A bipartisan pair of representatives are proposing a federal identity fraud prevention innovation grant program for states to modernize their identity systems and create secure digital IDs.
Reps. Bill Foster, D-Ill., and Pete Sessions, R-Texas, introduced the Stop Identity Fraud and Identity Theft Act on Monday in an aim to counter recent increases in identity fraud and artificial intelligence-powered (AI) deepfakes.
“Identity fraud is one of the fastest growing threats facing American families, our financial system, and the integrity of government programs,” Sessions said in a statement. “Criminal organizations and hostile nation-states are exploiting outdated identity systems, costing taxpayers hundreds of billions of dollars and putting Americans’ personal information at risk.”
Foster added that “it is important that Congress responds to the growing wave of identity theft and fraud in the United States by strengthening our digital identity infrastructure.”
Fraud has been a hot topic in Congress over the past few years. The Pandemic Response Accountability Committee revealed that the U.S. government could have saved $79 billion in fraudulent payments during the COVID-19 pandemic with proper identity verification and analytics. Meanwhile, the House Select Subcommittee on the Coronavirus Pandemic found that $200 billion of the $872 billion distributed under pandemic unemployment insurance benefit programs were paid out to fraudulent claimants.
Beyond pandemic-related fraud, the Government Accountability Office has also estimated that the federal government loses between $233 billion and $521 billion annually to fraud, largely due to compromised identities.
The congressmen’s proposal would address identity fraud by directing the Treasury Department to create a grant program to develop and strengthen secure digital identity tools – such as digital driver’s licenses and other state-issued credentials – that meet cybersecurity standards set by the National Institute of Standards and Technology.
While states could use the funding to replace outdated identity systems, protect government benefit programs, and reduce fraud across the financial system, at least 10% of each state’s grant must be spent helping residents obtain credentials or services needed to get digital IDs.
The bill emphasizes privacy protections and explicitly calls for defenses against AI-driven impersonation and deepfake attacks.
It also includes guardrails. For example, states cannot require anyone to use a digital ID, cannot eliminate physical driver’s licenses, and cannot use the funds to issue identity credentials to undocumented immigrants. Participation in the grant program is voluntary, the bill text also notes.
“The bill builds on work already directed by Congress for the National Institute of Standards and Technology to develop voluntary digital identity guidelines, while recognizing that many states and local agencies lack the resources to implement them,” a press release from Foster’s office said.
Speaking on the issue last year, Foster said that legislation aimed at creating more secure digital IDs has received strong support from industry. Some proposals have included requiring federal agencies to verify the identity of citizens claiming government benefits or services, and creating a regulatory sandbox for digital identity within banking and financial technology industries.