What is it and how to prevent it?
Acco 455: Fraud Prevention and Investigation
November 26, 2013 In 1986, fraudster James Hogue famously stole the identity of a dead infant to conceal his criminal past in order to attend high school while pretending to be an orphan with special backgrounds. Each year, nearly 2.5 million deceased Americans' identities are stolen by perpetrators (Kirchheimer, 2013). Death frauds have affected victims, companies, organizations and society at large in numerous ways. What exactly is death fraud, and how do we prevent it?
What is death fraud?
Death fraud can be broadly defined as any fraud that involves death but does not involve killing. There are several major types of death frauds: stealing the identity of a deceased person, faking death and faking that a deceased person is not dead.
A common type of death fraud is that of identity theft targeting dead people. According to the Identity Theft Handbook, during identity theft, criminals acquire key pieces of personal identifying information - such as name, address, date of birth, SSN/SIN etc. - for the purpose of impersonating and defrauding a victim (Biegelman, 2009). Death fraud, then, is a spin on this crime, targeting specifically the identity of deceased individuals who can no longer detect the crime and thus less likely to be caught. There are many ways a fraudster can obtain vital personal information of the deceased, such as stealing their mails or going through their garbage bags after learning of their decease through obituary (called 'dumpster diving'), access through friends and family, publicly available records on the Internet, computer hacking, etc. (Hyder & Warner [H&W], 2010). Identity theft is a federal crime in the U.S., with penalties of up to 17 years of incarceration and a maximum fine of $250,000 (H&W, 2010).
There are many ways a perpetrator could use a deceased person's personal information. Although not all inclusive, the following are common types of frauds committed:
(1) Tax Refund
According to the AARP, tax refund fraud committed using a deceased SSN amounted to $5.2 billion in 2011(Kirchheimer, 2013). Since it can take up to 6 months for a death to be registered in the DMF and decedent's personal information can be easily obtained, there are ample time and opportunities for fraudster to obtain false tax refund from the government. Several cases exemplify the prolificacy of false tax refund in death frauds. For instance, in California, two men was able to apply for $2 million in false tax refunds. In New Jersey, a woman stole the identity of 28 deceased individuals for a tax refund of $108,000 (H&W, 2010). In addition, last year, five men in Ohio have been accused of obtaining $1.2 million in false tax refund from 2009 to 2011 using the identity of the deceased. A 10-count indictment, including conspiracy to defraud the United States, conspiracy to commit mail fraud, mail fraud and aggravated identity theft, have been filed by the U.S. Department of Justice (Steer, 2012).
While tax refund frauds are more commonly committed by "everyday people" who sees the opportunity to obtain cash from the gap in the system, government officials are not exempt from committing tax fraud. Harriette Walters, former manager of tax refund for the District of Columbia, for instance, was sentenced to more than 17 years in federal prison for tax scams in 2009. Walters started issuing fraudulent tax refund checks to friends and co-conspirators in 1989. Fraudulent tax refunds checks were either deposited into fake corporate accounts or issued to deceased taxpayers then redirected to co-conspirators' account (H&W, 2010). Her schemes were discovered in 2007 when the co-conspiring bank manager at SunTrust Bank was fired and a suspicious employee contacted the FBI when Walter's niece tried to deposit a large sum of refund check.