HomeMy WebLinkAboutCC AG PKT 2009-06-08 #DAGEIV®A STAFF REP®RT
DATE: June 8, 2009
TO: Honorable Mayor and City Council
THRU: David Carmany, City Manager
FROM: Robbeyn Bird, CPA
Director of Administrative Services/City Treasurer
SUBJECT: 1®EiVTITY THEFT PREVEIVT90fV PROGRAM
SUMMARY OF REQUEST:
Staff requests that the City Council adopt Resolution No. 5876 in order to comply
with the federal implementing rules under the Fair and Accurate Credit
Transactions Act of 2003.
~ACaCGROUN®:
The Fair and Accurate Credit Transactions Act of 2003 ("FACT ACT") directs the
federal bank regulatory agencies and the Federal Trade Commission (the
"Agencies") to issue joint regulations and guidelines regarding the
implementation of programs to detect, prevent, and mitigate identity theft.
In November 2007, the Agencies jointly issued final rules and guidelines (the
"Rules") implementing Section 114 of the FACT ACT. The rules require each
financial institution or creditor to develop and implement a written Identity Theft
Prevention Program ("Program") to detect, prevent, and mitigate identity theft in
connection with the opening of certain accounts or certain existing accounts.
The Program must be able to detect patterns, practices, and specific forms of
activity that are "Red Flags" signaling possible identity theft and incorporate
those Red Flags into the program. The Agencies issued guidelines to assist
financial institutions and creditors in the development and continuation of a
Program that satisfies the requirements of the Rules. The Rules became
effective January 1, 2008, and compliance with the Rules is required by August
1, 2009.
A Program is required where a creditor maintains one or more "covered
accounts." The definition of "creditor" includes a governmental agency-
including utility companies-that arranges for the extension, renewal, or
continuation of credit. According to the Rules, a "covered account" is (1) an
Agenda Item
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account primarily for personal, family, or household purposes, that involves or is
designed to permit multiple payments or transactions, such as utility accounts, or
(2) any other account for which there is a reasonable foreseeable risk to
customers or the safety and soundness of the financial institution or creditor from
Identity Theft.
Based on the definitions of creditor and covered account, and the examples of a
utility company and a utility account being used in the Rules, public agencies are
required to implement a Program. The City is a public agency which permits
customers to pay for utility services after the service has been provided, as well
as allows customers, in some instances, to make payments over time.
Under the Red Flag Rule, the City is required to establish an Identity Theft
Prevention Program tailored to its size, complexity, and the nature of its
operation. The program must contain reasonable polices and procedures to:
1. Identify relevant Red Flags for new and existing covered accounts and
incorporate those Red Flags into the program;
2. Detect Red Flags that have been incorporated into the Program;
3. Respond appropriately to any Red Flags that are detected to prevent
and mitigate Identity Theft; and
4. Ensure the Program is updated periodically, to reflect changes in risks
to customers or to the safety and soundness of the creditor from
Identity Theft.
The attached resolution will bring the City into Compliance with FACT ACT.
FINANCIAL IMPACT:
There is no financial impact to the City.
RECOMMEN®ATION:
It is recommended that the City Council adopt resolution in order to comply with
the federal implementing rules under the Fair and Accurate Credit Transactions
Act of 2003.
SUBMITTED BY: NOTED AND APPROVED:
~~ ~
Robbeyn Ird, CPA David Carmany, City Manager
Director of Administrative Services
Attachments:
A. Resolution
B. Identity Theft Prevention Program
RESOLUTION NUMBER $$76
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEAL
BEACH, CALIFORNIA ADOPTING AN IDENTITY THEFT
PREVENTION PROGRAM
WHEREAS, the Federal Trade Commission ("FTC") has adopted regulations that
require "creditors" holding consumer or other "covered accounts" (which are
defined to mean any account where customer payment information is collected
in order to bill for services rendered) to develop and implement, by August 1,
2009, an identity theft prevention program that~complies with those regulations ;
and
WHEREAS, because the City of Seal Beach provides retail water services to its
customers, it is a "creditor" under the applicable FTC regulations and must
therefore comply with those regulations by adopting and implementing an identity
theft prevention program ;and
WHEREAS, said City Council has taken action to comply with the applicable
FTC regulations by adopting an identity theft prevention program.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SEAL BEACH
DOES HEREBY RESOLVE:
Section 1. That the City Council of the City of Seal Beach hereby adopts, and
directs staff to implement, the "Identity Theft Prevention Program in its entirety.
PASSED, APPROVED AND ADOPTED by the City Council of Seal Beach at a
meeting held on the 8th day of June , 2009 by the following vote:
AYES: COUNCILMEMBERS
NOES: COUNCILMEMBERS
ABSENT: COUNCILMEMBERS
ABSTAIN: COUNCILMEMBERS
ATTEST:
Mayor
City Clerk
STATE OF CALIFORNIA }
COUNTY OF ORANGE } SS
CITY OF SEAL BEACH }
I, Linda Devine, City Clerk of Seal Beach, California, do hereby certify that the
foregoing resolution is the original copy of Resolution Number 5876 on file in
the office of the City Clerk, passed, approved, and adopted by the City Council of
the City of Seal Beach, at a regular meeting thereof held on the 8th day of
June , 2008.
City Clerk
;~y ~ ~ e~h
9dent~ty Theft ~revent~®n Pr®gram
This program is in response to and in compliance with the Fair and Accurate Credit
Transaction (FACT) Act of 2003
and
The final rules and guidelines for the FACT ACT issued by the Federal Trade
Commission and Federal bank regulatory agencies in November 2007
1. PROGRAM ADOPTION
The City of Seal Beach developed this Identity Theft Prevention Program ("Program") pursuant
to the Federal Trade Commission's Red Flags Rule ("Rule"), which implements Section 114 of
the Fair and Accurate Credit Transactions Act ("FACT ACT") of 2003. (16 C. F. R. § 681.2).
The FACT Act requires that financial institutions and creditors implement written programs
which provide for identification, detection, and response to patterns, practices, or specific
activities ("Red Flags") that could detect identity theft.
II. PROGRAM PURPOSE AND DEFINITIONS
A. Fulfilling requirements of the Red Flags Rule
Under the Red Flags Rule, every financial institution and creditor is required to establish an
"Identity Theft Prevention Program" tailored to its size, complexity and the nature of its
operation. Each program must contain reasonable policies and procedures to:
1. Identify relevant Red Flags for new and existing covered accounts and incorporate
those Red Flags into the Program;
2. Detect Red Flags that have been incorporated into the Program;
3. Respond appropriately to any Red Flags that are detected to prevent and mitigate
Identity Theft; and
4. Ensure the Program is updated periodically, to reflect changes in risks to customers or
to the safety and soundness of the creditor from Identity Theft.
B. Red Flags Rule definitions used in this Program
The Red Flags Rule defines Identity Theft as `Yraud committed using the identifying
information of another person" and a Red Flag "as a pattern, practice, or specific activity that
indicates the possible existence of Identity Theft".
According to the Rule, a municipality is a creditor subject to the Rule requirements. The
Rule defines creditors "to include finance companies, automobile dealers, mortgage
brokers, utility companies, and telecommunications companies. Where non-profit and
government entities defer payment for goods or services, they, too, are to be considered
creditors."
All the City's accounts that are individual City service accounts held by customers of the City
whether residential, commercial, or industrial are covered by the Rule. Under the Rule, a
"covered account" is:
1. Any account the City offers or maintains primarily for personal, family, or household
purposes, that involves multiple payments or transactions; and
2. Any other account the City offers or maintains for which there is a reasonably
foreseeable risk to customers or to the safety and soundness of the City from Identity
Theft.
"Identifying information" is defined under the Rule as "any name or number that maybe
used, alone or in conjunction with any other information, to identify a specific person,"
including: name, address, telephone number, social security number, date of birth,
government issued driver's license or identification number, alien registration number,
government passport number, employer or taxpayer identification number, unique
electronic identification number, computer's Internet Protocol address, or routing code.
III. IDENTIFICATION OF RED FLAGS
In order to identify relevant Red Flags, the City considers the types of accounts that it offers and
maintains, the methods it provides to open its accounts, the methods it provides to access its
accounts, and its previous experiences with Identity Theft. The City identifies the following Red
Flags, in each of the listed categories:
A. Notifications and Warnings From Credit Reporting Agencies
Red Flags
1. Report of fraud accompanying a credit report;
2. Notice or report from a credit agency of a credit freeze on a customer or applicant;
3. Notice or report from a credit agency of an active duty alert for an applicant; and
4. Indication from a credit report of activity that is inconsistent with a customer's usual
pattern or activity.
B. Suspicious Documents
1. Identification document or card that appears to be forged, altered or inauthentic;
2. Identification document or card on which a person's photograph or physical description
is not consistent with the person presenting the document;
3. Other document with information that is not consistent with existing customer
information (such as if a person's signature on a check appears forged); and
4. Application for service that appears to have been altered or forged.
C. Suspicious Personal Identifying Information
Red Flags
1. Identifying information presented that is inconsistent with other information the customer
provides (example: inconsistent birth dates);
2. Identifying information presented that is inconsistent with other sources of information
(for instance, an address not matching an address on a credit report);
3. Identifying information presented that is the same as information shown on other
applications that were found to be fraudulent;
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4. Identifying information presented that is consistent with fraudulent activity (such as an
invalid phone number or fictitious billing address);
5. Social security number presented that is the same as one given by another customer;
6. An address or phone number presented that is the same as that of another person;
7. A person fails to provide complete personal identifying information on an application
when reminded to do so (however, by law social security numbers must not be
required); and '
8. A person's identifying information is not consistent with the information that is on file for
the customer.
D. Suspicious Account Activity or Unusual Use of Account
Red Flags
1. Change of address for an account followed by a request to change the account holder's
name;
2. Payments stop on an otherwise consistently up-to-date account;
3. Account used in a way that is not consistent with prior use (example: very high activity);
4. Mail sent to the account holder is repeatedly returned as undeliverable;
5. Notice to the City that a customer is not receiving mail sent by the City;
6. Notice to the City that an account has unauthorized activity;
7. Breach in the City's computer system security; and
8. Unauthorized access to or use of customer account information.
E. Alerts from Others
Red Flag
1. Notice to the City from a customer, identity theft victim, law enforcement, or other
person that it has opened or is maintaining a fraudulent account for a person engaged in
Identity Theft.
IV. DETECTING RED FLAGS
A. New Accounts
In order to detect any of the Red Flags identified above associated with the opening of a
new account, City personnel will take the following steps to obtain and verify the identity of
the person opening the account:
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Detect
1. Require certain identifying information such as name, date of birth, residential or
business address, principal place of business for an entity, driver's license or other
identification;
2. Verify the customer's identity (for instance, review a driver's license or other
identification card);
3. Review documentation showing the existence of a business entity; and
4. Independently contact the customer.
B. Existing Accounts
In order to detect any of the Red Flags identified above for an existing account, City
personnel will take the following steps to monitor transactions with an account:
Detect
1. Verify the identification of customers if they request information (in person, via
telephone, via facsimile, via email);
2. Verify the validity of requests to change billing addresses; and
3. Verify changes in banking information given for billing and payment purposes.
V. PREVENTING AND MITIGATING IDENTITY THEFT
In the event City personnel detect any identified Red Flags, such personnel shall take one or
more of the following steps, depending on the degree of risk posed by the Red Flag:
A. Prevent and Mitigate
1. Continue to monitor an account for evidence of Identity Theft;
2. Contact the customer;
3. Change any passwords or other security devices that permit access to accounts;
4. Not open a new account;
5. Close an existing account;
6. Reopen an account with a new number;
7. Notify the Program Administrator for determination of the appropriate step(s) to take;
8. Notify law enforcement; or
9. Determine that no response is warranted under the particular circumstances.
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B. Protect customer identifying information
In order to further prevent the likelihood of identity theft occurring with respect to City
accounts, the City will take the following steps with respect to its internal operating
procedures to protect customer identifying information:
1. Ensure that its website is secure or provide clear notice that the website is not secure;
2. Ensure complete and secure destruction of paper documents and computer files
containing customer information; '
3. Ensure that office computers are password protected and that computer screens lock
after a set period of time;
4. Keep offices clear of papers containing customer information;
5. Request only the fast 4 digits of social security numbers (if any);
6. Ensure computer virus protection is up to date; and
7. Require and keep only the kinds of customer information that are necessary for City
purposes.
VI. PROGRAM UPDATES
This Program will be periodically reviewed and updated to reflect changes in risks to customers
and the soundness of the City from Identity Theft. At least one time each year, the Director of
Administrative Services will consider the City's experiences with Identity Theft situation,
changes in Identity Theft methods, changes in Identity Theft detection and prevention methods,
changes in types of accounts the City maintains, and changes in the City's business
arrangements with other entities. After considering these factors, the Director of Administrative
Services will determine whether changes to the Program, including the listing of Red Flags, are
warranted. If warranted, the Director of Administrative Services will update the Program or
present the City Council with his or her recommended changes and the City Council will make a
determination of whether to accept, modify or reject those changes to the Program.
VII. PROGRAM ADMINISTRATION
A. Oversight
Responsibility for developing, implementing and updating this Program lies with the Director
of Administrative Services for the City. The Director of Administrative Services will be
responsible for the Program administration, for ensuring appropriate training of City staff on
the Program, for reviewing any staff reports regarding the detection of Red Flags and the
steps for preventing and mitigating Identity Theft, determining which steps of prevention and
mitigation should betaken in particular circumstances and considering periodic changes to
tFie Program.
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B. Service Provider Arrangements
In the event the City engages a service provider to perform an activity in connection with
one or more accounts, the City will take the following steps to ensure the service provider
performs its activity in accordance with reasonable policies and procedures designed to
detect, prevent, and mitigate the risk of Identity Theft.
1. Require, by contract, that service providers have such policies and procedures in place;
and
2. Require, by contract, that service providers review the City's Program and report any
Red Flags to the Program Administrator.
C. Specific Program Elements and Confidentiality
For the effectiveness of Identity Theft prevention Programs, the Red Flag Rule envisions a
degree of confidentiality regarding the City's specific practices relating to Identity Theft
detection, prevention and mitigation. Therefore, under this Program, knowledge of such
specific practices are to be limited to those employees who need to know them for purposes
of preventing Identity Theft. Because this Program is to be adopted by a public body and
thus publicly available, it would be counterproductive to list these specific practices here.
Therefore, only the Program's general red flag detection, implementation and prevention
practices are listed in this document.
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