Initiatives focus on health care, state government and the IoT
28 December, 2015
NSTIC Pilot: MorphoTrust
Stop fraudulent state tax returns
MorphoTrust USA was awarded its second NSTIC grant, this time focusing on the prevention of tax refund theft. The project will involve driver license and taxation departments from the states of North Carolina and Georgia.
The company’s previous grant was awarded in 2014 in partnership with North Carolina government agencies. That pilot focused on the creation of an electronic ID for accessing online services with the same security and identity authentication as in-person transactions.
“We thought there was something else to prove that we could demonstrate to the marketplace, and that is the securing of a transaction outside of a live web session,” says Mark DiFraia, senior director of market development for MorphoTrust USA. “We thought that asynchronous authentication was really important to demonstrate. We also thought this tax refund theft issue was so big that it really needed an answer and that we were perhaps uniquely positioned to demonstrate one.”
The pilot focuses on the issue of tax refund fraud at the state level, where a criminal submits a tax return in someone else’s name and steals the refund before the victim has had a chance to file. It’s a huge headache for the federal government as well, but this pilot specifically deals with the problem at the state level. The project seeks to show how to leverage trust created during the online driver licensing process – which includes verification through biometric identification – to then create trustworthy electronic IDs.
The pilot focuses on state tax refund fraud, where a criminal submits a tax return in someone else’s name and steals the refund. The project will show how to leverage trust in the driver licensing process to create strong electronic IDs.
MorphoTrust and its partners will set out to prove that a user can secure an online session that includes logging into a website and performing transactions in real time with a secure electronic ID based on the trust of a driver license. They’ll also show that a user can secure a transaction that will happen in the future.
“In many ways, this example is a preventative action that the taxpayer can take to prevent somebody from being able to perpetrate fraud on their tax ID account with the Department of Revenue. That’s a very different approach to what’s been going on in the marketplace now, which is typically a reactionary approach,” DiFraia says. “Things that we have that are identity protections typically occur after the fact. We get notified and then we can go take some action. This is a measure you can take to prevent the theft or fraud from happening to you in the first place.”
MorphoTrust is partnering again with the North Carolina Department of Transportation, which will continue issuing electronic ID’s to state residents. The North Carolina Department of Revenue is joining the team, as is the Georgia Department of Driver Services and the Georgia Department of Revenue.
The project will enable users to log in securely to the Revenue site, put a virtual lock on their tax ID, and authenticate later when a tax refund is filed in their name. The Georgia Technology Authority will assist in determining how lessons learned from the pilot may be extended throughout the state. Commercial partner H&R Block will help get the word out to taxpayers in both states that the service is available.
The total grant award is $1.8 million over two years, and the timeline requires that the project be aligned with the tax calendar. “We’re going to really engage the departments of revenue in their heavy lifting after the close of the tax cycle in April with an eye towards being live and available for people to go in and put that protective lock on their tax ID account in the fourth quarter of 2016. That makes sure that everybody’s ready for the 2017 tax cycle,” DiFraia says.
MorphoTrust’s arrangement with the National Institute of Standards and Technology includes the ability to work in tandem with more states as the pilot project is carried out. This gives states that want to participate a chance to join sooner instead of having to wait until the 2018 tax season.
“This is one of those problems that people are now increasingly aware of, even fearful of, but there’s really not a whole lot you can do proactively to prevent it from happening to you,” DiFraia says. “We really wanted to make this available as widely as we possibly can, leveraging the grant dollars to prove the things that need to be proven but welcome other states to participate.”
“State DMVs are the most trusted repository of identities in the U.S. and the best proofer of the largest number of Americans,” says DiFraia. “They can play a huge role in an online identity assurance and we’re really optimistic that this can lead to some great things for all of us as individuals in the next few years.”