5.3. ERMUSR 10-14-2008.^~/
Elk River
Municipal Utilities
13069 Orono Parkway • P.O. Box 430
Elk River, MN 55330-0430
October 10, 2008
To: Ell: River Municipal Utilities commission
Jerry Takle
Jim Tralle
John Dietz
From: Theresa Slominski
Subject: Red Flag/Identity Theft Prevention Policy
Phone: 763.441.2020
Fax: 763.441.8099
fay November i st, the Federal Trade Commission (FTC) "Red Flag" regulations are
requirint, all banks and other "creditors" to design and approve their own tailored plans
for preventing th:r ~ uston.~ers' information fi~i~raa being stolen or used illegally. Under
these regulations,. tl,;.. form "~.rf~ditor" encompasses all utilities, inchiding municipal
z~til:tics, because t;7e°; provide service ai~ead of payaYat~r;t. "IZod Fiat g" is the term used in
the regulatic:>ns t:c? re~:~r to v~aa-aairg signs that a customer's personal information has been
compa orr~~.ist:d~.
MMUA provided a model template to utilities as guidance for adopting their own plan.
The template was reviewed and modified to reflect ERMU current practices and policies.
In the last few years, with the adoption of collecting social security numbers and other
identification, adopting a deposit policy, and utilizing the resource of Online Utility
Exchange, we have many of these "Red Flag" issues addressed. We have passwords,
computer timeoazts, physical barriers and locks, destruction of paper records, statements
requiring staff to sign off on responsibility of customer privacy (and the consequences for
not complying j, grad verification of customer provided data with Online Utility Exchange
already in place. I and the two staff working with the Online Utility Exchange database
reviewed the MMUA template and identified the needed tailoring for our use.
Included is the proposed policy for your review. It has been reviewed by our attorney as
well. Staff recommends that the commission adopt the policy.
Elk River Municipal Utilities
Identity Theft Prevention Program
Effective beginning November 1, 2008
I. PROGRAM ADOPTION
The Elk River Municipal Utilities ("Utility") 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 of 2003. 16 C.
F. R. § 681.2. This Program was developed with oversight and approval of the Program
Administrator (defined below). After consideration of the size and complexity of the Utility's
operations and account systems, and the nature and scope of the Utility's activities, the Program
Administrator determined that this Program was appropriate for the Elk River Municipal Utilities
and therefore presented it to the Elk River Municipal Utilities Commission for approval of this
Program on October 14, 2008.
II. PROGRAM PURPOSE AND DEFINITIONS
A. Fulfilling requirements of the Red Flags Rule
Under the Red Flag 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 "fraud committed or attempted using the
identifying information of another person without authority" and a "Red Flag" as "a pattern,
practice, or specific activity that indicates the possible existence of Identity Theft."
According to the Rule, a municipal utility 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 Utility's accounts that are individual utility service accounts held by customers of the
utility whether residential, commercial or industrial are covered by the Rule. Under the Rule, a
"covered account" is:
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1. Any account the Utility offers or maintains primarily for personal, family or household
purposes, that involves multiple payments or transactions; and
2. Any other account the Utility offers or maintains for which there is a reasonably
foreseeable risk to customers or to the safety and soundness of the Utility from Identity
Theft.
"Identifying information" is defined under the Rule as "any name or number that may be used,
alone or in conjunction with any other information, to identify a specific person," including:
name, 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, or routing code.
III. IDENTIFICATION OF RED FLAGS.
In order to identify relevant Red Flags, the Utility 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 Utility 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
Red Flags
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
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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;
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 Utility that a customer is not receiving mail sent by the Utility;
6. Notice to the Utility that an account has unauthorized activity;
7. Breach in the Utility's computer system security; and
8. Unauthorized access to or use of customer account information.
E. Alerts from Others
Red Flag
L Notice to the Utility 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.
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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, Utility personnel will take the following steps to obtain and verify the identity of
the person opening the account:
Detect
1. Require certain identifying information such as name, date of birth, residential or
business address, principal place of business for an entity, social security number, driver's
license or other identification;
2. Run a credit inquiry (soft credit check) utilizing the Online Utility Exchange database
3. Verify the customer's identity when conflicting information is presented related to the
person (for instance, review a driver's license or other identification card);
4. Review documentation showing the existence of a business entity; and
5. Independently contact the customer.
B. Existing Accounts
In order to detect any of the Red Flags identified above for an existing account, Utility
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 Utility 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:
Prevent and Mitigate
I . 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.
Protect customer identifying information
In order to further prevent the likelihood of Identity Theft occurring with respect to
Utility accounts, the Utility 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. Ensure computer virus protection is up to date; and
6. Require and keep only the kinds of customer information that are necessary for utility
purposes.
7. Have all staff with access to protected information sign off on a customer privacy
understanding statement which states that a violation of customers' privacy results in
consequences up to, and including, possible termination.
VI. PROGRAM UPDATES
The Program Administrator will periodically review and update this Program to reflect
changes in risks to customers and the soundness of the Utility from Identity Theft. In doing so,
the Program Administrator will consider the Utility's experiences with Identity Theft situations,
changes in Identity Theft methods, changes in Identity Theft detection and prevention methods,
and changes in the Utility's business arrangements with other entities. After considering these
factors, the Program Administrator will determine whether changes to the Program, including the
listing of Red Flags, are warranted. If warranted, the Program Administrator will update the
Program and present the Utility Commission with his or her recommended changes and the
Utility Commission will make a determination of whether to accept, modify or reject those
changes to the Program.
VII. PROGRAM ADMINISTRATION.
A. Oversight
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Responsibility for developing, implementing and updating this Program lies with an
Identity Theft Committee for the Utility. The Committee is headed by a Program Administrator
(the Finance Director.) Two or more other individuals appointed by the head of the Utility or the
Program Administrator comprise the remainder of the committee membership. The Program
Administrator will be responsible for the Program administration, for ensuring appropriate
training of Utility 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 be taken in particular circumstances and considering periodic
changes to the Program.
B. Staff Training and Reports
Utility staff responsible for implementing the Program shall be trained either by or under
the direction of the Program Administrator in the detection of Red Flags, and the responsive
steps to be taken when a Red Flag is detected. Review with staff already trained will occur
annually. Reporting.......
C. Service Provider Arrangements
In the event the Utility engages a service provider to perform an activity in connection
with one or more accounts, the Utility 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 Utility's Program and report any
Red Flags to the Program Administrator.
D. Non-disclosure of Specific Practices
For the effectiveness of this Identity Theft Prevention Program, knowledge about specific
Red Flag identification, detection, mitigation and prevention practices must be limited to the
Identity Theft Committee who developed this Program and to those employees with a need to
know them. Any documents that may have been produced or are produced in order to develop or
implement this program that list or describe such specific practices and the information those
documents contain are considered "security information" as defined in Minnesota Statutes
Section 13.37 and are unavailable to the public because disclosure would be likely to
substantially jeopardize the security of information against improper use, that use being to
circumvent the Utility's Identity Theft prevention efforts in order to facilitate the commission of
Identity Theft.
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