NORTH BAY, Ont. espite an explosion in identity theft, the only effort to track the crime in Canada is through a tiny initiative in northern Ontario that has a name that sounds a lot like the movie Ghostbusters.

The phone rings up to 1,200 times a day at the Phonebusters anti- fraud call centre, but the dozen or so call- takers are so swamped that most victims hang up while they’re waiting.

“ I don’t think we’re touching the surface,” concedes Det.- Sgt. Debbie Bell, the Ontario Provincial Police officer who runs the centre.

Bell, who has been on the job six months, says the piecemeal operation has become Canada’s national response to identity theft by default, because nobody else was taking charge.

And identity theft is only “ a bit of a sideline” for the centre, Bell says, which was started in 1993 by Det. Staff- Sgt. Barry Elliott to tackle telemarketing fraud. After 14 years, the Ontario police still run Phonebusters, although the RCMP and the federal Competition Bureau have joined as secondary partners.

In 2006, almost 7,800 victims reported losses of $ 16 million, which falls dramatically short of the number of cases of identity theft that are actually suspected to occur in Canada.

The federal government’s failure to set up a central clearinghouse to keep tabs on identity theft, as the Federal Trade Commission does in the United States, means that the Canadian justice system “ doesn’t have a clue” about who is committing the ballooning crime, says Elliott, who is now a major anti- fraud investigator with the force.

“ I don’t know of one single arrest that has ever been made on a complaint to Phonebusters because we have no idea how the victims have been compromised,” he says.

“ Somebody has to take responsibility,” says Pippa Lawson, a privacy expert at the University of Ottawa. “ It’s almost a no- brainer.”

Moreover, says Lawson, federal laws are lax because the government is focused on violent crime, and police do not have the time and money to cope with complicated identity theft.

Det. Bob Gauthier of Edmonton city police agrees, saying there are “ piles and piles” of identity theft files in his office that will never be investigated.

The chances of catching the thieves are slim because many operate in borderless cyberspace. “ It’s an unpoliced world,” he says. “ With the volume, we just don’t have a chance to get to this stuff.”

Studies in the United States show police investigate fewer than five per cent of the cases reported, and even fewer lead to convictions. Even after convicted, the punishments meted out in Canada are relatively light because the crime isn’t violent.

Just before Christmas 2005, for instance, Jennifer Poskus, a 21year- old Edmonton woman, was jailed for seven days for being caught with the credit card numbers of 3,300 online shoppers on her personal computer and numerous driver’s licences containing her photo and stolen names.

In another case, an Edmonton man served only a few months in jail after he obtained $ 100,000 in cars, jewelry and other merchandise by using the good name of a young B. C. man, Gauthier said.

In Vancouver, Andrea Fraser — the daughter of Alberta’s chief justice — pleaded guilty in March to a credit card scam that was fuelled by an addiction to crystal meth. Her sentence was the three months she served in custody awaiting her court date, as well as an 18- month suspended sentence and an order to undergo drug treatment.

Several recent incidents, however, are putting pressure on the federal government to clamp down on identity theft.

In January, Canadian consumers were rattled by the revelation that their credit cards may have been compromised after computer hackers stole customer information from the U. S. parent company of Canadian retailers Winners and HomeSense. As many as two million credit cards were affected.

At the same time, there was another breach involving close to half a million clients of Talvest Mutual Funds, a subsidiary of CIBC, when a backup computer f ile disappeared in transit between Montreal and Toronto.

The crimes touched off an outcry for a new federal law forcing businesses to notify their customers when their systems have been hacked. The requirement already exists in most American states. In New York, for instance, businesses can be penalized up to $ 150,000 if they fail in their obligations. The federal government says i t i s considering the prospect.

There have also been calls for Ottawa to make identity theft a distinct criminal offence. Convictions are currently pursued under at least a dozen related Criminal Code measures, such as fraud, theft and impersonation. Justice Minister Bob Nicholson told CanWest News Service he plans to introduce a law to make it a crime to possess someone’s personal or financial information without their knowledge.

An all- party House of Commons committee is also studying the issue of identity theft. Lawson recently told the committee that banks are the best source of information about identity theft and should be legally required to report incidents.

John Lawford, representing six consumer organizations through the Canadian Consumer Initiative, told MPs that use of social insurance numbers should be legally restricted to their original purpose — employment.

The federal privacy commissioner, Jennifer Stoddart, wants the government to combat spam e- mails often used by identity thieves who pose as legitimate companies to trick people into divulging personal information.

Stoddart has said that a lack of strong laws and penalties is earning Canada a worldwide reputation as a hot spot for identity thieves and Internet scam artists.

The Commons passed a private member’s bill, sponsored by Conservative MP James Rajotte, in June that makes it a crime for an individual or a company to collect personal information through fraud or impersonation.

Rajotte said the government has to do more. “ I think we have to start looking at people’s identity as something of value,” he says.

Payment- card fraud often leaves businesses on the hook

 

BY CARLY WEEKS CanWest News Service

 

TORONTO — Payment card fraud is a growing threat to businesses across Canada because they’re being forced to reimburse banks and credit card companies for fraudulent transactions.

When customers discover they’ve been ripped off by a payment card scam, their financial institutions typically reimburse them with relative ease. It’s a zero- liability policy that banks and payment card companies cite quickly and often as proof they are protecting victims of fraud.

But, increasingly, those same institutions are forcing retailers across the country to pay for fraudulent transactions. That means retailers are often on the hook when criminals use counterfeit credit and debit cards to pay for purchases.

“ People don’t see that side of the business and this is why the banks and the customer experience tends to be a positive one,” said Derek Nighbor, vice- president of national affairs at the Retail Council of Canada.

When credit card companies call a merchant to tell them they must pay for a fraudulent transaction, it’s called a “ chargeback,” and it’s becoming a nightmare for businesses across Canada.

As Nighbor describes it: “ You’re busting your butt, you might be having a tough week in terms of sales, and you just found out that your big $ 500- sale from last week was a fraudulent one.”

It’s a growing problem that’s creating new levels of tension between financial institutions and retailers that are struggling to maintain consumer confidence in the electronic payments system, while at the same time combating the rise of credit and debit- card fraud.

Credit card companies and the Canadian Bankers Association, where the country’s major banks direct most inquiries about payment card fraud, say retailers are only asked to pay for fraudulent transactions in which they didn’t fulfil their responsibilities, such as verifying the customer’s signature.

“ Where t h e d u s t s e tt l e s between the bank and the merchant, it’s on a case- by- case basis,” said Warren Law, the association’s senior vice- president of corporate operations.

But it’s often difficult for retailers to prove they performed due diligence, particularly since privacy laws restrict businesses from doing much more than asking to look at customer’s driver’s licence to verify his or her identity, Nighbor said.

The chargeback issue could become an even greater problem for retailers in the next few years as Canadian credit- card companies begin rolling out new cards that combine a microchip and personal identification number as a way to reduce fraud. To use the new cards, merchants will have to purchase or rent new equipment that is compatible with the upgraded cards.

Those that don’t may be liable for all future fraudulent transactions, even if the merchant isn’t a t fa u l t . Visa Ca n a d a , for instance, has said that, as of 2010, any merchant who doesn’t invest in the new equipment will be liable for future fraudulent transactions.

If the problem of payment card fraud persists, consumers will inevitably have to bear the brunt of the consequences through higher prices in retail stores, Nighbor said.

 

Weak penalties and crime’s ease encourage drugs and arms dealers

BY CARLY WEEKS CanWest News Service

I

OTTAWA t was the summer of 2002 and James Kerwin was eagerly awaiting a financial windfall from the sale of a home in Calgary. Although Kerwin did manage to generate a modest profit from the transaction, his good fortune wouldn’t last forever.

Soon after the sale, he was arrested and tossed in jail. His crime? Selling a house that didn’t belong to him.

Kerwin had assumed the identity of Keith Larsen, a carpenter who worked at the Calgary Exhibition and Stampede, to dupe a realtor and sell the Centre Street home where Larsen spent his childhood.

While Kerwin was eventually caught and charged with five counts of fraud and forgery- related crimes, the other members of the gang he was working with — who pocketed most of the money from the real estate scam — walked free.

“ He was their puppet,” Kerwin’s lawyer, Mark Takada, said in an interview. “ The people who are behind the scenes set it up and they used my client as the front man.”

Kerwin has a long rap sheet and while he’s out of jail now, his drug habit could help put him back behind bars.

“ He’s been in and out of crime a lot, all because of drug addiction,” Takada said.

Kerwin’s case is hardly unique and Takada says he’s seen a major surge in the number of people who are turning to identity theft and fraud to raise money to feed drug and other habits.

Police departments across the country say the lucrative opportunities, weak penalties and sheer ease of identity theft and fraud has spawned an extensive new breed of organized crime that preys on individuals and businesses to finance the drug trade, weapons and prostitution.

The federal government is under increasing pressure from police organizations, industry associations and privacy experts who say stronger punishments and greater deterrents are needed to curb the epidemic of identity theft and fraud, which is undermining the national economy.

“ Identity theft right now, the speed it’s growing, I think it should be a national priority,” said Sgt. Ken Athans, head of the Identity Theft Task Force at the Vancouver police department.

“ We can say that people need to be more vigilant. But really, the people who can protect the people in Canada is the government, by making legislation that makes that kind of crime a serious offence.”