CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Protect Your Company From Business Identity Theft with State Alert Services

By: John Morrissey, COGENCY GLOBAL INC. on Mon, Nov 10, 2014

business indentity theftHardly a day goes by without the report of the theft of personal identifiable information, more commonly known as “identity theft.” While, identity theft is usually associated with the stealing of an individual’s personal information, businesses can also suffer from identity theft. Business identity theft can range from the unauthorized charging of purchases to stolen business credit card numbers to elaborate frauds involving fake websites and the renting of office space under fictitious names. In 2010, Georgia reported that criminals used forged business identities to make expensive purchases using fraudulently obtained credit. Colorado and other states have also reported numerous examples of business identity theft.

 

Unauthorized Changing of Business Records
A growing concern of many Secretary of State offices is the unauthorized changing of business records to facilitate the obtaining of credit for fraudulent purposes.  For example, perpetrators will renew a previously revoked corporation and use its credit history to obtain a line of credit. Some particularly aggressive criminals will go online and file an amended annual report affecting a change in the principals of an entity. The selected target is often a mid-size company with excellent credit. The altered state record is then used to facilitate the purchase of expensive items, such as computers, on credit. By the time the fraud is discovered the criminals have disappeared. 

 

Steps States Have Taken to Combat Business Entity Identity Theft
Secretary of State offices have taken various steps to combat identity theft, including posting information and warnings about identity theft on their websites and initiating statutory changes that make it easier to prosecute the perpetrators of business identity theft. They have also changed procedures for reinstating revoked corporations to make it more difficult for unauthorized filers to reinstate an entity.

It is commonly recommended that businesses frequently review their online records posted on the Secretaries of States’ websites. This suggestion, however, requires proactive action by busy business executives. In response, some states have initiated an e-mail notification system that alerts registered users if a document is filed on behalf of their company. The alert enables the company to review the filing and promptly take corrective action if the filing was unauthorized. These services are free or have a modest annual service fee.

 

States Offering E-Mail Alert Services
Georgia was the first state to offer an e-mail online notification service. To initiate the service, business executives can go the Secretary of State’s website and complete the simple registration form.  Upon registering, the system will send alert notifications to the registered user via e-mail when changes have been made to the entity’s account. The system will also notify the user of pending annual report due dates and other legal communications. The system has internal controls to prevent an unauthorized user from defeating the system by deleting previously entered e-mail address.

Colorado, Kansas, Ohio, North Carolina and Rhode Island offer a similar free service. Utah and Idaho charge an annual subscription fee of $3 for their e-mail alert service. There is a $35 annual service charge to subscribe to the e-mail service offered by the Maine Secretary of State.

Click here for links to subscribe to the alert service in the states that offer it.

The Oregon Secretary of State website indicates it will offer this type of service in the near future.

While these e-mail alerts can be a helpful tool to assist with the tracking of entity information, it is still incumbent on the entity to take prudent steps to protect its entity information.

This article was updated on January 15, 2015 to reflect current state information.



This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Company Formation and Filing Considerations