The frequently fun and always interesting Financial Cryptography blog a link to a recent New York Times article that describes how social security numbers and other personal identifiers have become a form of currency for those living on the semi-legal edges of American society:

Some Immigrants Are Offering Social Security Numbers for Rent

By EDUARDO PORTER
June 7, 2005

TLALCHAPA, Mexico - Gerardo Luviano is looking for somebody to rent his Social Security number. Mr. Luviano, 39, obtained legal residence in the United States almost 20 years ago. But these days, back in Mexico, teaching beekeeping at the local high school in this hot, dusty town in the southwestern part of the country, Mr. Luviano is not using his Social Security number. So he is looking for an illegal immigrant in the United States to use it for him - providing a little cash along the way.

"I've almost managed to contact somebody to lend my number to," Mr. Luviano said. "My brother in California has a friend who has crops and has people that need one." Mr. Luviano's pending transaction is merely a blip in a shadowy yet vibrant underground market. Virtually undetected by American authorities, operating below the radar in immigrant communities from coast to coast, a secondary trade in identities has emerged straddling both sides of the Mexico-United States border...

...The number of people participating in the illegal deals is impossible to determine accurately. But it is clearly significant, flourishing despite efforts to combat identity fraud. Hundreds of thousands of immigrants who cross the border from Mexico illegally each year need to procure a legal identity that will allow them to work in the United States. Many legal immigrants, whether living in the United States or back in Mexico, are happy to provide them: as they pad their earnings by letting illegal immigrants work under their name and number, they also enhance their own unemployment and pension benefits. And sometimes they charge for the favor.

...Demand for American identities has blossomed in the cracks between the nation's increasingly unwelcoming immigration laws and businesses' unremitting demand for low-wage labor. In 1986, when the Immigration Reform and Control Act started penalizing employers who knowingly hired illegal immigrants, most employers started requiring immigrants to provide the paperwork - including a Social Security number - to prove their eligibility to work...

...These days, most immigrants working unlawfully buy a document combo for $100 to $200 that includes a fake green card and fake Social Security card with a nine-digit number plucked out of thin air. "They'll make it for you right there at the flea market," said David Blanco, an illegal immigrant from Costa Rica who works as an auto mechanic in Stockton, Calif.

This process has one big drawback, however. Each year, Social Security receives millions of W-2 earning statements with names or numbers that do not match its records. Nine million poured in for 2002, many of them just simple mistakes. In response the agency sends hundreds of thousands of letters asking employers to correct the information. These letters can provoke the firing of the offending worker.

Working with a name linked to a number recognized by Social Security - even if it is just borrowed or leased - avoids these pitfalls. "It's the safest way," said Mario Avalos, a Stockton accountant who every year does tax returns for dozens of illegal immigrants. "If you are going to work in a company with strict requirements, you know they won't let you in without good papers"...

...Done skillfully, the underground transactions are virtually undetectable. They do not ring any bells at the Social Security Administration. Nor do they set off alarms at the Internal Revenue Service as long as the person who lends the number keeps track of the W-2's and files the proper income tax returns.

In a written response to questions, the audit office of Social Security's inspector general acknowledged that "as long as the name and S.S.N. on an incoming wage item (i.e., W-2) matches S.S.A.'s record" the agency will not detect any irregularity. The response noted that the agency had no statistics on the use of Social Security numbers by illegal immigrants. It does not even know how many of the incorrect earnings reports it receives every year come from immigrants working unlawfully, though immigration experts estimate that most do.

Meanwhile, with the Homeland Security Department focused on terrorism threats, it has virtually stopped policing the workplace for run-of-the-mill work violations. Immigration and Customs Enforcement arrested only 450 illegal immigrants in the workplace in 2003, down from 14,000 in 1998. "We have seen identity fraud," said John Torres, deputy assistant director for investigations. But "I haven't heard of the renting of identities."

Not exactly comforting, is it.

Read the full article, with much more detail here.

-- MDT