The arrival of the Internet with its new methods of communicating through web sites, electronic mail, news groups, chat rooms, electronic bulletin boards, and commercial on-line services is an historical development much like the introduction of television or the telephone, a few generations ago. Similar to these earlier technologies, the Internet presents customers with an stirring new means for them to purchase both innovative and traditional goods and services faster and at lower prices, to communicate more efficiently, and to tap into rich sources of information that were formerly difficult to access and that now can be used to make better-informed purchasing decisions.
The Internet’s assurance of extensive consumer benefits is, however, coupled with the risk for fraud and tricks. Fraud is opportunistic, and fraud operators are always among the first to welcome the potential of a new technology. This observable fact was illustrated by the arrival, successful, and near-demise of pay-per-call technology as a commercial medium during the last decade. 900-number technology was the foremost interactive technology and still is the only interactive technology offering nearly universal access because all that is needed is a telephone. This technology has enormous potential as an alternative payment system, since each telephone could serve as a payment terminal, and no credit cards, debit cards, or checks are needed. In 1991, there were $6 billion in pay-per-call transactions. But scam operators moved in to take advantage of the technology, and the industry was slow to respond to this challenge. As a consequence, the 900-number industry’s reputation became stained by fraud and abuse, and sales plummeted to $300 million annually.
A number of the same features that made pay-per-call technology a persuasive field for fraud artists in the 1980s were low start-up costs and the potential for big profits exist on the Internet today. In fact, after buying a computer and modem, scam artists can set up and maintain a site on the World Wide Web for $30 a month or less and seek consumers anywhere on the globe. There is nothing new about nearly all types of Internet fraud. What is new and outstanding is the size of the potential market and the relative ease, low cost, and speed with which a scam can perpetrate.
If the Internet is to evade a destiny similar to that of 900-number technology, then it is important to address Internet fraud now, before it discourages new consumers from going on-line and chokes off the remarkable commercial growth now in progress and latent for advance on the Internet
Common Internet Fraud
Chain Letter Fraud
The most common frauds at Credit/Debt Management involve Chain Letter Fraud claiming to be very legal. These letters have been screening up on the Net as either posting to newsgroups or as unwanted e-mail. Mostly they claim to be absolutely legal and even quote postal regulations. According to the government authorities, chain letters are ‘illegal if they request money or other items of value and promise an extensive return to the participants. Chain letters are like playing a gamble. The important thing to notice is that it doesn’t matter how the original request is made, if the money is mailed, then it’s illegal.
Identity theft and identity fraud
Another one of the most common fraud is Identity theft and identity fraud. These terms are terms used to refer to all types of crime in which someone by the use of wrong means obtains and uses another person’s private data in some way that involves fraud or trick, usually for economic gain. In other words it’s a crime.
Unlike your fingerprints, which are inimitable to you and cannot be given to someone else for their use, your personal data especially your Social Security number, your bank account or credit card number and other valuable identifying data can be used, if they fall into the wrong hands, to personally profit at your expense. For instance in the Germany and Russia many people have reported that unauthorized persons have taken funds out of their bank or financial accounts, or, in the worst cases, taken over their identities altogether, running up vast debts and committing crimes while using the victim’s names. Sometime the victim’s losses may include not only out-of-pocket financial losses, but also significant additional financial costs related with trying to reinstate his reputation in the community and correcting mistaken information for which the criminal is responsible.
In one disreputable case of identity theft, the criminal not only incurred more than $100,000 of credit card debt, obtained a federal home loan, and bought homes, motorcycles, and handguns in the victim’s name, but called his victim to taunt him saying that he could continue to pose as the victim for as long as he wanted because identity theft was not a federal crime at that time — before filing for bankruptcy, also in the victim’s name. While the victim and his wife spent more than four years and more than $15,000 of their own money to restore their credit and reputation, the criminal served a brief sentence for making a false statement to procure a firearm, but made no restitution to his victim for any of the harm he had caused.
Credit card and bank account schemes are common where card and bank numbers are obtained for illegal purposes. This is similar to identity theft above.
Investment schemes
Investment schemes including market manipulation are also becoming common. Here’s an example of how it works:
John buys a large set of stock;
He then sends out a large mail saying how great the stock is to attract others to buy in;
The stock goes up;
John sells his block of stock at a major profit.
The schemes are gradually more difficult and confusing. They cost lot money to various nations every year. Following are some of them.
1 Ponzi schemes: In this the perpetrators utilize the money from recent investors to pay returns to earlier investors, until the schemes fail. Promoters normally blame government involvement for the failure of new investors to get their promised returns.
2 Investment fraud targeting seniors: These complex investment scams guarantee huge returns.
3 Promissory notes: They usually involve loans to companies made by investors in turn for a fixed amount of periodic income. However, legal corporate promissory notes are not usually sold to the general public and some schemes are fakes. The schemes often misleadingly claim insurance companies guarantee, the money invested or collateral located offshore, and promise unusually high returns.
4 Unscrupulous brokers: Regulators say they receive many investor complaints about brokers cutting corners or engaging in fraud to enrich themselves.
5 Quick divorce schemes :It is another popular scam. Generally utilizing a foreign country without ever having to leave the residing nation, false documents are sent to the victim with no legal action ever being taken.
Email scams known as ‘Phishing’
In this scam several emails are send to you by the name of popular companies requesting you to reply with your Internet banking logon information, or prompt you to click on a link and then enter your log on information. These are not genuine E-mails as the concerned company would never email you asking for your Internet banking Password and Memorable Information in full. These emails are designed and sent by criminals to trick you into giving away your log on details so that they can gain access to your accounts and steal your money and information.
Email scams that claim to offer you additional income
This scam involves a third party asking you to collect or pay funds into your account on the understanding that you then transfer the funds on to another account or overseas. In return, they offer you a commission. Though you will not receive payment for your involvement and as a result of any participation you may have, you will automatically become involved in subsequent Police investigations.
Email scams that claim you have won a Lottery prize
This scam involves a third party e-mail to advise that you have won a substantial amount of money in a lottery draw. If you reply the third party then asks you for bank account details and other such personal information to allow for the funds to be transferred to you, occasionally they may also ask for you to arrange payment of a handling fee. Please be aware that these scenarios are not genuine and you will lose any money you pay and your personal information may be used in other fraud.
Protecting Yourself Against Online Fraud
Some of the distasteful investment schemes in cyberspace are identical to those that have been used somewhere else for decades. The online world, however, represents an enormous advance in the ability of cheat artists to victimize the unwary. Some simple precautions can keep you from becoming a victim.
Don’t trust everything you read.
Carefully examine the information you get online in the same way that you would a whispered hot tip from a stranger. Work out healthy doubt and remember how easy it is for people to cover their identities online. Always remember that investment schemers will often talk up projects in distant corners of the world that can’t be easily checked out, or use never-ending technical terminology that can only be understood by experts
Never guess you know whom you are talking to.
Usually debate group and official statement boards participants may not be who they say they are. They claim to be those who suggest specific securities may have no asset qualifications and may well have hidden motives
Never believe that your online service provider polices its investment bulletin boards.
Most of them do not policies their investment to bulletin boards. The degree of postings often swamps the ones that try. Often there is nothing to stop a fraud from posting one or 100 pitches for a trick
Never purchase thinly traded, little known securities on the basis of online information.
Most of these are the securities most prone to manipulation. Unlike blue-chip stocks, the price of finely traded, low priced shares can be moved drastically through comparatively small strategic trades. For this reason the online publicity usually concerns little known junior companies
Always take the time to do your own study, based on sound information sources, and ask for the advice of a qualified, independent financial adviser
Never get fascinated by claims made about ‘inside information.’
Investment announcement and dialogue groups are riddled with imaginary hot tips that are sure to send some stock high in value. Think yourself, “If this is such great news, why are they telling me?”
These hot tips are seldom, if ever, true. Still if they are true, trading on inside information is illegal in many countries
Be on the watch for conflicts of interest.
The company whose shares they are recommending is paying some of the people who analyze and recommend securities online. Some reveal this fact, whereas others do not mention of their conflicts of concern. Make sure you know why someone is passionate about an investment opportunity
Always confirm that the security has been eligible for sale and is being sold by a person properly registered with your securities regulator.
Securities rules designed to defend investors from fraud and abuse do apply in cyberspace. Your securities regulator can tell you whether an individual or company is registered to trade or advise in your area and whether the company selling the securities has filed a prospectus.
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