[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



















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