Millions of phoney Social Insurance Numbers fostering fraud, auditor general says

Sean Durken, Sun Ottawa Bureau, 09/30/98

OTTAWA - There are almost four million illegal Social Insurance Numbers circulating in Canada, creating a gold mine for frauds, cheats and conmen, says federal Auditor General Denis Desautels.

SINs are easy to obtain with false birth certificates, which are not cross-referenced, or to assume from people whose deaths have not been recorded in the SIN registry, Desautels said yesterday in his latest report.

Desautels said there are 3.8 million more active SINs in Canada than there are people entitled to them.

Desautels also noted that 11.8 million Canadians who have SIN numbers have never been asked to provide proof of identity.

As an example of the failure to record deaths, Desautels said the SIN registry lists 311,000 living Canadians aged 100 or more, while Statistics Canada's census shows there are only 3,000.

Temporary SINs are also an easy target for criminals, said Desautels. These are issued to foreign students or investors, and have no time limits. The latest figures show there were 470,000 more listed temporary SINs last year than there were non-permanent residents living in Canada.

The flood of illegal cards creates a massive opportunity to fraudulently obtain government benefits and to rip off banks and other private companies, said Desautels.

It is also easy to "steal a person's identity" by obtaining his or her SIN and using it to fraudulently obtain social benefits, tax rebates or credit cards, he added.

The SIN was initially designed in 1964 as a means of identifying Canada Pension Plan and unemployment insurance clients and was later expanded for use by Revenue Canada in tracking tax returns.

Despite repeated statements by governments that the SIN should not be used as a general identification number, it is now used as just that, with 24 federal departments, the provinces, and the private sector all using it to keep track of their clients, said Desautels.

The auditor general said no statistics exist to show how much money is fraudulently obtained each year in Canada through false SINs, but assuming it is 10% of the amount reported in the U.S., the figure would top $100 million annually.

Desautels said investigation of SIN fraud by the federal Human Resources Department, which is responsible for maintaining the registry of numbers, is weak, and the punishments for those who are caught are light.

The maximum penalty for a SIN sin is a $1,000 fine and one year imprisonment.

Desautels said his department only found one investigation which led to false use charges being laid, and that resulted only in a $200 fine being imposed.

Desautels said the government must either impose drastically improved security, including the use of fingerprints or even retinal scans to identify SIN users, or replace the system with a completely new identification program.

Auditor shows where some of the money went

The following are major examples of SIN fraud listed yesterday by federal Auditor General Denis Desautels:

  • Three people obtained 20 false SINs, used them to lease 18 luxury cars from a dealership, and shipped the vehicles abroad in containers, netting $1.1 million.
  • One person is under investigation for using 30 false SINs to obtain up to $450,000 in false Employment Insurance claims.
  • A work placement company, over several years, provided 1,295 invalid SINs to workers to obtain false welfare payments totaling $10 million.
  • An individual used the SINs of six other people to register 22 bogus companies, then attempted to obtain $12.5 million in GST rebates from Revenue Canada.
  • Another person obtained SINs from employees' time cards at a major food retailer's warehouse and used them to create 27 bogus companies and claim $254,000 in GST rebates.
  • A person used help-wanted ads to obtain legitimate SINs from 86 people, then used them to obtain $239,000 in fraudulent income tax rebates.