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Data storage: storing customers'' personal information is useful for marketing but subject to strict regulation on how you can use it, finds Fiona Harvey.

Article Excerpt
When IBM found earlier this year that a disk drive holding the names of thousands of its customers had been stolen, the company went into a panic. Losing personal data on your customers is one of the most serious electronic crimes any company can commit these days.

It's hardly surprising: identity theft has become the fastest growing form of fraud, costing the UK [pounds sterling]20.6m in 2002, up from [pounds sterling]14.6m in 2001. In the US, the number of complaints about identity theft to the Federal Trade Commission nearly doubled between 2001 and 2003, from 86,000 to 162,000.

Thieves target individuals using a few personal details, such as name, address and date of birth. They then use these to gain credit cards, loans and mobile phone contracts. Because the thieves use a false address, only when they move on, having run up huge debts, does the crime come to light. The person whose identity has been stolen first knows about it when debt collectors turn up having traced the name to the genuine address.

In the case of IBM and its stolen data, the matter was soon contained. The files held hundreds of thousands of details--including bank account details and mothers' maiden names--on the customers of IBM's insurance company clients. The local police in Canada, where the crime took place, found the disk drive shortly afterward with the confidential data it had held written over. But it seems clear that the goal had been identity theft.

The rules surrounding data protection vary from North America to Europe, but all jurisdictions agree that sensitive data of this kind must be kept under several levels of protection.

First, as IBM found out to its cost, there's physical protection. The thief who stole its data took the entire 30Gb hard drive from its secure facility. Even...