Growth in E-Commerce – Top Dot Cons

NEERAJ AARORA, AICWA, LLB, PGD (Cyber Law), ACFE (USA)

The growth of the Internet and ecommerce has been phenomenal. Unfortunately, but not surprisingly, the boom in ecommerce has created fertile ground for new schemes of fraud, known as cyber frauds. The experience has so far shown that fraud operators are always among the first to appreciate the potential of a new technology to exploit and deceive consumers. The architecture of the Internet itself has given rise to new high-tech scams that were not possible before development of the Internet. It has become the latest draw for opportunistic predators who specialize in fraud which has allowed them to bring all their pre-internet fraudulent schemes, as well as some new ones, to a vast new market. Both traditional scams and the innovative ones exploit the global reach and instantaneous speed of the Internet. In addition, the Internet enables con artists to cloak themselves in anonymity, which makes the task of law enforcement authorities much difficult to act against the perpetrators who disappear quickly. Many of these fraudulent methods clearly resembles the honest e-commerce promotions thus making it extremely difficult for consumers and investors to separate the genuine from the fake one. The ever-changing face and technology employed by the cyber fraudster makes it necessary for law enforcement authorities to act much more quickly to stop newly-emerging deceptive schemes before the perpetrators disappear.

Law enforcement authorities, banks and financial institutions and various consumer organizations have warned time and again about the many types of Dot Cons (internet fraud schemes) over the past few years. This article describes various types of Dot Cons that has been used by the cyber criminals:-

  • 1. Internet Identity Theft Schemes : A major growing problem world over due to IT revolution is identity theft which has been referred to as “the crime of the new millennium. Identity theft is the stealing and use of someone’s personal information used primarily for financial or monetary gain. Unlike your fingerprints, which are unique to you and cannot be taken by someone else for their use, your personal data like your bank account or credit card number, passwords, login Ids and other valuable identifying data ­ can of course be used, if they fall into the hands of fraudster which can be used to make money at your expense & liability. On the internet, fraudulent transactions are the most prevalent crime committed by fraudster with the stolen identity like take over of the credit card account, use of stolen identity to create a new credit account, execution of fraudulent online share transactions etc. Phishing is the most prevalent method to steal the personal identifying information. The fraudster sends a fraudulent email with a link to a fake website that is exact replica of the original bank sites which are so designed to fool the users so that they reveal their personal information.
  • 2. Internet Nigerian Advance Fee Scheme : The fraudster sends the email to target persons in guise of some rich family member of a dead African Millionaire who is in distress due to political turbulence in his country. The fraudster offers the recipient the “opportunity” to share in a percentage of millions of dollars, soliciting for help in placing large sums of money in overseas bank accounts. Payment of taxes, bribes to government officials, and legal fees are often described in great detail with the promise that all expenses will be reimbursed as soon as the funds are out of the country. The recipient is encouraged to send information to the author, such as blank letterhead stationary, bank name and account numbers, and other identifying information using a facsimile number provided in the letter. The scheme relies on convincing a willing victim to send money to the author of the letter in several installments of increasing amounts for a variety of reasons. This scam is called as “Nigerian 419 fraud” (for the relevant section of the Nigerian Criminal Code).
  • 3. Online Fraudulent Share & Commodity Transactions: Now a day the shares are sold and purchased online. There has been spurt in the cases in which the complainant report that there online share/commodity account has been compromised and fraudulent transactions has been executed by unknown fraudster which resulted in huge loss to him. In the online transaction, the client is allotted an online account with client id & password through which he executes the sale & purchase transactions through the server based in the broker’s office. The fraudster who are generally software experts or the executives (core dealers) at the broker’s office try to acquire the client id & password from the broker office itself, hit & trial methods or social engineering. After acquiring the client Id & password, the fraudster makes unauthorized access to the client account and also accesses their own account in which the profits are to be transferred from the victim client account. The fraudster executes the transactions into the client accounts at unrealistic prices and match these transactions into their own account simultaneously. In this way, he shifts the profit to his own account and losses to the account of the unsuspecting clients.
  • 4. Internet Auction Fraud : Online auction fraud includes fraud due to the misrepresentation of a product advertised for sale through an Internet auction site, the non-delivery of an item purchased through an Internet auction site or a non-payment for goods purchased through an Internet auction site. The FBI reported Internet Auction fraud as the most reported offence. In this fraud scheme, the criminal typically offers high value merchandise or collectibles at a “bargain” price, which induces consumers to spend their money. Consumers become victims when the merchandise isn’t delivered or, if delivered, is much less valuable than what the criminal represented. Under the scheme, the fraudster requests funds to be wired directly to him/her via Western Union, MoneyGram, or bank-to-bank wire transfer. By using these services, the money is virtually unrecoverable with no recourse for the victim.
  • 5. Internet Information and Adult Services (Unauthorized Credit Card Charges ): Under this schemes the Operators of “free” adult Web sites, offer “free” viewing, or “free 30-day” or 90-day trials. Consumers were required to provide credit card information to verify their age. But consumers who visited the sites soon discovered that their credit cards were billed, sometimes in a matter of hours, after they registered for the “free” trial. The free website trap the customer by advertising that consumers who canceled in a timely manner would not be charged any fees, but they use a variety of tactics to make it impossible for consumers to cancel their registration. In some instances, consumers who attempted to cancel were “upgraded” to a more expensive and also unwanted service.
  • 6. Pyramid Scams : Ponzi or pyramid schemes offer often starts with the opportunity to join a program in which you will make money based not only on your own sales, but also on those of the people you recruit into the program. After digging deeper, you find that the program has no actual product to offer and its participants make money by solely recruiting distributors – not by selling goods or services to consumers.
  • 7. Business Opportunities and Work-At-Home Scams : They send hoax emails to victims in a very tempting language and attract the eyes of unemployed targets. The email will state: “no experience necessary” “Earn Rs. 30000-40000 PM by spending only two to three hours. You are then asked to pay anywhere from Rs. 2000 to Rs. 10000 to purchase the kits or materials that will not earn you a single penny.
  • 8. Affiliation Scams : Some web-based fake companies are advertising for affiliate opportunities, offering individuals the chance to sell high-end electronic items, such as plasma television sets and home theater systems, at significantly reduced prices. The affiliates are instructed to offer the merchandise on well-known Internet auction sites. The affiliates will accept the payments, and pay the company, typically by means of wire transfer. The company is then supposed to drop-ship the merchandise directly to the buyer, thus eliminating the need for the affiliate to stock or warehouse merchandise. The merchandise never ships, which often prompts the buyers to take legal action against the affiliates, who in essence are victims themselves.
  • 9. Travel Fraud : The hospitality industry is the biggest victim of online frauds due to the rapid increase in the use of the Internet for communicating and transacting with customers in the worldwide tourism & hotel industry. According to a new report from security vendor MarkMonitor, Online travel sites is among the biggest victims of brand jacking which refers to “the criminal act of hijacking strong brands for profit by cyber squatting, phishing, false association, pay-per-click abuse and domain kiting. The most common scheme are the fraudster, in order to trap the potential customers also launch a website which looks exactly the same (like having same look & feel) like a legitimate website of the established hotel or travel agency with minor spelling variations which is very difficult to identify in first glance. The customers who take the website as the genuine one surf through the website which diverts them to another site which may be trap by the fraudster to extract sensitive information like credit card detail, passport number etc. from the customers in the guise of e-booking. Thus, the victim customer credit card is compromised and being misused by the fraudster.

One hallmark of Internet fraud is the ability of perpetrators to cover their tracks and mask their locations and identities. Using anonymous emails, short-lived Web sites, and falsified domain name registrations, many fraud operators are able to strike quickly, victimize thousands of consumers in a short period of time, and disappear nearly without a trace with impunity. To stop these swift and elusive con artists, law enforcement agencies are moving very fast and technologically upgrading themselves to fight the menace of the online frauds. However, the Law enforcement alone cannot stop the tide of fraudulent activity on the Internet. Meaningful consumer protection depends on education as well. Consumers must be given proper information and education to spot potentially fraudulent schemes, and businesses must be advised about how to comply with the law. The Internet itself should be used to communicate anti-fraud and educational messages to reach vast numbers of people in creative and novel ways quickly, simply and at low cost. However, last but not the least, the netizens should follow the old age proven golden adage that “if the offer seems too good to be true, it probably is”.

4 comments

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