Where Thieves Lurk
An identity thief may steal your purse or wallet to get credit cards and IDs, but today's criminals are often more resourceful. You could encounter them in: 

~ Public Places. Thieves may peer over your shoulder or eavesdrop to get account numbers, personal identification numbers, and passwords. Beware at store checkouts, phone booths, and automated teller machines. 
~ Phone. Rip-off artists posing as telemarketers are after personal information such as your date of birth or Social Security number.
~ Mailbox. Identity thieves may steal credit card statements and pre-approved credit applications, using or activating them without your knowledge. 
~ Computer. These scamsters hack into your home or business computer network and steal files. Or, they send spam e-mail to obtain personal information in exchange for a product or service they never intend to deliver.
~ Front Door. Brazen con artists pretending to be salesmen could show up at your home or business, trying to finagle information.
~Trash. Thieves dig through even the smelliest garbage for private information and records such as bank statements, credit card receipts, and pre-approved applications.

These thefts aren't always obvious -- smarter criminals know how to cover their tracks. For instance, they may have your subsequent credit card or bank statements sent to another address. By the time you learn of the unauthorized activity, they've depleted your accounts, run up big bills, and ruined your credit rating.

How to Protect Yourself
To avoid becoming a victim, heed the old warning: Don't talk to strangers. Shield your private information from people or organizations you don't know. Some information to closely guard includes: your name, family maiden names, address, birth date, Social Security or other identification numbers, employer, income status, financial assets and account records, and health records.   Here are some important steps to take:

~ Be Discreet. Take special care in handling personal documents, such as your Social Security card, driver's license, birth certificate, and passport. Consider getting a safe for your home, or a sturdy file cabinet that you can lock up.   If you have a safety deposit box, put it to good use.    
~ Travel Light. Keep track of what identification and credit cards you carry, and leave what you don't need at home. Most adults can make it through the day with little more than their driver’s license.   If you do not plan on making any major purchases on a particular day, leave your credit cards behind and opt to carry cash. Or, if you have multiple credit cards stored in your wallet, take only the one you absolutely need.
~ Stay Organized. File away receipts and records, or shred them thoroughly before tossing them out.   Remember, you can tell a lot about a person by looking at their trash.   Don’t give identity thieves the opportunity to get to know you.

Even the most careful person may still get hit. But you'll minimize the impact if you swiftly smell a rat and take action. So monitor all financial statements, immediately investigate red flags such as collection agency calls, and get and review your credit report annually.

What to do about Cybercrime
Identity thieves love the Internet and e-mail, and they target both personal and business computer networks. To protect your systems from cybercrime, apply these safeguards:

~ Password-Protect Systems. Limit system access by requiring all authorized users to create an obscure password combination of numbers, as well as upper- and lower-case letters, and change it periodically. 
~ Install a Firewall. Block unauthorized access by installing firewalls at key network connection points, such as the Internet, or customer or supplier local area network.
~ Encrypt Data. As an added measure of protection, consider encrypting system data. This will help protect your system should an especially clever hacker manage to break through your firewall.
~ Avoid File Sharing. Consider disabling system file-sharing features to prevent other computers on the Internet or from other networks from reading your personal or business files. 
~ Monitor Activity. Watch for suspicious activity by regularly reviewing system data logs.
~ Stay a Step Ahead. Periodically review and update your system's security to ensure you're taking advantage of the latest practices.

When You've Fallen Victim
If, despite your best vigilance, you become an identity theft victim, follow these three steps to restore your identity and rebuild your credit:

1)  Notify the Authorities. Immediately report the fraud to one of the three major credit bureaus: Equifax (800.685.1111), Experian (888.397.3742) or TransUnion (800.916.8800). The bureau you contact will alert the others. They'll also place a fraud alert on your credit file, which instructs creditors to contact you before opening a new account or processing account changes.
 
In addition, file a report with your local police as well as a complaint with the FTC, which aids law enforcement agencies in identity theft investigations. If you think someone is using or may use your Social Security number, driver's license or passport, get in touch with the United States Social Security Administration (800.772.1213), United States Department of State Passport Services (877.487.2778), and your state's Department of Motor Vehicles.

2)  Prevent Further Damage. Close all suspect credit or bank accounts. Ask the financial institutions to help you follow up with a written "ID Theft Affidavit." Developed by the FTC in collaboration with banking, credit and consumer advocates, this is a simple, universally accepted way to report fraudulent claims to credit issuers, banks, and other financial institutions.

3)  Document Everything. Contact the three credit bureaus and order copies of your credit reports for your records. The bureaus should provide them at no charge. Request a letter from each bureau, and a police report, as proof of the crime and pending investigation. You can show this to your creditors and other institutions. Maintain all documents, including detailed notes and dates of related phone discussions, for later reference.

If you have trouble convincing creditors or agencies that you've been victimized by identity theft, you may obtain legal assistance to help ensure you're treated in accordance with the Fair Credit Reporting Act.

Why Vigilance Pays Off
 Identity theft hits hard. You stand to lose precious assets and your hard-earned financial reputation. Worse yet, you can spend countless hours getting out of the mess. By taking a defensive posture, you can help fend off would-be thieves. And if you know what to do when fraudsters strike, you'll be forearmed to restore your identity. HBM

Don Mitchell, CPA, CFE is a Member at Brown Smith Wallace. Mitchell can be reached at e-mail . Brown Smith Wallace is the second-largest locally owned independent full-service CPA and business consulting firm in Missouri. For more information visit www.bswllc.com.

Previously published in the August 2006 issue of HOME BUSINESS® Magazine, an international publication for the growing and dynamic home-based market. Available on newsstands, in bookstores and chain stores, and via subscriptions ($15.00 for 1 year, six issues). Visit www.homebusinessmag.com