Financial Cryptography

Identity is an asset. Assets mean theft ... and Trade!

This is a good article. It describes what happens when you make a simple number the core of your security system. If you control the number, it becomes valuable. If it becomes valuable then it will either be stolen or traded. Valuable things are assets - which means trade or theft. (See also EC.)

In this case we we see the trade, and this sits nicely alongside the identity theft epidemic in the US: all there because the system made the number the control.

All security is based on assets. Perversely, if you make a number the core of your security system, then it becomes an asset, thus adding one more thing to protect, so you need a security system to secure your security system.

The lesson is simple. Do not make your security depend on a number. Identify what the asset is and protect that. Don't protect stuff that isn't relevent, elsewise you'll find that the costs of protecting might skyrocket, while your asset walks off unprotected.

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Some Immigrants Are Offering Social Security Numbers for Rent
By EDUARDO PORTER

Published: June 7, 2005

TLALCHAPA, Mexico - Gerardo Luviano is looking for somebody to rent his Social Security number.

Mr. Luviano, 39, obtained legal residence in the United States almost 20 years ago. But these days, back in Mexico, teaching beekeeping at the local high school in this hot, dusty town in the southwestern part of the country, Mr. Luviano is not using his Social Security number. So he is looking for an illegal immigrant in the United States to use it for him - providing a little cash along the way.

"I've almost managed to contact somebody to lend my number to," Mr. Luviano said. "My brother in California has a friend who has crops and has people that need one."

Mr. Luviano's pending transaction is merely a blip in a shadowy yet vibrant underground market. Virtually undetected by American authorities, operating below the radar in immigrant communities from coast to coast, a secondary trade in identities has emerged straddling both sides of the Mexico-United States border.

"It is seen as a normal thing to do," said Luis Magana, an immigrant-rights activist assisting farm workers in the agriculture-rich San Joaquin Valley of California.

The number of people participating in the illegal deals is impossible to determine accurately. But it is clearly significant, flourishing despite efforts to combat identity fraud.

Hundreds of thousands of immigrants who cross the border from Mexico illegally each year need to procure a legal identity that will allow them to work in the United States. Many legal immigrants, whether living in the United States or back in Mexico, are happy to provide them: as they pad their earnings by letting illegal immigrants work under their name and number, they also enhance their own unemployment and pension benefits. And sometimes they charge for the favor.

Martin Mora, a former migrant to the United States who these days is a local politician preparing to run for a seat in the state legislature in next October's elections, said that in just one town in the Tlalchapa municipality, "of about 1,000 that fixed their papers in the United States there might be 50 that are here and lending their number."

Demand for American identities has blossomed in the cracks between the nation's increasingly unwelcoming immigration laws and businesses' unremitting demand for low-wage labor.

In 1986, when the Immigration Reform and Control Act started penalizing employers who knowingly hired illegal immigrants, most employers started requiring immigrants to provide the paperwork - including a Social Security number - to prove their eligibility to work.

The new law did not stop unauthorized immigrant work. An estimated 10 million illegal immigrants live in the United States today, up from some 4 million before the law went into effect. But it did create a thriving market for fake documents.

These days, most immigrants working unlawfully buy a document combo for $100 to $200 that includes a fake green card and fake Social Security card with a nine-digit number plucked out of thin air. "They'll make it for you right there at the flea market," said David Blanco, an illegal immigrant from Costa Rica who works as an auto mechanic in Stockton, Calif.

This process has one big drawback, however. Each year, Social Security receives millions of W-2 earning statements with names or numbers that do not match its records. Nine million poured in for 2002, many of them just simple mistakes. In response the agency sends hundreds of thousands of letters asking employers to correct the information. These letters can provoke the firing of the offending worker.

Working with a name linked to a number recognized by Social Security - even if it is just borrowed or leased - avoids these pitfalls. "It's the safest way," said Mario Avalos, a Stockton accountant who every year does tax returns for dozens of illegal immigrants. "If you are going to work in a company with strict requirements, you know they won't let you in without good papers."

While renting Social Security numbers makes up a small portion of the overall use of false papers, those with close ties to the immigrant communities say it is increasingly popular. "It used to be that people here offered their number for somebody to work it," said Mr. Mora in Tlalchapa. "Now people over there are asking people here if they can use their number."

Since legal American residents can lose their green cards if they stay outside the country too long, for those who have returned to Mexico it is useful to have somebody working under their identity north of the border.

"There are people who live in Mexico who take $4,000 or $5,000 in unemployment in the off season," said Jorge Eguiluz, a labor contractor working in the fields around Stockton, Calif. "They just lend the number during the season."

The deals also generate cash in other ways. Most identity lending happens within an extended family, or among immigrants from the same hometown. But it is still a hard-nosed transaction. Illegal immigrant workers usually earn so little they are owed an income tax refund at the end of the year. The illegal immigrant "working the number" will usually pay the real owner by sharing the tax
refund.

"Sometimes the one who is working doesn't mind giving all the refund, he just wants to work," said Fernando Rosales, who runs a shop preparing income taxes in the immigrant-rich enclave of Huntington Park, Calif. "But others don't, and sometimes they fight over it. We see that all the time. It's the talk of the place during income tax time."

Done skillfully, the underground transactions are virtually undetectable. They do not ring any bells at the Social Security Administration. Nor do they set off alarms at the Internal Revenue Service as long as the person who lends the number keeps track of the W-2's and files the proper income tax returns.

In a written response to questions, the audit office of Social Security's inspector general acknowledged that "as long as the name and S.S.N. on an incoming wage item (i.e., W-2) matches S.S.A.'s record" the agency will not detect any irregularity.

The response noted that the agency had no statistics on the use of Social Security numbers by illegal immigrants. It does not even know how many of the incorrect earnings reports it receives every year come from immigrants working unlawfully, though immigration experts estimate that most do.

Meanwhile, with the Homeland Security Department focused on terrorism threats, it has virtually stopped policing the workplace for run-of-the-mill work violations. Immigration and Customs Enforcement arrested only 450 illegal immigrants in the workplace in 2003, down from 14,000 in 1998.

"We have seen identity fraud," said John Torres, deputy assistant director for investigations. But "I haven't heard of the renting of identities."

Immigrants on both sides of the transactions are understandably reluctant to talk about their participation.

A 49-year-old illegal immigrant from Michoacan who earns $8.16 an hour at a waffle factory in Torrance, Calif., said that she had been using a Social Security number she borrowed from a friend in Mexico since she crossed illegally into the United States 15 years ago. "She hasn't come back in this time," the woman said.

There are risks involved in letting one's identity be used by someone else, though, as Mr. Luviano, the beekeeping instructor, learned through experience.

Mr. Luviano got his green card by a combination of luck and guile. He says he was on a short trip to visit his brother in California when the 1986 immigration law went into effect and the United States offered amnesty to millions of unauthorized workers.

Three million illegal immigrants, 2.3 million of them from Mexico, ultimately received residence papers. Mr. Luviano, who qualified when a farmer wrote a letter avowing he had worked for months in his fields, was one. Once he had his papers, though, he returned to Tlalchapa.

He has entered the United States several times since then, mostly to renew his green card. But in the early 1990's, concerned that long absences could put his green card at risk and spurred by the chance to make a little extra money, he lent his Social Security number to his brother's friend. "I kept almost all the income tax refund," Mr. Luviano said.

Mr. Luviano decided to pull the plug on the arrangement, however, when bills for purchases he had not made started arriving in his name at his brother's address. "You lend your number in good faith and you can get yourself in trouble," he said.

But Mr. Luviano is itching to do it again anyway. He knows that Social Security could provide retirement income down the line. And there's always the tax refund.

"I haven't profited as much as I could from those documents," he said ruefully.

Copyright 2005 The New York Times Company
http://www.nytimes.com/2005/06/07/business/07immigrant.html

Posted by iang at June 7, 2005 09:51 AM | TrackBack