Scam Artists have been around for centuries. Years have passed and new technology has emerged And so have a new breed of con artist;
A wise man once said “money is the root of all evil” could this be one of the things he was referring to?
THE ONLINE FRAUDSTER.
Utilizing various aspects and tools of the Internet, the online fraudster has become more successful then ever in defrauding a large target audience. So successful, that the issue has been the subject of much concern in recent years. Online fraud is still continuing to thrive. As long as the fraudster is motivated by greed and able to deceive others, fraud will always be in existence. This report will closely examine the emergence of the fraudster into cyberspace. It will discuss what tactics and methods the online fraudster utilizes in his/her attempts to successfully deceive others. Lastly, several conclusions will be drawn regarding Internet fraud.
THE VENTURE INTO CYBERSPACE
Imagine a medium in which information or ideas can be passed on to a large audience of individuals in a relatively short period of time. If you haven’t been living under a rock in recent years, you would know that such a thought is in fact reality. The Internet, has now found its way into the commercial and private sectors of countries around the globe. The number of Netizens increases greatly with the passing of each day. As the population of people on the Internet continually grows, so do the potential threats and vulnerabilities associated with it. The Internet can provide a wealth of information. However, it can also be viewed as a breeding ground for fraud.
Just think, the Internet has made things so much easier for the fraudster. No longer is there a need to rent office space, hire employees and spend countless hours on a telephone pitching to targeted audiences. Time and funding have been reduced significantly. As a result, the Internet looks extremely attractive. Furthermore, with the usefulness, popularity and global reach of the Internet continuously growing, it doesn’t take much to try and understand why fraudsters are venturing off into cyberspace.
Who Are They? / What is Their Motive? So, who are these online fraudsters?
fraudsters are individuals “who defraud others”. Fraudsters have been around for centuries. “throughout the centuries, people have committed frauds of all sorts in order to gain, through taking advantage of others”. Virtual scam-artists are similar to the traditional scam artists in the real world. Their fundamental motive is greed. However, there is one distinct difference; they utilize a completely different medium/environment in their mission to ultimately accomplish their goal of successfully deceiving others. The typical traditional fraudster starts his/her venture off in a similar manner to that of a business entrepreneur. In regards to financing his/her operation, To get up and running a relatively small amount of money is required. As little as one individual to as many as twenty staff can operate a typical operation. Some operations can be small and generally done on one’s spare time, while others may involve full time work. No matter how sophisticated the operation may be, each fraudster must rely on his/her ability and motivation to find the weaknesses of their target audiences and exploit them out of greed. During the months of May 2000 through November 2000 an extensive study to help address the issue of fraud committed through the Internet was undertaken. In this study, a thorough and complete data list was compiled, which allowed a general profile of a typical online fraudster to be made. According to the study, the data suggests that individuals who are involved in fraudulent activities via the Internet are generally, individuals and not businesses. Furthermore, these individuals are predominantly males residing in largely populated states. The data also suggests that these individuals have diversified international backgrounds with representation in the United States, Eastern Europe and Canada. In a recent article relating to the emergence of Internet fraud stemming from the recent terrorist attacks on the World Trade Center and the Pentagon (fake donation funds,etc.)started to pop up, an official at Britain’s National Criminal Intelligence Service (NCIS) stated “fraudsters typically exploit human misery, so they invariably create human misery. They are without scruples because this is how they make money. It is very grubby money”. There is a saying: “another day, another dollar”. If there is a dollar to be made, the fraudster will do whatever it takes to make it.
Fraud Exists in Various Corners of Cyberspace The Internet has allowed for people thousands of miles away to communicate with one another in real time. The most dominant forms of communication over the Internet are electronic mail, newsgroups, Usenet, “chat” rooms, Internet relay chats, list serves.
Types of Online Scams Used by Fraudsters:
Bulletin boards also serve as major mediums of communication. Electronic mail is of great use to online fraudsters. In literally a few minutes, an online fraudster can create a personalized email and send it to thousands of individuals in his/her target audience. Using e-mail to accomplish such a task is known as “spamming”. The fraudster knows that many people will simply delete the e-mail once it arrives. However, it is also likely that many will be made curious by the subject heading of the e-mail message, and therefore click the message to read on. The people who do open the message, a small percentage just may fall into the fraudster’s trap.
have also proven useful to online fraudsters. Bulletin boards are a typically the location where many individuals exchange information with one another. Many online fraudsters utilize message boards. Offering schemes to subscribers/browsers of such boards. Fraudsters, who target securities investors for example, utilize the message boards to pass on bogus “inside” information on certain stocks or corporations. Many fraudsters prefer this medium because it adds the benefit of them being able to easily hide their true identities with the use of aliases. Using multiple aliases, a fraudster can make it seem as though many people share the same opinions or have the same “inside” information that the fraudster does.
According to a study released in May 2001. Internet auction fraud makes up a majority (64%) of all online fraud. Internet auction houses have become extremely popular in recent years. An online auction is very similar to a real life auction. The only differences in an online auction are that the auction has a global reach and that there is no need to have an auction house with limited seating. On the Internet, it is quite possible to have multiple bidders and millions of potential bidders for a specific item. It’s a great concept; however, there are multiple reasons, why Internet auction fraud is the number one type of online fraud. According to the May 2001 study “Internet auction fraud involves “nondelivery, misrepresentation, triangulation fee stacking, black market goods, multiple bidding and shill bidding”. In regards to “non-delivery”,this type of fraud involves having an auction on an item that does not exist.
Misrepresentation results when the seller deceives the potential buyers. Essentially the seller lists false values and conditions for the items up for bid.
Triangulation involves the selling of an item (by the perpetrator) using fake identities and payment information to a bidder at an online auction web site. The winning bidder and online merchant are later questioned as to how they came across the stolen merchandise.
In regards to Fee stacking, this type of fraud involves the tacking on of extra fees by the seller after the auction closes.
Black-market goods are another type of Internet auction fraud. Black market goods are generally goods that are shipped to the winning bidder without a box, instructions or manufacturer’s warranty.
Occurs when the buyer places multiple bids for the same item using different aliases. Once the other potential bidders have lost interest and the auction is coming to a close, the high bids are withdrawn and the item is won at a lower bid.
the seller, using different aliases/or with the help of associates, bids on the item, which results in driving the price of the item up. It is estimated that in the year 2000, auction customers lost $4 million. Over 1.3 million transactions take place daily on online auction sites.
Online investment fraud is a type of Internet fraud, which is becoming all too common. Many brokerage houses/firms are providing clientele with great incentives to manage their accounts online. Furthermore, a countless number of websites have popped up within recent years that offer financial advice. Although a majority of these websites offer reliable news and advice on specific stocks and corporations, the web user should be weary. In a recent study conducted by ABCNews.com, it was found that seven million Americans used the Internet to trade investments. This figure suggests that approximately twenty five percent of all investment trades made by individual investors take place online. That number is astounding. It is no wonder why many fraudsters prey on those individuals who manager their investment portfolios via the Internet. There are several different tactics that the fraudster can employ when attempting to commit investment fraud.
Typically fraudsters generate and distribute online newsletters. Such newsletters, which are commonly found on web sites, bulletin boards or via e-mail, often carry no subscription fee and offer the online investor valuable information about specific stocks/corporations. Many of these online newsletters are in fact legitimate. It is known that many corporations legally pay individuals to create and distribute newsletters promoting their companies. The newsletters are legitimate as long as the company files that such a newsletter has been made, who created it, how much they were paid, and to whom it was distributed. At any given time there may be hundreds of thousands of newsletters of the sort floating around cyberspace. However, it is often difficult for the average web surfer/individual online investor to determine the legitimacy of the information provided in the newsletters. If the fraudster spends a little time and effort in developing the newsletter and making it appealing to the human eye, he may just be successful in deceiving some of those in his targeted audience. Based on the information they obtain from such newsletters, many individual investors may chose to either buy or sell a particular stock featured in the newsletter. It doesn’t take a genius to realize that a fraudster can profit considerably from either investing or selling the stocks he/she features in his/her newsletters.
Many fraudsters are also turning to message boards to obtain financial information. Many websites feature message boards, company information and real time quotes on companies trading on the NYSE or NASDQ stock market exchanges. The most popular website of this sort is Yahoo! Financial. To gain access to such information it only takes a few keystrokes necessary to enter in the URL of the web site into the web browser. Information is then at your fingertips. One can easily view all the information about a particular corporation or its stock history. The web surfer can view anything from the latest real time quotes, company news, and press releases to even the most recent trades made by top executives in that specific corporation. If one wants to be able to post any information on the message board of a particular stock a simple registration process needs to be completed. No information needs to be verified to obtain the user ID and password necessary to gain full access to the boards. A few simple questions and a fraudster can be just moments away from posting a message to his/her targeted audience. If the fraudster wants to make even more of a statement about a particular stock or corporation he/she intends to focus on, it only takes a few more minutes of his/her time to generate more accounts/aliases.
Fraudsters interested in committing investment fraud via the Internet are finding their way into live chat rooms. It is here where fraudsters can engage in real-time conversations with individuals who are interested in investing. Through the use of such chat rooms, fraudsters can easily relay information to those individuals in the chat room he/she intends to deceive. Chat rooms can be a great tool for the online fraudster. Not only can he/she engage in real-time conversation with his/her target audience, he/she can also hide his/her identity through the use of aliases as well.
There are several categories of Internet Investment fraud. One of the common is known as the pump and dump scam. In such a scam, the fraudster creates in his/her intended target’s mind the need to either buy or sell a stock immediately. Usually the fraudster creates newsletters or posts on message boards claiming knowledge of inside information on a particular stock. In reality, this is just a neat little game the fraudsters play to reel their victims in. The fraudsters who typically own shares of stock in this company want others who are gullible to buy the stock. In a sense, by promoting a stock, the fraudster is engaged in the pumping aspect of the scheme. Once the stock price has increased, the fraudster will then decide to sell or dump the stock. As a result, the gullible investors lose money, while the clever fraudster may profit enormously from the scheme. The fraudster may also employee this type of scheme if he/she wants to merely affect a corporation’s stock price out of spite. Fraudsters frequently use this ploy with small, thinly-traded companies because it’s easy to manipulate a stock when there’s little or no information available about the company. Common schemes employed by fraudsters targeting online investors are those that fall into the following categories: the pyramid, risk free fraud and off shore frauds.
The pyramid is a commonly used tactic. Risk free fraud involves investment opportunities associated with selling too good to be true investments. Usually, such deals are offered via the Internet and it doesn’t take much money or effort for the individual investor (the fraudster’s gullible target) to become involved. It is not uncommon for the investment and so called unbelievable opportunity to be non-existent.
Offshore fraud, this type of fraud, involves investments in overseas countries or markets. With the use of the Internet, previous barriers have been eliminated.
However, these investments are particularly risky because they are ventures into areas outside of your own Country and they become difficult to investigate if the investor suspects fraud.
Online fraudsters have many ways of using the Internet to put their plan to deceive others into action. We have seen how the various aspects of the Internet are used. Now, we will examine just how these online “tools” help the fraudster accomplish his/her goals.
Pyramid schemes are gaining tremendous popularity amongst fraudsters. Essentially, a pyramid scheme is “a fraudulent system of making money, which requires an endless stream of recruiters for success. Recruits (a) give money to the recruiters and (b) enlist fresh recruits to give them money”.
In fact, “the result of such a scheme is inevitable: at best a few people walk away with a lot of money, while most recruits lose whatever money they put into the scheme.
Online fraud can encompass a wide range of categories. According to Internet Fraud Watch statistics compiled for the year 2000, the top 10 forms of Internet Fraud are:
online auctions (78%), general merchandise sales (10%), Internet Access Services (2%), Work-At-Home (3%), Advance Fee Loans (2%), Computer Equipment/Software (2%), Nigerian Money Orders (1%), Information Adult Services (1%), Credit Card Offers (0.5%) and Travel/Vacations (0.5%).
Never invest based solely on bulletin board postings or an online newsletter, Always find review sites and read if and how they have been tested.
The virtual cyber scammer is really no different then the traditional scam artist of the real world.
However, the online scam artist has many advantages over the traditional scam artist. The online scam artist can target a tremendously large audience without ever having to come into physical contact with those he/she plans to deceive. Furthermore, the online scam artist doesn’t need much time, effort or money to reach his/her intended audience. It may take only fifteen minutes or so for the online fraudster to compose and send a customized email message to thousands of people. It would take months if not more, for the traditional scam artist to accomplish such a task. This is just one reason why many fraudsters are making their way into cyberspace. Not only is it easy for cyber scammers to deceive others online. It is also easy for them to cover their tracks. With the use of aliases and such they can hide their identity and location it makes it less likely for the fraudster to get caught; why would anyone want to pick, another profession?
With the introduction of review sites it is now a little easier to find genuine offers. Although there seems like a lot of progress has been made in attempting to combat Internet fraud, more has to be done.
Internet fraud exists now, and it will continue to thrive well into the future. There will always be those who because of greed, want to defraud others.
It is a known fact that fraudsters have been around since the beginning of mankind. There will always be those who will, through human nature, fall victim to fraudsters.
Therefore, the issue can never be resolved it can only be addressed. The best way to address the issue is by informing and educating others on the issue.
I truly hope this makes people aware of the many scams out there, always try and locate a good review site before you buy your product as review site owners will not usually allow any product on there site that has not been tested or researched in one way or another. If you cant find a good review site research the company as much as possible or the owner of the product you want to buy. Buying well-known products on the web is always a good place to start.
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