Internet Fraud

Once you've got your website up and running, positioned great in the search engines for maximum exposure, and droves of new customers are flocking to your website, what more do you need?

I can tell you that you need to have a complete understanding of how you can be ripped off for information, money and goods by just about anyone possessing a minimal knowledge of fraudulent techniques and no conscience. And the worst part of this deal is that protection of the law for small businesses and individuals is minimal if it exists at all. I have experience with this first hand. Believe me when I say, "Protect Yourself."

Arm yourself with a keen awareness of the techniques used by today's cyber confidence artists. And know what measures you can take to both protect your information, money and goods as well as where to turn in the event of theft.

Here's a short list taken from DotCons written by James Thomes of some of favorite frauds happening on the Internet today:

• Violation of privacy committed by businesses using commonly applied advertising methods
• Identity theft can be committed simply and easily and so effectively that you can be driven into bankruptcy
• Bulletin boards, chat rooms and discussion groups have become prime territory for Internet firms to gather information about your thoughts, intentions, physical health and financial situation.
• Illegal franchising and business opportunities have proliferated to the point that the FTC receives over 500 complaints a day.
• Telephone schemes have been automated to the point where you are automatically routed to a long-distance 900 number while surfing the Internet.
• Unscrupulous sellers at auction sites are selling counterfeit goods with little fear of legal recourse.
• Unsolicited email has replaced the letter bomb. Open an attachment and lose your computer, credit rating, or your business.
• Internet sites operate off-shore out of the jurisdiction of the laws of civilized countries so they can bilk millions of people with no fear of prosecution.
• Computer stores and malls appear with astounding offers and discounts for expensive products that are never shipped.
• Advance fees are collected for illegal university degrees, identification cards, licenses, credit repair, credit cards, loans, divorces, Social Security cards and pirated software---but the products are never delivered.

  "It's a big problem today. Take identity theft, for example. It's expected to cost businesses $24 Billion in 2003 which is almost three times more than last year. And it's a big challenge for governments as they provide more services online and implement cyber security measures. We are seeing more theft involving not just an individual credit card number, but a person's entire personal information file. We're also seeing identity theft on a larger scale like the recent news about the theft of 8 million credit card accounts by computer hackers."

  ---Bill Connor, Entrust Chairman and CEO

Identity Theft and Credit Card Fraud - How it Happens

A Dotcon consumer places an order for an expensive item and provides personal and credit card information obtained from someone else. The shipping address will be different from the billing address OR you will receive a call from the Dotcon saying they've moved and need it shipped to another address.

You ship the product.

A month later you get a chargeback and a claim from an angry cardholder claiming you've made a fraudulent charge to his credit card and demanding his money be returned. What do you do? The phone call itself could be a scam. You probably refund the money and try to find the real criminal. But the only thing genuine is the email address and shipping address. All the other information is faked.

You try the email first and find that it belongs to the legitimate cardholder. The criminal has used the cardholder's name to open an email account with a free service like Hotmail.

So you call the police in the town where you shipped the product and find out that the shipping address was a maildrop. Then you call the maildrop and find out that the box was opened in the legitimate cardholder's name.

The identity thief profits from this crime by fencing or reselling the goods. He gets away with it because you can't tell who he is. In order to combat this type of crime you must reduce the perception of anonymity before you close the sale. Here's some things you can do:

• Post a warning stating that fraudulent use of credit cards is a federal offense and that you will prosecute to the fullest extent of the law.
• Set up your website to capture the buyer's email address and screen orders that come from free email services where the buyer can maintain an anonymous name.
• Get as much information as possible from the buyers of expensive items include a full address and home phone number.
• Verify the billing address with the merchant vendor before authorizing the purchase. Address verification can easily be set-up with your merchant account.
• Call the phone number to confirm the sale.
• Require a hard-copy confirmation by fax for the shipping of expensive items to addresses that are different from the billing address on the credit card.
• Validate international orders with an additional credit reference.
• If anything seems strange after the shipment, call your merchant credit processor and inform them of the situation.

For more information, read this Fraud Prevention Guide provided by ClearCommerce.

Helpful Websites
IFCC (Internet Fraud Complaint Center) - IFCC's mission is to address fraud committed over the Internet.
National Fraud Information Center - provides information about telemarketing and Internet fraud.
Internet Fraud - information provided by the Department of Justice.
ScamBusters - a publication on Internet fraud.
Merchant Risk Council - A network for merchants doing business online.
Federal Trade Commission - Offering information about internet fraud for consumers and businesses.

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