Developing an identity fraud measurement model: a factor analysis approach
| Date | 09 October 2009 |
| Published date | 09 October 2009 |
| Pages | 364-386 |
| DOI | https://doi.org/10.1108/13590790910993708 |
| Author | Kayvan Miri‐Lavassani,Vinod Kumar,Bahar Movahedi,Uma Kumar |
| Subject Matter | Accounting & finance |
Developing an identity fraud
measurement model: a factor
analysis approach
Kayvan Miri-Lavassani, Vinod Kumar,
Bahar Movahedi and Uma Kumar
Carleton University, Ottawa, Canada
Abstract
Purpose – Though many studies and reports have been published about the scale of identity fraud
(IDF), no work has been done on developing models to measure IDF. The purpose of this paper is to
propose a measurement model for IDF and test the validity of that measurement model.
Design/methodology/approach – After providing a background on the concepts of IDF, the paper
discusses the related term, identity theft. Next, a measurement model is developed, based on the
current practice of measurement of IDF in four countries. Exploratory factor analysis (EFA) is used in
identifying the indicators and factors of IDF. After the EFA is conducted, confirmatory factor analysis
is employed to test the validity of the measurement model. These tests are conducted using the data
collected from Canadian financial institutions.
Findings – The review of the current empirical studies suggests that IDF should be assessed using a
measurement model with 33 indicators to measure five factors of IDF. However, the analysis of
Canadian financial institutions suggests that a measurement model that includes 27 indicators and
four factors is most appropriate for the data.
Research limitations/implications – The measurement model developed in the present paper is
based on an examination of a sample of financial institutions in Canada. Hence, the results of this
paper cannot be generalized to organizations in other sectors of the economy. Further studies in other
sectors of the economy are required to identify industry-specific measurement model.
Practical implications – This paper is the first approach toward developing a model for
measuring IDF.
Originality/value – This paper is the first study that attempts to scientifically identify and validate
a measurement system in the area of IDF.
Keywords Fraud, Crimes,Measurement, Modelling
Paper type Research paper
1. Introduction
Good name, in man and woman, dear my lord, Is the immediate jewel of their souls: Who
steals my purse, steals trash; ’tis something, nothing; ’Twas mine, ’tis his, and has been slave
to thousands; But he, that filches from me my good name, Robs me of that, which not enriches
him, And makes me poor indeed (Shakespeare, 1833, p. 877, Othello, Act III, Scene III).
Many things have changed since the early nineteenth century, yet many things have
remained the same. The non-monetary contents of a purse or wallet, such as personal
identification information, can be used by identity thieves to damage the good name,
i.e. credit record, of identity fraud (IDF) victims and make them poor indeed. IDF is the
fastest growing white-collar crime in many countries, especially in developed
countries. IDF is not a new phenomenal in human societies; the history of IDF can be
The current issue and full text archive of this journal is available at
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JFC
16,4
364
Journal of Financial Crime
Vol. 16 No. 4, 2009
pp. 364-386
qEmerald Group Publishing Limited
1359-0790
DOI 10.1108/13590790910993708
traced back hundreds of years. For example, William Dodd the well-known British
writer, poet, and theologian of the eighteenth century was charged with “forging the
name of the Earl of Chesterfield to a bond for 4200l” and was hanged in Tyburn[1] on
June 27, 1777, for the fraud he had committed (Trusler, 1782, p. 36). Many similar
incidents of identity-related fraud in the eighteenth century have been recorded in the
literature; some of this can be found in the works of Trusler (1782) and Howell and
Cobbett (1816). What has made IDF the center of attention in the past few years is the
acceleration in the frequency and the impacts of IDF on individuals and businesses. The
modern payment systems have provided an invaluable platform for identity thieves to
take advantage of stolen identities (Anderson et al., 2008). Beside the effect of
technology, the contextual factors have proved to be significant players in the spread of
IDF. The predicted increase in the level of crime and “particularly cases of fraud and
identity theft” as a result of the economic recession (Clark, 2008) in the USA has become
reality. The 2009 report of IDF conducted by Javelin Strategy & Research[2] indicates
that, while the number of IDF victims in the USA had been decreasing at a slow pace
during the period from 2003 to 2007 (from 10.1 to 8.1 million), there has been a sharp
increase in the number of IDF victims during 2008. In 2008, the number of IDF victims
has increased by 22 percent to 9.9 million victims, “a level not seen since 2004” (Javelin
Strategy & Research, 2009). While “by any measure, the world faces an identity
management challenge of escalating proportions,” we are not equipped with the
proper twenty-first century tools to manage different dimensions of the problem
(Chertoff, 2009).
One of the preliminary steps in managing IDF as a global phenomenon is to
understand the scope of the problem by being able to measure the different aspects of
the problem. In the absence of a widely developed and employed IDF measurement
model, we are already observing misconceptions about the problem of IDF. One
example is the biased perception that the use of new technologically advanced business
channels – such as the internet and, specifically, the processes of electronic
identification in business-to-consumer and government-to-consumer, and
business-to-business e-commerce systems – increases the risk of exposure to IDF. In
fact, according to the measurement of methods of IDF, based on one of the few
comprehensive measurements of IDF provided by the US Trade Commission, only
0.8 percent of IDF victims actually know that the internet has helped IDF criminal s to
access their information. In contrast, at least 16 percent of the IDF activities have been
enhanced by non-technological factors, known as low-tech methods, which include lost
or stolen wallets or purses, mail theft, etc. As a result of this misconception, some
individuals hesitate to use the internet as a safe method of transaction that can benefit
consumers, businesses, and therefore, the whole economy. Although the importance of
developing measurement models for IDF has been echoed by several researchers in this
field, there is a gap in the available literature of empirical studies that validate the
existing measurement models. Most of the current studies on IDF are only concerned
with the collection of information, and they are mainly conducted by empiricists. An
empiricist “is a person who spends a great deal of time collecting data and talking to
computers” (Armstrong, 1967). In contrast, theorists have conducted very few studies
in this area. A theorist reads and contemplates the area of study and tries to come up
with revelations or conceptual breakthroughs (Armstrong, 1967). A small number of
researchers have explored the measurement of IDF from the theorists’ perspective and
Developing an
IDF measurement
model
365
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