislation has merit as an individual tool that law
enforcement can use to protect critical infrastructure and
financial infrastructures.
Mr. Coble. Mr. Ryan, in your testimony, you advocate the
development of national standards for the protection of
personal information. Elaborate on this suggestion and what
type of standards would you suggest.
Mr. Ryan. Mr. Chairman, for example, there are--there are
several active public policy issues that are either before
Congress or will come before Congress. One example, perhaps,
would be in the protection of Social Security numbers. There
are various bills that would ban the public display and
availability of Social Security numbers. Obviously, we support
that.
But that would also restrict the use and the ability to
gather Social Security numbers that can be important for credit
grantors and financial institutions. So if and when Congress
takes up a set of restrictions on the use and publication and
openness of Social Security numbers, it makes a lot of sense
from our perspective that would set a national standard so we
don't have different rules among the States.
Mr. Coble. Mr. Cannon, as with many criminal
investigations, sharing information within the law enforcement
community is crucial. With regard to identity theft cases, what
partnerships have local departments formed with Federal law
enforcement agencies to address the problem?
Mr. Cannon. There are a number of multi-jurisdictional task
forces. I must credit the Secret Service also, in fact, for the
training they provide to the local jurisdictions in being able
to know what to look for and, once they know what to look for,
then where to go with it. So that is a key component.
Mr. Coble. I thank you. I recognize the gentleman from
Virginia.
Mr. Scott. Thank you, Mr. Chairman.
And I want to thank Mr. Cannon for his willingness to come
at the late hour. We had another witness scheduled who,
unfortunately, had to cancel, and we appreciate you filling in.
You mentioned the case where someone had lived in one
State, lost credit information in another; the credit
information was used in a third. You represent mostly local and
State officials and some Federal.
Mr. Cannon. I represent everybody. If they wear a badge, I
am representing them.
Mr. Scott. Most would be local and State.
Mr. Cannon. I represent quite a few of those. I do have a
significant amount of Federal law enforcement officers in my
organization here in D.C.; and having served on both sides, I
feel both pains.
Mr. Scott. Let me ask you, if someone were to be the victim
in that situation, who would they call?
Mr. Cannon. They are going to pick the phone up and call
911 and get the local officer to come out, whether it be the
municipal police officer, the county sheriff or the township
officer. And that is one of the key things--that individual has
to have a central place to go. And the training that is
needed--Secret Service provides great training in regards to
that. I was pleased to hear something in regard to a central
clearinghouse.
Secret Service does--and I am sure Mr. Johnson is going to
love me putting work on him--the Secret Service does have a
tremendous resource available to serve as a focal point for the
collection of certain data that, once that data is then
collected, it can then be used, similar to the NCIC system that
is currently in place by the FBI.
The people involved in identity theft, they don't do it
once. They are involved in multiple identity thefts spanning
the Nation. As a matter of fact, I don't know whether I can say
luckily, but fortunately, I just finished working an identity
theft case for the U.S. Mint where an employee had stolen
someone else's credit card and then used that it. And the
actual victim in this one was the Federal Government--by
stealing this individual's Government credit card. And he
didn't stay in D.C.; he went around doing this.
One of the problems is, once we get this investigation
underway and we identify the different jurisdictions, there is
no coordinated prosecution effort that we could use at that
point. We were able to prosecute him in multiple States, but
then you get the problem of who comes first, who is going to
get him, where is he going to serve the time?
Mr. Scott. There is enough of a paper trail out there that
if somebody investigated it, you could solve the crime?
Mr. Cannon. Absolutely.
Mr. Scott. In a normal case where you call the credit card
company--when you find out there are some bogus charges, you
call your credit card company, they cancel the card, does
anybody ever at that point--and cancel the charges, so that the
card holder isn't at a loss--how many people--do the people
call the police?
Mr. Cannon. The first call isn't to the credit card
company. A lot of times it is the credit card company telling
you that your identity has been stolen. And then at that point,
a lot of times the police or law enforcement is never notified
of that. That is also a problem, because if you don't know what
is going on, then you can't combat it.
If you have a group working a specific area that could be
isolated and the Secret Service could identify, they need to be
on top of it as quickly as possible. But the failure to notify,
that creates a whole separate problem there.
Mr. Scott. Mr. Ryan, if people actually did notify--I mean
you have access to all the problems that occur. What would
happen if people notified the police? Do they have enough
resources to actually follow through on all of these cases?
Mr. Ryan. Congressman Scott, I can't really speak. My sense
is that law enforcement does need more resources at all levels,
local, State and Federal. That would be speaking as a layman.
Our company works closely with law enforcement. But more
resources are important from our perspective.
Mr. Scott. How often does your agency report run of the
mill credit card fraud to the police? Is that a routine
referral--every time you get somebody with a stolen credit
card, you routinely report it to the police?
Mr. Ryan. What is more routine, Congressman, is when we
have evidence of rings--keep in mind that there are two broad
forms, I would say, of identity fraud. There is still--although
rings are a very important and growing most sinister part of
it, there is also a good deal of identity fraud that is a crime
of opportunity by family members.
And so our management of our fraud victim unit will pick up
the phone and call their appropriate law enforcement. We have
excellent relations with the Secret Service, FBI, with local
law enforcement agencies, financial crime units, et cetera. Our
folks will pick up the phone and call appropriate law
enforcement when we uncover or we know about a ring. We know
that they will want to know about it.
Mr. Coble. The gentleman from California, Mr. Schiff.
Mr. Schiff. Thank you, Mr. Chairman.
I want to begin by thanking my colleague, Mr. Carter, for
his initiative on this issue.
It has been a pleasure working with you and your staff.
The bill was originally introduced in the Senate, Senator
Feinstein and Senator Kyl having worked with the Justice
Department. Did you work with them on the drafting at that
time?
Mr. Coleman. I did not. I was still in the Southern
District of New York as a line prosecutor at that time.
Mr. Schiff. Couple of questions about some of the language
in the bill, trying to get a sense of the scope of the
language. In section A where the offenses are defined, it
refers to a means of identification of another person. I take
it by the choice of that language that these enhancements apply
when the fraudulent identification is that of another existing
person, either live or deceased, but an actual individual, so
in the case of a garden-variety immigration case where somebody
fabricates an identity card out of whole cloth, not referring
to any other person but merely invents a persona, that that
would not be included within the sweep of this.
[11 a.m.]
Mr. Coleman. I believe that is correct. That is my
understanding of how the legislation was drafted in my
construction of the plain language. Presumably a court could
take a different view in a particular case, but I believe it is
fair to say that, on the face of it, the plain language would
exclude cases of a fictitious identity as opposed to the theft
of an existing identity.
Mr. Schiff. I think that is significant. I think that is
correct looking at section 1028, which is also distinguished in
its use of language between the possession of a false
identification document and a means of identification of
another person. But the reason I think it is significant is
that otherwise you would potentially have an enhancement for
everyone who illegally enters the country, that they would be
committing one crime entering the country and they would be
committing a second crime having a false document, but there
wouldn't be another victim in the sense that no one's identity
had been stolen to facilitate that crime.
The other question I wanted to ask refers to the changes
that are made to section 1028 (a)(3) in section 3 of the bill,
and that is a--what the bill changes is subsection 7--
(a)(7)--which provides for currently the transfer or use
without lawful authority of the means of identification of
another person. This would add possession to that.
I guess my question is, much of subsection (7) overlaps
with subsections (1), (2) and (3) in the sense that subsection
(a)(1) says if you knowingly produce a document, subsection (2)
is if you knowingly transfer a document, and subsection (3) is
if you knowingly possession five of these. What do you add with
subsection (7) other than the fact that you don't need five of
these anymore that is not already covered in (1), (2) and (3)?
Mr. Coleman. Well, I believe the one that jumps out at me
is the possession prong, so that it is no longer required to
show a transfer, necessarily. The prosecutor can simply prove
that the defendant possessed a stolen identity in order to
satisfy the requirements of 1028(a)(7).
Mr. Schiff. In 1028(a)(3) possession is also all that is
required. You are required to possess five of these. I guess my
question was, if we reduce five to one, would that accomplish
the same goal?
Mr. Coleman. It may do that. I would have to look at it a
little more closely and consult with my colleagues, but I
believe that may satisfy that same goal.
Mr. Schiff. Do you know whether in the sentencing
guidelines the guidelines distinguish between the recommended
sentence or the range for the use of a fraudulent ID that is
not based on a real person and the use of a fraudulent ID that
has been appropriated from a real person?
Mr. Coleman. I believe that the current state of the
guidelines are more restrictive in that they require proof of
such facts as producing multiple identity documents with an
access device that creates identification cards or
identification devices. I don't believe that there is any
enhancement for the mere possession of a stolen identity. So
this would----
Mr. Schiff. I understand that. But my question is, under
existing law or under this new statute there are two kinds of
identity crimes: One is where you create a false ID which is
prohibited by 1028; the other is where you basically
appropriate the ID of another person. In the one case, you have
committed a crime, but there is no individual other victim out
there, the society as a whole is a victim. In the second case,
you have the society as a whole as a victim, but somebody's
identity has been stolen and has therefore suffered the loss of
the identity and having to go through all the trouble of
correcting that.
I was wondering if the sentencing guidelines currently
distinguish between the two of the greater recommended
sentences for where you appropriate someone's ID and where you
fabricate one out of whole cloth.
Mr. Coleman. I don't believe they do. I don't believe the
guidelines recognize the increased damage that is caused by
hijacking the identity of an existing individual as opposed to
just creating a fictitious identity. That is one of the
benefits that the Department sees in the proposed legislation.
Mr. Schiff. Thank you, Mr. Chairman.
Mr. Coble. The gentleman's time has expired.
Even though Mr. Carter does not sit as a Member of the
Subcommittee, he is a sponsor of one of the two bills before
us. I will recognize him without objection for 5 minutes.
Mr. Carter. Thank you, Mr. Chairman. Thank you, Ranking
Member.
I want to ask you a couple of questions. In his testimony--
this is to Mr. Coleman. In his testimony in a joint hearing
last year for this Subcommittee and the Subcommittee on
Immigration, Border Security, and Claims on identity theft and
identity fraud, U.S. Attorney Paul McNulty testified I think
that probably the most significant weakness has been identified
by the Attorney General in the proposal to increase the
penalties for general false identity statute which is 18 USC
1028. The problem with the statute is that the penalties
essentially don't have any effect whatsoever. They are
essentially lumped in with the underlying fraud that is
occurring. So there is no incentive whatsoever to prosecute
someone for identity card possession in combination with the
false form that has been filled out.
H.R. 1731 has been drafted in response to this concern.
Would you mind elaborating on what those weaknesses are and
discuss how H.R. 1731 will address them?
Mr. Coleman. I would be happy to do that. Let me start,
Representative Carter, by saying how grateful the Department of
Justice is for your sponsorship of this legislation and your
commitment to addressing this important problem, as we are
grateful to Mr. Schiff's cosponsorship of the bill.
With the existing penalties for identity theft, a
prosecutor like myself will ordinarily charge some other crime
that has a higher penalty. For example, if the defendant
committed mail fraud or wire fraud and also committed identity
theft as defined by section 1028(a)(7), the usual practice is
simply to charge the most serious readily provable offense,
which is usually something else.
There are rare cases--and I say rare based on several years
of experience handling all types of fraud cases, that the case
is rather rare where identity theft as currently defined under
section 1028(a)(7) is the most serious readily provable
offense. So adding an identity theft charge under existing law
does two things: It makes the case harder to prove and harder
to charge, but it does not increase the potential sentence. So
for a prosecutor there is very little incentive to charge
identity theft under existing law, and there is very little
incentive for criminals to alter their conduct by avoiding
committing identity theft. If they are going to commit a crime
anyway, they don't get any worse punishment by adding identity
theft to it.
H.R. 1731 is targeted at exactly that problem that U.S.
Attorney McNulty articulated so eloquently in his previous
testimony, and we believe that H.R. 1731 would result in much
more frequent charging of identity theft and send a message
that this is a serious crime that is being addressed seriously.
Mr. Carter. Thank you.
I will address this to everybody out there. The Social
Security Administration Office of the Inspector General has
suggested to this Committee that two felony violations not
currently listed in 18 USC 1028(a)(3) that could involve the
transfer, possession, and use without lawful authority of any
other personal means of identification, that this should be
added to this bill. These are 18 USC 371 relating to conspiracy
to commit offense against or defraud the United States, and 18
USC 641 relating to the theft of public money, property, or
records.
Given the dramatic increase of identity theft actions
against the Federal benefits programs such as Social Security
benefits, veterans benefits, workmen's compensation benefits,
Medicare fraud, shouldn't 18 USC 371 be included in this bill?
Does anybody want to address that?
Mr. Coleman. Representative Carter, the Department has not
taken a formal position on that proposal, but we are a little
bit concerned about the inclusion of section 371. It does give
some pause to consider including that particular provision,
which Mr. Schiff and other prosecutors know is often referred
to as ``the prosecutor's darling.'' I would say the vast
majority of Federal criminal cases include a conspiracy charge,
and that really changes the tenor of the legislation. It would
change the tenor of the legislation from a narrowly focused and
targeted enhancement to the existing identity theft law to a
much broader change in the Criminal Code.
Mr. Carter. One more question. Somebody might know the
answer to this.
The other day I was happening to dig through some old
papers. I found an original Social Security card for my father,
and printed at the bottom of the card it said ``Not For
Identification Purposes.'' what happened? Does anybody have any
idea why all of a sudden our grades are posted in college by
Social Security numbers and so many other things are done as
identifier when it was clearly designated in the original
Social Security it was not for identification purposes? Anybody
know the answer?
Mr. Ryan. I will step forward, Congressman. Because it
possessed the virtue of being a unique identifier that bridges
all systems, all other infrastructure. So over time it came to
be exploited.
Mr. Carter. It is also becoming a unique door-opener to get
into some of this stuff.
Mr. Schiff. Would the gentleman yield for a moment?
Mr. Carter. Yes, sir.
Mr. Schiff. It is an interesting question, if this is your
father's identification.
Mr. Carter. Yes. It was probably an original.
Mr. Schiff. If someone stole your father's Social Security
card and used it, there would probably be a problem of proof
because it says on it Not For Identification Purposes. So would
it be an identification document under the section if the card
itself says not for identification purposes?
Mr. Carter. It probably would not. I agree. But it is
interesting that it has changed so much in the history of this
country.
Mr. Coble. The gentleman's time has expired.
Folks, I think we have time for a second round. Let me
start a second round here.
Mr. Coleman, I am told that many criminals purchase a
document or breeder document which enables them to obtain
legitimate Social Security numbers and other genuine documents.
What can be done to combat this growing problem?
Mr. Coleman. Mr. Chairman, this is exactly the type of case
that we believe H.R. 1731 would help to remedy. In many of
these cases identity theft offense is a derivative offense.
There is some other Federal crime that is being committed,
whether it is mail fraud, wire fraud, embezzlement or some
other baseline offense. Identity theft goes on top of that and
makes it worse; and in some of these breeder cases H.R. 1731
would define that kind of conduct as more serious conduct, as
aggravated identity theft and impose enhanced penalties for
that type of conduct. It would also streamline the proof
process so that prosecutors would not be constrained by State
law requirements in order to effectively prosecute these cases.
So we believe that that is a good illustration of why this
legislation would help to address the problem.
Mr. Coble. Mr. Johnson, insider threat whereby employees
have access to information that they subsequently use to their
own benefit to the detriment of innocent third parties, what
steps do you think the Congress can take to address these
insider threat activities and what can employers do to prevent
such threats that they may not be doing now?
Mr. Johnson. Currently, the Secret Service, in conjunction
with CERT and Carnegie Melon University, are conducting an
inside threat study due for release in the coming months. That
would help private industry, businesses, help them identify the
insider threat that they may have in their company. What we
have seen with companies in insider threats or what we suggest
to those companies are, when the employee leaves the company,
is to erase their access or deny their access to the systems
that they once were privy to. Also to change the fire wall,
change passwords.
You can go to different--a lot of companies will not do
that initially, and often it comes back to be--if an intrusion
or the system is taken down, it is a lot easier for the Secret
Service to investigate an insider threat as opposed to a
hacking situation that may come from another country. It makes
it much more difficult. So, basically, Mr. Chairman, it is a
common sense issue to dealing with your employee.
Mr. Coble. Thank you, Mr. Johnson.
Mr. Ryan, I read a recent article in North Carolina about
an employment agency that went out of business; and they left
all the job applications along with photocopies of drivers
licenses, Social Security numbers, et cetera, in a box on the
curb to be collected as garbage. What can be done to address
the issue of third party handling of personnel--personal
information such as I just outlined?
Mr. Ryan. Mr. Chairman, I feel more comfortable speaking
within the framework of financial institutions and consumer
credit reporting agencies. Within that universe we are covered
by the information safeguarding rules of Gramm-Leach-Bliley,
Fair Credit Reporting Act that has certain provisions dealing
with the safeguarding of disposed information. I am a little
out of my realm in dealing with a firm that is not governed
under financial institutions or credit reporting law.
Mr. Coble. Do any of the other witnesses feel comfortable
putting your oars into those waters? The situation seems to me
invites problems when you abandon property like that and just
leave it to the public at large.
In any event, thank you, gentlemen.
I recognize the gentleman from Virginia.
Mr. Scott. Thank you, Mr. Chairman.
Mr. Coleman, when you use the term ``identity theft,'' what
portion of those kinds of cases are consumer identity theft as
opposed to immigration or other kinds of identity theft?
Mr. Coleman. Representative Scott, I don't have the
numbers. I don't have the breakdown by consumer cases as
opposed to immigration or other offenses, so I wouldn't even
want to hazard a guess.
Mr. Scott. It has been estimated that over nine million
people last year were victims of identify theft. How many of
those cases were investigated as crimes?
Mr. Coleman. Again, I don't have the figures, but one would
have to total up all of the Federal cases that were
investigated either as identity theft cases and charged as
identity theft cases or charged as something else, which is
usually more common, theft or fraud or any number of other
crimes. Then you would have to add on top of that State crimes,
local law enforcement matters, matters that were not charged.
So it would be a hard task to get that figure, I believe.
Mr. Scott. If we just looked at the kind of credit theft
where you use somebody's credit, either credit card or get a
mortgage in somebody else's name and run away with the money,
doesn't matter what you charge it as--I mean, it is nice to
call it identity theft but, if you catch the guy and send him
to jail, it doesn't matter what you are convicted of. It
doesn't seem to me that it is important what code section you
got them under. You caught them and you sent them to jail.
How many people would be subject to prosecution under H.R.
1731 that are not subject to prosecution?
Mr. Coleman. It is hard to put an exact figure on it, but
we believe that the number of identity theft prosecutions would
increase substantially.
Mr. Scott. How many prosecutions would go up? I mean, is
there anybody out there that is committing a crime that would
be subject to prosecution under H.R. 1731 that is not already
subject to prosecution?
Mr. Coleman. Certainly there was a gap in existing law
which covered international terrorism cases but not domestic
terrorism cases. So that the proposed legislation H.R. 1731
fills in a gap in those types of cases by creating a 5-year
enhanced penalty for identity used in the service of terrorism.
Mr. Scott. But you could have convicted the person of
terrorism anyway.
Mr. Coleman. Well, when you say we could have convicted the
person of terrorism, there are often difficulties in the proof.
There are often difficulties in finding an appropriate charge
and proving an appropriate charge.
One of the great benefits of the proposed legislation is it
defines a category of aggravated identity theft, and it
streamlines and simplifies the proof process so that we, as
prosecutors, are not constrained by, for example, State law,
mental State requirements that often create problems with
prosecuting these cases.
Mr. Scott. Do you have many people who are being charged
for subsequent offenses, that is to say, that the penalty for
the first offense didn't deter them from doing it again?
Mr. Coleman. Again, I don't have figures on that. Certainly
there would be increased penalties simply based on the criminal
history provisions of the sentencing guidelines for recidivist
offenders. But given many of the cases that we have seen of
identity fraud result in sentences that do not adequately
reflect the seriousness of the conduct, we believe that there
is great need for additional deterrence and that this
legislation improves that.
Mr. Scott. But you are not aware of anybody who--many
people that have been convicted of second offenses.
Mr. Coleman. Again, Representative Scott, I don't have the
figures; and I wouldn't want to guess.
Mr. Scott. How often does the Department of Justice
prosecute cases where the loss is under a couple of thousand
dollars?
Mr. Coleman. There are substantial number of those cases.
Again, I don't have statistics that I could cite to you, but
certainly in my own experience as a prosecutor I have handled
small cases. There is a famous Supreme Court case, whose name I
can't remember sitting here, which says that there is a long
history in this country of deciding important issues on cases
that involve no more than a few dollars.
So there are resource constraints that cause U.S. Attorneys
Offices, for example, to turn away cases that are not above a
certain limit, but there are exceptions to that that allow us
to bring smaller cases.
Mr. Scott. That is fine. One of the bills before us will
address that resource problem. Thank you.
Mr. Coble. I thank the gentleman.
The gentleman from California.
Mr. Schiff. Mr. Chairman, I wanted to follow up on the
issue that I discussed a little earlier and that is the
language and means of identification of another person. In the
first section that provides the 2-year enhancement it makes
reference to means of identification of another person, which I
think is an appropriate narrowing of the statute so that it
doesn't reach everyone who commits an immigration violation
which, like incorporating 371, would expand the scope of this
very significantly. It also recognizes that there is no second
victim in the case of someone who merely uses a false document
not attached to another real person.
But I wonder whether the same logic applies to the
terrorism enhancement. The gravamen of the terrorism offense is
so significant in most of the sections that the threat of the
consecutive sentence for the false ID is a relatively minor
factor. When you look at some of the sections in 2332 that
apply to acts of terrorism, transcending national boundaries,
relating to biological weapons, relating to chemical weapons,
relating to kidnap or killings of congressional, Cabinet, or
Supreme Court members, nuclear materials, plastic explosives,
probably the last thing to be concerned about by potential
terrorist is an enhancement for having a false ID.
But there are a few sections in here such as those relating
to providing material support for terrorists, relating to
providing material store for terrorist organizations, relating
to financing of terrorism, where the section may be more
significant.
I wonder, because the range of offenses is so narrow here
and you don't have the same concern that you would in the first
section, whether it would make sense to include not only when
you use the means of identification of another person but when
you use a false or fraudulent identification document, whether
or not it pertains to another person.
If a member of al-Qaeda or someone supporting al-Qaeda with
a financial support is using false identification to do so, we
probably don't need to be as concerned about the fact there is
no additional individual victim whose identity is stolen but
the fact that they are using this technique that gives
prosecutors another tool to go after them.
So we may want to think about whether it makes sense that--
given the scope of the list of offenses is so narrow in part 2
and whether the scope of the documents that are used can be
broader.
Mr. Coleman. We would certainly be happy to work with the
Subcommittee to try to refine some of those definitions and
work on the drafting to see if there were a way to address
those concerns either in this legislation or perhaps in a
separate piece of legislation.
Mr. Schiff. For example, if someone uses a false document
to come into the country to hijack a plane to crash into a
building, the fact that that false identification document
isn't connected with a real person is of very little
significance. If you arrest them before they commit the act and
you can prove that it was in connection with a conspiracy to
commit the act, you would certainly, I think, want the ability
to make use of this section.
I yield back.
Mr. Coble. I thank the gentleman.
The gentleman from Texas is recognized for 5 minutes.
Mr. Carter. Thank you, Mr. Chairman. I would like to thank
you, Mr. Chairman, and your staff for holding this hearing. I
would like to thank Congressman Schiff for joining me in
support of this legislation.
Gentlemen, I have one simple question. Is there anything--
and I--first let me say that what Congressman Schiff was
talking about makes good sense to me and maybe that is
something we need to look at. Is there anything that you can
think of that will make this a better piece of legislation that
we should consider at this time? And I will lay that out for
any of you and all of you. Does anyone have any suggestions of
anything we could add that would improve this?
Mr. Coleman. Representative Carter, sitting here today, the
Department doesn't have any suggestions for additional matters,
but we would certainly be happy to work with the Committee to
examine other possibilities.
Again, we greatly appreciate your support on this issue.
Mr. Carter. Thank you, Mr. Chairman. I yield back my time.
Mr. Coble. I thank the gentleman.
Gentlemen, again we thank you.
Mr. Scott. I would ask unanimous consent that the record
include a copy of the speech given by Supreme Court Justice
Kennedy on August 14, 2003, in which he discusses mandatory
minimums.
Mr. Coble. Without objection, it will be received in the
record.
[The speech given by Supreme Court Justice Kennedy can be
found in the Appendix.]
Mr. Coble. I thank you all for your testimony. The
Subcommittee very much appreciates your contribution and those
in the audience as well.
This concludes the legislative hearing on H.R. 1731, the
``Identity Theft Penalty Enhancement Act,'' and H.R. 3693, the
``Identity Theft Investigation and Prosecution Act of 2003.''
The record will remain open for oneweek. Thank you for your
cooperation.
The Subcommittee stands adjourned.
[Whereupon, at 11:30 a.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Prepared Statement of Louis P. Cannon
Good morning, Mr. Chairman, Ranking Member Scott and distinguished
members of the House Subcommittee on Crime, Terrorism and Homeland
Security. My name is Lou Cannon, and I am a 22-year veteran of the
Washington, D.C. Metropolitan Police Department and currently serve as
an Inspector with United States Mint Police. I am also the elected
President of District of Columbia Lodge #1, which represents more than
9,500 law enforcement officers throughout the greater Washington, D.C.
metropolitan area. Nationally, the F.O.P. is the nation's largest law
enforcement labor organization, representing more than 311,000 rank-
and-file law enforcement officers in every region of the country.
I am here this morning at the request of Chuck Canterbury, National
President of the F.O.P. to discuss two pieces of legislation, H.R.
1731, the ``Identity Theft Penalty Enhancement Act of 2004'' and H.R.
3693, the ``Identity Theft Investigation and Prosecution Act'' and also
to give this Subcommittee the views of the Fraternal Order of Police on
the rise of identity crimes in the United States.
The technology of the information age has allowed criminals to
commit ``traditional'' crimes in new ways. Identity theft is one such
example. A criminal who obtains key pieces of personal information--
Social Security and driver's license numbers, for example--can then
commit fraud and other crimes by purchasing credit, merchandise and
services in the name of the victim.
Identity theft is the fastest growing crime in the United States.
The Federal Trade Commission (FTC) found that complaints of identity
theft increased eighty-seven percent (87%) between 2001 and 2002, and
more than 161,000 complaints were received by the agency last year.
The cost of these crimes is high. The FTC estimates that the loss
to the businesses and financial institutions to be approximately $47.6
billion, and the cost to individual consumers is estimated to be
approximately $5 billion.
The F.O.P. was very pleased to have played a leadership role in the
recent enactment of S. 1581, the ``Identify Theft Victims Assistance
Act,'' which was passed as a component of H.R. 2622, the ``Fair and
Accurate Credit Transactions Act'' and signed into law in December of
last year. This legislation gives law enforcement officers the tools to
better investigate identity theft crimes by allowing victims to
designate local law enforcement as their agent in obtaining business
records--applications for credit, records of sales, and other
documents--related to ongoing fraud. Access to such records will
greatly improve the speed and effectiveness of investigations into
these types of crimes. Without a court order, most creditors are
unwilling to divulge information to law enforcement about open accounts
because of liability concerns, and a good faith desire to protect the
privacy rights of the account holder. The new law provides that a
business may not be held liable for any disclosure made in good faith
to further a prosecution of identity theft. This is a huge step forward
for law enforcement because the lack of timely information about the
fraudulent transactions delays the progress of the investigation and
the chances of closing the case.
Now that Congress has addressed one of the hurdles on the ability
of law enforcement to collect the information it needs to investigate
such crimes, we believe that further Federal funding will enable us to
aggressively investigate these cases and go after these criminals.
Legislation like H.R. 3693, offered by the Ranking Member and
Chairman of this Subcommittee would authorize $100 million to the
Department of Justice for the investigation and prosecution of identity
theft and identity fraud cases. The legislation does not restrict how
that money might be used, allowing law enforcement to develop and fund
its best approach, be it equipment, multijurisdictional task forces, or
grants to State and local agencies.
Because the nature of these crimes make it difficult for local and
State law enforcement to investigate these crimes effectively--or even
take a report--the F.O.P. believes that enhanced funding will have a
positive effect on the ability of law enforcement to investigate and
close these types of cases. For example, a victim in South Carolina has
his identity stolen while on vacation in Florida and the information is
used to buy merchandise in New Jersey. Where was the crime committed--
in South Carolina, where the victim resides; in Florida, where the
information was stolen; or the point of purchase in New Jersey? What if
the fraudulent purchase was made online? Identity theft crimes require
a great deal of coordination and cooperation between law enforcement
agencies. To us, it only makes sense to provide greater resources to
address a type of crime that is on the rise.
Similarly, Congress should consider enhancing the available
penalties to identity criminals, as is contemplated by H.R. 1731.
I want to thank Ranking Member Scott for inviting me to appear
before the Subcommittee today, and I would be happy to answer any
questions you might have.
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress From the State of Texas
Speech Given by United States Supreme Court Justice Anthony M. Kennedy