Everyone is a target for identity theft, but wealthy individuals are more likely to be victimized by cybercrooks. The reason: The bad guys follow the money.
Yet affluent people aren't at greater risk of identity theft simply because they have more to lose than the average consumer does. It's also because they're more vulnerable, said Neal O'Farrell, executive director of the Identity Theft Council in Walnut Creek, California, and a consumer-security expert.
"I started to focus on this area about two years ago, when I first started getting inquiries not from wealthy people, but [from] their lawyers," O'Farrell said.
"They said, 'We have this high-net-worth individual who's been the victim of identity theft. We need your help. We'll pay anything, but it's got to be on the quiet, because this individual is worried about his reputation,'" O'Farrell said. "It started with that, and since then, I have received dozens of similar requests and it's just escalating."
What makes wealthy people perfect targets
Targeting the wealthy makes perfect sense, O'Farrell said. That's because the fraudsters aren't after just money — they're also after access to bank accounts.
"I have two bank accounts — a savings and a checking account," he said. "But wealthy people can have over a dozen accounts.
"They have investment accounts. They have trust accounts. They've got all kinds of different accounts with a lot of money in them," O'Farrell said. "The problem is, the more you have to protect, the less well you protect it."'
In other words, affluent individuals often just have too many points of access and too much vulnerability.
"High-net-worth individuals typically have a lot of people around them," O'Farrell said. "They have advisers and employees, which makes them vulnerable to phishing attempts and social engineering. These people can be exploited."
Additionally, he said, cybercriminals also look for corporate secrets. They're after networks. They want access to other wealthy people, private communications and data that they can sell to other cyberthieves.
Fear and arrogance
"The beautiful thing about it is that it's high reward and low risk," O'Farrell said. "The chances of a wealthy person telling someone that they're being fleeced is pretty minimal. And if they do find out that they've been a victim, they're very unlikely to report it, because of reputation damage."
From a crook's perspective, this type of identity theft is highly lucrative, he said.
"I've also found that the wealthy tend to be a little bit arrogant about their protection," O'Farrell said. "They have a feeling that either it won't happen to them — no one would dare — or if it does happen to them, their lawyer will clean up the mess."
The fact is that most consumers have bad security practices, such as using easy-to-crack passwords or not checking their bank accounts or credit reports. Affluent people can be the worst of all consumers when it comes to adhering to security best practices, in large part because they're so busy — busy making and managing their money, or busy enjoying it, O'Farrell said.
"They just don't spend the time to check their credit reports, or check their financial statements for accuracy, or change those important passwords," he said. "They don't talk to their employees about their security practices.
"That's why we're seeing, in the last year, warnings from the FBI, from the American Bar Association, the SEC [Securities and Exchange Commission], from FINRA [Financial Industry Regulatory Authority], that advisors to wealthy people — law firms and wealth-management and financial-services firms — are increasingly being targeted," O'Farrell said. "The only reason I can see the cybercriminals targeting them is because they want access to their clients."
The bottom line is that affluent people need to recognize that when it comes to cybercrime, they're not the same as everybody else — they may be targeted even more often than the average consumer.
"It used to be the wealthier you were, the more immune you were to crime, because you could afford to live in a better neighborhood where maybe there were more police," O'Farrell said. "You could afford to live in a gated community with a guard and install a security alarm and lights — the works
"But cybercrime has tipped it the other way," he said. "Not only can crooks reach you from a neighborhood on the other side of the world, but now you're the hottest target."
How the wealthy can protect themselves
O'Farrell said there are several steps a wealthy person can take to protect his or her identity and money:
Check bank accounts and investment accountsregularly, and update the security of those accounts routinely.
Take security seriously. No one is immune to identity theft, and no one should assume it won't happen. Once it does, lawyers won't be able to fix the mess.
Ensure that advisers, assistants and wealth managers are aware of the importance of security. The mantra should be "Security first." Be wary of opening emails, particularly if they have attachments. Be suspicious of telephone calls from people asking for information.
Take the same precautions as everybody else. Shred personal information, check credit reports and be careful with mail.