Online Fraud and How It Can Affect You

According to MSN news “High fraud rates continue to plague electronic commerce Web sites, with criminals expected to steal $2.6 billion from online merchants this year, according to a new survey.” Despite the fact that consumers and merchants are taking every effort to avoid getting hit with fraud, a survey conducted by Webroot, a Colorado company that sells consumer security software, concluded 1 out 7 online shoppers have been a victim of fraud. Many companies are now accidentally rejecting legitimate orders due to the increasing fraud attempts.

Fraud expert, Ori Eisen, Founder and CIO of the 41st Parameter shares the latest trends on the more complex fraud scams.

  • Re-shipper/Rerouting Schemes — Taking advantage of the fact that during the holidays, organizations are more lenient about shipping to alternate names and addresses, since this is the most common purchase pattern at this time of year. This opens the door for orders to be fraudulently redirected via the freight carrier’s site to the thieves’ destination of choice.
  • New account creation utilizing stolen info — once a new account is established on an online merchant’s site, items are purchased to be shipped as gifts exploiting holiday patterns and leniency so the mailing address need not match the card holders.
  • Fraudulent Gift Card/Gift Fund purchases — crooks load gift cards with funds from the victim’s card and shop freely either online or at the actual store.

As buyers and sellers we ask our selves, “How Can We Protect Our Selves from Internet Fraud?”

For the buyers here are some red flags:

  • If the seller asks you to pay through non-traceable avenues, such as Western Union, third party, or an overseas address, the red light should flash. Before you do anything find out why the seller will not accept payment options that are traceable and convenient.
  • If you find a deal that is too good to be true it probably is. If you thought you were getting something genuine, you most likely just got scammed and will be getting counterfeit, fake, or stolen goods. Know the source of where you will be purchasing your product from and if possible check references.
  • If a seller refuses to provide tracking numbers when you make a purchase, then chances are nothing will be shipped.

For the sellers here are some red flags:

  • When, the buyer provides you with a different mailing address and billing address.
  • When the buyer faxes full credit cards numbers with security codes. I don’t know anyone who would just fax their credit card number and security code, do you?
  • When credit cards are declined and the buyer continues to provide you with multiple cards and addresses. Chances are he/she has a stack of cards and is trying to find one that will work.
  • Fictitious company name with no verifiable credentials (i.e. address, phone, number, web address, etc).

These are of course only a handful of suggestions when looking for a fraud transaction.

Internet fraud warning -

In addition to the warning signs above Daniel J. Barrett, PH.D who has been active participant on the Internet since 1985, worked as a UNIX system administrator, university instructor (computer science, and computer music), software engineer, industry consultant, and Usenet newsgroup moderator shares “Fifteen Ways to Spot an Internet Bandit“.

  • Hidden name or address. Don’t conduct business with users unless they reveal their name, address, and phone number. Beware of users who try to buy or sell things using an anonymous email address *like or a post office box.
  • Uncheckable references. “As seen on Donahue!” “The subject of hundreds of newspaper articles!” These credentials sound impressive, but notice that you aren’t given enough information (dates, newspaper names) to look them up.
  • Too much talk about money, not enough about the deal. Scammers try to blind you with dreams of becoming rich, so you won’t notice the fine print. Watch out for bogus “profit charts” promising easy wealth.
  • “This is not a scam.” Scammers say this all the time. They might even cite specific laws that “prove” their legality. Don’t fall for this trick. A legitimate business doesn’t spend time “convincing” you of its honesty.
  • Requests for your credit card number. Don’t send your credit card number to anybody by email. If your mail software supports encryption, this can help protect the number, but it may not be foolproof. Some encryption techniques are better than others.
  • Pyramid scheme. Are you asked to send money to (say) five people, who each send money to five more people, who each send money to five more people, and so on? Then you are very likely looking at an illegal pyramid scheme.
  • Spamming. People who post huge numbers of identical articles online are forcing you to pay the bill.
  • Too much knowledge about you. Take notice if a newfound “Net friend” suddenly knows details about you that you have not revealed.
  • LOTS OF CAPITAL LETTERS and punctuation!!! Be skeptical of ads that shout at you, like “MIRACLE CURE!!!” or “Learn how to make BIG $$$$$ MONEY in NO TIME AT ALL!!!!!
  • Pay before you play. The details of the offer are kept hidden until after you pay a fee. But what happens if the details turn out to be junk? You lose. Remember that “money-back-guarantees” from strangers may be worthless.
  • Hidden costs. Watch out for ads that shout “it won’t cost you a penny to get started” and then quietly charge you an “entrance fee.”
  • “Secret” method available “only to a limited number of people.” A typical scam ad reaches thousands or millions of users. That’s a strange way to reveal a secret! Scammers accept a “limited number” of responses so they can close their business quickly and run away with people’s money.
  • Requests for your password. Never reveal your password to anybody. Your system administrator never needs to ask you for it. If somebody asks you to change your password to a known word for “system testing,” be immediately suspicious; this is a well-known cracker trick.
  • Unsolicited email. If you get email from a stranger out of the blue, offering to give or sell you something, treat it with suspicion.
  • Inappropriate questions. If a “Net friend” you hardly know starts asking very personal questions or tries to borrow money from you, be on your guard.

To all the consumers and merchants be careful with your on-line transactions this holiday season.

Resources National Fraud Information Center: Link to a fraud claim form provided by the NFIC. The NFIC accepts reports about attempts to defraud consumers on the telephone or the internet.MSN News: Find out more about online fraud and how to avoid or report it.Office Supplies Blog from View great articles on protecting yourself from Online Fraud, Identify Theft, Computer Theft, and more.

  • There is so much fraud out there it’s unbelievable.

    Webhosting companies who offer things like cheap “unlimited bandwidth” cannot possibly fulfil their promises. They have to pay for bandwidth.

    The more sites like this there are, the chances are more people will get to be aware of the problem and not fall victim.

  • address labels

    great info… we are very strict on our use of the AVS system, so far so good..