Identity theft occurs when an unscrupulous person obtains enough of your personal information to be able to impersonate you and use your identities to obtain financial gain. Sometimes, this results in innocent victims having charges leveled against them for something they had not done. It should be pointed out that identity theft does not really exist by itself but is a concept that is inherent to a lot of cybercrimes.

Unlike your fingerprints, which are unique to you, other forms of your personal data such as your username, password or credit card number, can be used by a perpetrator to impersonate you. Every year, thousands of people report of unauthorized persons retrieving funds out of their financial accounts, or, sometimes even taking over their identities altogether, which will end up with the victim racking up large amounts of debt.

Unlike the real world, the cyber world follows altogether a different set of rules. The Internet has offered us a veil of anonymity and privacy. Unfortunately these are exploited by the cybercriminals, to appease their ulterior motives. Under his victim's identity, the perpetrator commits his crimes. The victim suffers both financial and emotional damage. In many cases, the victim loses his reputation in society and is wrongfully charged for crimes that he never committed.

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Traditional form of identity theft

Identify theft is not something new. Therefore, it is possible for the perpetrator to steal your identity without the use of any device at all. People often fail to comprehend how easy it is for a determined person to commit identity theft. Two methods used by old-age identity thieves were "shoulder surfing" and "dumpster diving".

Shoulder surfing involves keeping a watch on you as you enter your personal information, such as your password or credit card number or eavesdropping on your personal conversation.

Dumpster diving involves going through your trash bins and garbage to retrieve copies of your checks, credit card or bank statements, or other sensitive records that you have not properly disposed of, e.g. by shredding.

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Identity theft in the cyber world

We all know that computers and the Internet have brought us great comfort and convenience. Unfortunately, they have also provided more loopholes for the criminals to exploit. In the cyberworld, there are various methods available to commit identity theft. Hacking, Phishing, Spyware and Trojans are some of the popular methods used by the modern identity thieves.

Identity theft via Hacking

This is a direct and straightforward method of identity theft. The perpetrator intrudes your system illegally and steals your files. Some of these may include your personal information, using which he commits the crime.

Identity theft via Phishing

Firstly, the perpetrator sets up a bogus website that tries to imitate a well-known website. When a victim comes across the bogus website, he/she thinks it is the real website, and discloses his personal information, during log-in or when filling up a web form. However, this information is transferred directly to the criminal. Now the criminal has your personal information and he can commit crime under your identity.

Identity theft via Spyware and Trojan Horses

A spyware program or a Trojan horse monitors your activities on your computer and sends this information back to the perpetrator. For example, the program can log your keystrokes and send it to the perpetrator. From the log, the would-be criminal can obtain sensitive information such as your username, password and even your credit card number, if you do online shopping.

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Reference

ID theft - FraudWatch International
http://www.fraudwatchinternational.com/idtheft/idtheft.htm

How identity theft works
http://computer.howstuffworks.com/identity-theft.htm

What is identity theft?
http://101-identitytheft.com/idtheft.htm