Identity Theft vs. Identity Fraud: What is the Difference? + 4 APIs for Fraud Prevention
Have you ever wondered how secure your business is against identity theft and identity fraud? Luckily, there are processes you can follow to protect yourself against these two scenarios, especially if you’re in one of the seven industries mentioned in this blog. These are serious problems affecting not only businesses, but individuals as well.
Understanding these terms and processes, and knowing how to protect against them, is crucial. So, today, we will clarify the differences between the two and introduce four powerful APIs that help combat against them.
Identity Theft Meaning
Identity theft happens when someone steals your personal information and then assumes your identity. This could be your Social Security number, credit card details, or bank account information. Thieves can then use this information to access finances, open new accounts, or commit other crimes under this newly assumed name (this is the fraud aspect, defined in the next section).
Common Methods of Identity Theft:
- Phishing: Scammers send fake emails or messages that appear legitimate, tricking recipients into providing personal information. These messages often look like they come from trusted sources, such as banks, employers, or social media platforms. By filling out a form, clicking on a link, or downloading an attachment, victims unknowingly give thieves access to their information.
- Data Breaches: These types of activities make headlines in the news consistently. Hackers target companies with large databases of customer information. When they successfully breach these systems, they can steal sensitive data like Social Security numbers, credit card details, personal contact information, etc. Companies of all sizes, from small businesses to large corporations, are at risk.
- Skimming: Thieves install small devices on ATMs, gas pumps, or point-of-sale terminals to capture credit card information during transactions. These devices are often hard to detect and can store large amounts of data, which the thief then retrieves later.
- Mail Theft: Criminals steal physical mail to gather information such as bank statements, credit card offers, and other documents containing personal details. They can then use the stolen information to commit fraud, such as opening new accounts or redirecting mail to a different address.
Identity Fraud Meaning
Identity fraud occurs when someone uses stolen information to deceive or commit crimes. It’s the next step after identity theft. For example, a thief uses your Social Security number to apply for a credit card or other type of loan.
Common Types of Identity Fraud:
- Financial Fraud: Thieves open new credit accounts, take out loans, or make unauthorized purchases using stolen information. Victims may not realize their identity has been stolen until they notice unexpected charges or receive bills for accounts they didn’t open.
- Medical Fraud: Using someone else’s identity to receive medical treatment, prescription drugs, or other healthcare services. This type of fraud can result in incorrect medical records and negatively impact the victim’s healthcare standing.
- Criminal Fraud: When an arrested individual provides stolen personal information, it can create a criminal record for the victim. This can lead to legal complications and damage the victim’s reputation.
Key Differences Between Identity Theft and Identity Fraud
Identity Theft:
- Stealing personal information.
- Involves various methods like phishing and skimming.
- Targets anyone with valuable information.
Identity Fraud:
- Using stolen information for illegal activities.
- Includes financial, medical, and criminal fraud.
- Causes financial loss, legal headaches, and damages your reputation.
4 APIs for Fraud Prevention
APIs can be your powerful allies in the fight against identity theft and fraud. They can verify identities and mitigate risks, providing you with a robust defense. Here are four essential APIs:
Verification APIs
1. Skip Tracing API
Skip tracing API helps locate individuals by using various data points. This tool is crucial for debt collectors, investigators, and businesses needing to verify someone’s whereabouts. Skip tracing combines data from private data sources and public records to find accurate information.
Benefits:
- Finds accurate information, such as SSN, addresses and phone numbers.
- Helps verify identity by cross-referencing data.
- Essential for debt collection and background checks.
2. People Search APIs
People search APIs provide comprehensive information about individuals. This includes their contact details, address history, dates of birth, and other relevant information. Businesses use this API to verify identities and ensure they deal with legitimate customers.
Benefits:
- Offers detailed personal information.
- Verifies identity through multiple data points and sources.
- Crucial for customer verification (Know-Your-Customer) and background checks.
Risk Management & Fraud Prevention APIs
This API matches Social Security numbers with names to verify identities. It’s vital for businesses to ensure their customers or employees are who they claim to be. It helps prevent fraud by detecting mismatches early.
Benefits:
- Confirms identity by matching SSN and full or partial name.
- Reduces the risk of identity fraud.
- Ensures accurate employee and customer records.
2. Terrorist Watchlist (OFAC) API
The OFAC (Office of Foreign Assets Control) API checks individuals against government watchlists. This API is crucial for businesses that need to comply with regulations and prevent illegal activities. It also helps identify individuals involved in terrorism or other crimes.
Benefits:
- Checks names against government watchlists.
- Ensures compliance with regulations.
- Helps prevent criminal activities.
6 Industries That Should Highly Prioritize Identity Verification
Certain industries are more vulnerable to identity theft and fraud. Prioritizing identity verification in these sectors is essential.
1. Financial Services
Banks, credit unions, and loan processors handle sensitive information. Identity verification prevents fraud and ensures compliance with regulations like Know-Your-Customer (KYC) regulation.
2. Healthcare
Hospitals, clinics, and insurance companies manage personal and medical information. Identity fraud in healthcare can lead to incorrect medical records and insurance fraud.
3. E-commerce
Online retailers face significant risks from identity fraud, especially with card-not-present transactions. Verifying customer identities using People Search APIs reduces the risk of fraudulent transactions and chargebacks.
4. Telecommunications
Telecom companies must verify customer identities to prevent fraud and ensure regulatory compliance. People Search APIs help verify new customers’ identities to avoid misusing services to scam people.
5. Government Agencies
Government agencies handle various services, from social security to driver’s licenses. Verifying identities ensures only eligible individuals receive benefits and services.
6. Legal Services
Law firms and legal service providers handle sensitive client information. They also face a significant number of investigative cases that require accurate information and findings about the parties involved. One API that can highly elevate their game is the Skip Tracing API.
How to Implement Fraud Prevention APIs
Step 1: Identify Your Needs: Determine what kind of identity verification or fraud prevention your business requires. This will help you choose the right API.
Step 2: Integrate the API: Work with your IT team to integrate the API into your software, website, or application. All APIs come with documentation to help with this process.
Step 3: Test the API: Before fully implementing the API, test it to ensure it works as intended. This step helps to identify any issues early in the process.
Step 4: Monitor and Update: Regularly monitor the API’s performance and update it as needed. This ensures continued effectiveness in preventing fraud.
Benefits of Using APIs for Fraud Prevention
1. Increased Security: APIs provide a secure way to verify identities and prevent fraud. They use advanced algorithms and various data sources to cross-check information and detect anomalies.
2. Cost-Effective: Using APIs can be more cost-effective than traditional methods. They automate many processes, reducing the need for manual work.
3. Compliance: APIs help businesses comply with regulations by ensuring they verify identities and check against watchlists. This prevents legal issues and fines.
4. Improved Customer Trust: Customers trust businesses that protect their information. Using APIs for identity verification shows you take data security seriously.
Challenges and Solutions in API Integration
Data Accuracy: APIs rely on accurate data to function correctly. Ensure your data sources are reliable and regularly updated.
Integration Issues: Integrating APIs can be complex. Work closely with your IT team and use the provided documentation to streamline the process.
Cost: While APIs can save money in the long run, there is an initial cost. Evaluate your budget and choose APIs that are the best value for your needs. It would be best to ask a third-party data company whether they offer cumulative-volume-based pricing like Searchbug, rather than locked-in subscriptions and firm commitment requirements like most of our competitors.
Regular API Monitoring
Regularly monitoring API performance is crucial to ensure the effectiveness of identity verification and fraud prevention. Here’s what you need to do to keep your fraud prevention processes on track:
- Continuously monitor the API’s performance to identify any anomalies or issues. Use automated tools to track usage and detect unusual patterns that may indicate fraud attempts.
- Set up alerts for specific triggers, such as multiple failed verification attempts, which can signal potential fraudulent activities.
- Stay informed about new threats and vulnerabilities. Implement security patches and updates promptly to protect against emerging risks.
Conclusion
Identity theft and identity fraud are serious threats, but with the right tools, you can protect your business and customers. Understanding the differences between these crimes helps you take the right steps to prevent them.
Using APIs like Skip Tracing, People Search, SSN and Name Match, and Terrorist Watchlist can significantly reduce the risk of fraud. Implement these tools today to safeguard your business and build customer trust.
To help you strengthen your identity verification process and fraud prevention strategy, Searchbug offers FREE API testing for all of its APIs, including those mentioned in this blog. There are no out-of-pocket or upfront fees—test it out on the house!
So, what are you waiting for? Contact us today to inquire about our free API testing.
