Commonwealth of Australia 2014


Estimating the economic impact of identity crime to Australia



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Estimating the economic impact of identity crime to Australia


Key finding: The total economic impact of identity crime in Australia could well exceed
$1.6 billion annually.

Apart from the limitations in available data from government agencies and other public sources, it is possible to produce some estimates of the total economic impacts of identity crime to Australia.
Table 8 shows the estimated direct losses attributable to identity crime and misuse, over various 12 month periods and sectors, including businesses, government and individuals. Due to a lack of available data, it was not possible to calculate the economic impact of identity crime on state and territory government agencies.
The total of these direct losses is just over $1.5 billion. In light of the underreporting of identity crime, by both individuals and organisations, it is likely that these estimates are fairly conservative.
Table 8: Estimated direct losses to identity crime, by agency and year

Agency

Year

Unit of measurement

Loss to who

Total fraud cost

Average ID
crime costs

PIa


2012

Data breach

Businesses

$131,760,000

$49,410,000

KPMGb

2012

Fraud incidents

Businesses

$865,480,000

$324,555,000

Cth fraudc

2009–10

Fraud incidents

Government

$495,534,658

$185,825,497

ABS

2010–11

Personal fraud incidents

Individuals

$2,400,000,000

$900,000,000

APCA

2012–13

Payment frauds

Financial institutions

$121,413,912

$45,530,217

Total





 

 

$4,014,188,570

$1,505,320,714

a: Ponemon Institute 2012

b: KPMG Survey of Fraud, Bribery & Corruption 2012

c: AIC Fraud against the Commonwealth 2009–10 annual report to government



Any attempt to calculate the direct losses attributable to identity crime will need to rely on a number of assumptions. The identity crime losses presented in Table 8 are based on the assumption that 37.5 percent of total fraud costs are identity crime. This percentage is the mid-point between two previous estimates of the proportion of all frauds that involve identity crime (i.e. 25% - AFP 2000; 50% - CIFAS 2012), noting that the percentage of fraud involving the misuse of personal information varies considerably across sectors, depending on the identity crime methodologies employed.
When combined with the estimated direct costs of investigating and prosecuting identity crimes calculated earlier (i.e. $75 million per annum), the total economic impact of identity crime in Australia could well exceed $1.6 billion annually (see Figure 32).
Figure 32: The economic impact of identity crime

This estimate is towards the conservative end of previous attempts to measure the total impact of identity crime in Australia, which have ranged between $800 million and $4 billion each year (see Figure 33).

Figure 33: Total estimated cost of identity crime, by source

The variations in these estimates are largely due to the definitional issues and differences in the methodologies used in calculating the final cost estimate.
In 2001, AGD published a report on the scope of identity crime, which estimated the total cost of
identity-related fraud to the Australian economy at $4 billion (AGD 2001). This is around $5.5 billion in 2013 dollars and was based on the Reserve Bank of Australia inflation calculator with an annual inflation rate of 2.8 percent (RBA 2014).
The estimate calculated by Lozusic (2003) of total impacts of between $2.5–$3 billion (around
$3.2–$4 billion in 2013 dollars) sought to account for the total direct losses to identity crimes, as well as the indirect costs (such as prevention and remediation) to business and government agencies.
The estimate by Cuganesan and Lacey (2003) of impacts of up to $1.2 billion ($1.57 billion in 2013 dollars) similarly took into account the direct losses to identity crimes, as well as the indirect costs associated with detection, investigation, prevention, recovery and restoration.

Finally, the ABS (2012) estimated the direct cost to individual victims of all personal fraud offences to be between $804 million and $2.05 billion. While these are frauds that are not limited to identity crime, and in this sense would be overestimates, they do not take into account losses experienced by organisations, and in this sense could be underestimates.





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