It is certainly no secret that the identities of the business owner, officers, directors, or key executives are closely intertwined with their business - whether from a credit or financial standpoint, or in regards to operational and decision-making authority for the company. Because of this, many cases of business identity theft also involve the misuse of the identities of these individuals. 

Some of the common ways that thieves may obtain this information include, but are not limited to:

• Traditional personal identity theft schemes
• Dumpster diving (obtaining information from discarded documents)
• Cyber-crime (spyware, phishing, etc.)
• Data breaches and information compromise (loss, theft, or hacking)
• The Internet information black market
• Personal credit reports and business credit reports
• State business records and other public records

Regardless of how their personal identity information is ultimately obtained, the misuse of that information by business identity thieves can further compound the problems for both the business and the business owner or officer, as you will see below.  Also see Business Owner Risks  

Common ways that business identity thieves use the identity of the business owners or officers for fraud

Obtain business loans or lines of credit using the owner, officer, or key executive as a guarantor

Many types of business accounts require a personal guaranty from one or more of the business owners. Some examples include credit cards, bank accounts, merchant processing accounts; and, of course, business loans and lines of credit.

For example, all SBA loans require personal guaranties from every owner of 20 percent or more of the business, as well as from other individuals who hold key management positions. Whether or not a personal guaranty will also be secured by personal assets is based on the value of any assets (business or personal) already pledged, and the value of the assets personally owned compared to the amount borrowed.¹

With enough information, not only may the thieves use the business owner or officer's identity to secure a fraudulent loan or line of credit, but they may fraudulently pledge the business assets, or even the personal assets of the owner or officer, in the process.

Open or access existing bank or credit accounts
(personal or business)

Armed with the owner, officer, of key executive's personal information, business identity thieves may attempt to access the business' existing cash and credit accounts for fraudulent withdrawals, purchases, transfers, or cash advances. They may also attempt to open new bank and credit accounts, completely under their control, and use these accounts in fraud schemes to purchase goods or services. The accounts may be opened in the business' name, with the business owner or officer listed as the guarantor for the accounts; or, opened as personal accounts in the name of the owner or officer - or both. Either way, once the thieves have exhausted all available credit or are unable to continue to use the accounts, they quickly disappear and leave the creditors, banks, business, and business owners to try and determine what happened and unravel the mess.

Because the business owner or officer were used as the owners or guarantors of the accounts, defrauded creditors and lenders will attempt to collect from them personally. The accounts will also most likely be negatively reported against them to the credit reporting agencies, check verification and deposit account services, and possibly even pursued through legal action while the owner or officer attempts to dispute and resolve the matters. While this is occurring, negative credit reporting and collections activity may cause the owner or officer to suffer an increase in interest rates, or decreases in credit lines, on his or her personal accounts; or an inability to open new accounts, obtain business or personal financing, or write checks. It can all be eventually resolved and corrected, but even in the short term any of these can have a significant negative impact on both the business and the owner or officer.

Impersonate the owner of officer in order to conduct significant transactions in the business' name

Impersonating the business owner or a key officer can potentially allow thieves to convince third parties they have the authority to initiate significant transactions in the business' name, such as the sale of business assets - or even sell the business itself.

Yes, it can and does happen. For example:

Krawczyk, a business consultant and public speaker, said he recently did a routine check of his corporate filing with the Nevada Secretary of State’s office, and learned that the company no longer existed. The name, corporate officers and resident agent had been changed. Krawczyk has filed suit alleging that another company fraudulently changed his corporate information and sold his business for $10,000.²

In another case, a small business owner received a phone call about an unpaid electricity bill for one of his office buildings. The owner discovered he never received the bill because the building had been sold without his knowledge. A fraudster had falsified the company minutes, made himself the new CEO, and sold the building to an accomplice - walking off with the proceeds of the sale.³

In both cases, the victims were eventually able to reverse the transactions and recover their assets. But if such a thing happened to your business, even if only temporary, what kind of an impact could it have?

Learn how to protect your business from business identity theft

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¹ U.S. Small Business Administration, "The Application Process - Collateral," www.SBA.gov.
² Norman, Jan. "Irvine businessman sues over corporate identity theft," Orange County Register, May 21, 2008.
³ Prashad, Sharda. "Identity theft strikes small businesses," The Globe and Mail, January 18, 2010.