Improving Digital Identity Verification
Improving the digital identity verification process is becoming essential as identity theft and fraud are more common by the day which is why the U.S. Congress is doing something about it with the Improving Digital Identity Act of 2021.
The internet, which was originally developed to let government researchers share data more efficiently, has ballooned into something much bigger which offers nefarious individuals a channel to commit fraud with stolen identities using advanced methods while it also improves people’s lives.
With new regulations which often overlap with other laws at least partially, the government authorities seem to be playing catch-up and focusing more on prevention. While regulations are typically deigned to protect consumers from identity theft which have already destroyed or at least harmed some citizens’ financial lives, recent attempts to defraud the government have spurred elected officials to recognize the issue’s urgency.

The Problems
Here are just a few of the problems that members of Congress wish to solve, as outlined in the Improving Digital Identity Act:
- Inadequate resources for government agencies and businesses that verify identities
- Rising cases of identity theft
- Billions of financial losses from identity fraud
- Erosion of privacy for victims of identity theft
Government Fraud Case
A New Jersey man, Eric Jaklitsch, recently made the news for draining California of over $900,000 by filing unemployment claims with fake identities. He wasn’t caught because of an excellent identity theft prevention system, though. Law enforcement only noticed him because he used fraudulent debit cards at ATMs.
Jaklitsch wasn’t unique. You can find lots of similar stories, like this Boston-area man who participated in unemployment fraud.
How Will the Improving Digital Identity Act Help?
Improving digital identity verification with the implementation of the Act could reduce or even solve digital identity fraud problems. The text of the Act notes that the Federal Government’s authority puts it in a strong position to effect change. State governments, which handle driver’s licenses and IDs, also have extensive reach.
The Improving Digital Identity Act aims to solve digital identity problems in several ways:
- Creating a cohesive, interoperable digital identity system
- Providing increased funding to improve digital identity systems
- Cooperating with private sector entities to improve digital identity verification systems through innovative methods
Benefits of Improving Digital Identity Verification
If all goes as planned, the Act will create a cascade of benefits:
- Reduced identity theft
- Greater privacy and data protection
- Improved banking access for vulnerable individuals
- More efficient detection of identity fraud and theft
Which Agencies Are Involved?
Representatives from a variety of agencies and departments will form a task force to implement the Improving Digital Identity Act. The involved federal entities are as follows:
- Department of the Treasury
- Department of Homeland Security
- Department of Education
- Office of Management and Budget
- Social Security Administration
- National Institute of Standards and Technology
- Department of General Services
Representatives of various state and local agencies will also participate.
What Will They Do?
At this early stage, some agencies’ responsibilities are clearly outlined. In other cases, it’s unclear which unique tasks each might face. As a whole, the task force will be responsible for several activities:
- Identifying government agencies that handle identification information
- Evaluating restrictions on those agencies’ abilities to handle identification information for other agencies and organizations
- Assessing necessary legal changes to manage the restrictions mentioned above
- Recommending a framework that would allow agencies to manage digital identity verification securely
- Determining necessary funding
- Assessing whether a fee-based model would be effective when offering digital identity verification services to private entities
- Recommending further actions that Federal, State, and local government entities should take to securely and accurately manage digital identity verification
- Determining the criminal exploitation risks of digital identity verification methods
- Assessing the merits and drawbacks of digital identity verification compared to traditional identity verification
- Working with the private sector to improve digital identification security
In addition to those general tasks, the Act also gives specific directions to representatives of some departments:
- The Director of the National Institute of Standards and Technology must create a framework of standards and procedures to guide other government agencies in supporting secure digital identity verification.
- The Secretary of Homeland Security must allocate grants to government agencies that provide identity credentials like driver’s licenses. The grants will be for relevant system upgrades. After all agencies have completed their tasks, the Secretary must also issue binding operational directives for moving forward.
- The Comptroller General, head of the Government Accountability Office, must assess the use of Social Security numbers by nongovernmental agencies and make relevant security recommendations.
How Will the Government Recommendations Help Private Companies?
Interoperability is one of the key aims of the Improving Digital Identity Act. Private sector companies should take note; cooperating to create a system that connects data from multiple sources could enhance their ability to flag attempted identity fraud. Companies would also benefit from allocating further resources to secure identity verification processes.
Improving Digital Identity Act Timeline and Budget
The Act also referred to as Strengthening Digital Identity Act of 2021 was first introduced in September 2020 and directs the Secretary of Commerce through the Director of the National Institute of Standards and Technology to establish a robust digital identity management program with standards and guidelines for improving America’s cybersecurity posture.
The Act requires the publication of the interim Framework no later than 240 days after the date of the Act which should come sometime in 2022. $10 million will be allocated to the secretary for each fiscal year from 2022 through 2026 to implement the Act. A grant program will be established within the Department of Homeland Security to allow States to upgrade their systems for issuing drivers’ licenses and other forms of digital identities.