The federal government has passed tough new legislation to give police and courts added powers to fight identity theft.

"This legislation … will better address identity theft and provide police with the tools they need to help stop these crimes before they are committed," Justice Minister Rob Nicholson said in a statement released Tuesday in Ottawa.

Bill S-4 creates three new Criminal Code offences related to identity theft, including:

• Obtaining and possessing identity information with the intent to use the information deceptively, dishonestly or fraudulently in the commission of a crime.
• Trafficking in identity information, an offence that targets those who transfer or sell information to another person with knowledge of, or recklessness as to, the possible criminal use of the information.
• Unlawfully possessing or trafficking in government-issued identity documents that contain the information of another person.

All three offences carry five-year maximum prison sentences. In addition, the legislation gives courts the power to order offenders to pay restitution to a victim of identity theft as part of their sentence.

Identity theft costs Canadian consumers, banks and credit card firms, stores and other businesses an estimated $2 billion annually, according to the Canadian Council of Better Business Bureaus.