Businesses now required to monitor warning signs for identity theft

Business owners take heed. A November 1 update to FACTA (the Fair and Accurate Credit Transactions Act of 2003) requires businesses to implement a written policy that monitors the business for "Red Flag" warning signs for identity theft. The policy must also specify how the business will respond to the crime if discovered.

The Red Flag rules have been on the books for years, and lawyers, health care practices, and small business owners have been fighting the changes to the law. In fact, the new deadline is only the latest deadline for the rule that was first introduced in April 2008. The initial deadline was set for November 1st, 2008 and subsequently moved to April 1st, 2009 and then finally November 1st, 2009.
 
The Red Flag Rule covers "financial institutions" and "creditors." It is this second group that almost every business falls into. Any business that doesn't collect payment in full at time of service is considered a "creditor." This includes doctors, lawyers, accountants, designers, phone companies, or anyone else who offers payment terms.
 
"Most businesses understand that they need to protect information through security and paper shredding programs," says Steven Hastert, president of Shred Nations, an expert in identity protection issues. "But even though this new law has been posted for more than a year, few businesses are aware of the scope of these changes."
 
The American Bar Association (ABA) and American Medical Association (AMA) have been vocal critics about being covered by the rule. They have a last ditch effort with H.R 3763 to prevent being covered. The bill has passed the House on October 26th and is headed for the Senate. This proposed legislation exempts businesses under 20 employees from the changes.
 
The Red Flag Rule requires businesses to install four components:
 
1)   Reasonable policies and procedures must be in place to identify suspicious patterns or practices in day-to-day operations. This activity indicates possible identity theft.
 
2)   The program should also detect identified red flags for the business. For example, obvious fake identification.
 
3)   The program should have procedures to take when a red flag is identified.
 
4)   There must also be having a system in place to re-evaluate the program as threats change.
 
These new requirements are just part of a good information security program. Hastert reminds businesses to remember the basic steps they need to take. These include locking file cabinets, not giving information over the phone and shredding everything with personal information on it.
 

You may like these other stories...

School tax breaks get House support as Democrats objectRichard Rubin of Bloomberg reported that the House of Representatives on Thursday voted to expand and simplify tax breaks for education as Republicans continue to pass...
The Financial Accounting Standards Board (FASB) has relaunched its technical agenda web page, which Chairman Russell Golden said will inform visitors at a glance on where any given FASB project stands, the steps it took to...
Tax accounting to be simplified for money-market fundsThe US Securities and Exchange Commission (SEC) voted 3-2 on Wednesday for sweeping changes to institutional money-market funds, Emily Chasan, senior editor of...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.