Fraud Over The Internet:

Some sources have put Internet growth by as much as 12 million new users per year and it is now estimated that about 40 to 140 million users access the ‘Net. Naturally, this large audience demands online commerce, which grew exponentially over the past few years. Although most of the business conducted over the Internet is legitimate, invariably, scoundrels, scam artists and "information superhighway-men" have attempted to take advantage of the anonymity inherent in and lack of regulatory structure over the Web.

Currently, the so-called Internet crimes that have received the most media coverage have been child pornography and other physical crimes perpetrated by assailants who meet their victims through e-mail spam and bulletin boards or in chat rooms. However, the crime most conducive to the commerce-driven Internet, which provide consumers with ever increasing access to depth of information and advertising, is the old fashion scam or fraud. The "high tech" nature of the ‘Net adds to this because ‘Net newcomers sometimes place excess confidence in the reliability of what they encounter on the information superhighway and misplaced confidence presents attractive opportunities to confidence men (i.e., "con men").

Most of us are familiar with the traditional scams like Ponzi or pyramid schemes, get-rich-quick scams, and advertising tricks having obviously deceptive potential (e.g., "lose 40 pounds in 10 days using our product"), and we are aware of credit card fraud offered through mail, print and through telemarketing. But the scams do not end there. For instance, the so-called "Nigerian scam," which is your basic no-risk, get rich quick scheme solicited through the mail or by fax, has received media coverage all over the world (this scam became so widespread that the Nigerian government took out advertising in the New York Times to warn potential victims). It is only logical that scam artists, because of the popular growth of the Internet, extend their iniquitous schemes to the information super highway replacing the highwaymen of old with a new breed of "information super-highway men." In most cases, the actual scams are not new, but the level and international scope of the audience present problems in enforcement.

According to some sources, the average fraud over the Internet costs $90,000 per victim and no more than 10% of the crimes involving computers get reported to authorities; further, less than 2% result in convictions. Other sources estimate that the crime rate on the ‘Net is increasing at the rate of 4.7% per week and that online fraud has cost online users over $350 million this year alone. Because of the international nature of the Internet, it is nearly impossible for each individual country or agency to regulate and enforce its laws over the Internet in a consistent, effective way. In addition, an agreement by the various countries providing for some type of international control over the Internet is unlikely to be made anytime soon, if ever. As touched upon in a prior article in Legal Column Archives, the boundary-less Internet transcends current laws on fraud; identifying and then obtaining jurisdiction over these criminals is also a difficult task. No wonder scam artists believe that Internet crime pays; the perpetrator rarely gets caught and even more rarely gets prosecuted.

So what is there to be done about this problem? Consumer awareness is certainly a critical factor. If the victim does not cooperate, the scam fails. But, unfortunately, there will still be victims. Perhaps a new wave of tough legislation enacted and enforced where the scam artists live and work can solve some of these problems. In the U.S., the Computer Fraud and Abuse Act of 1986, codified in 18 U.S.C. section 1030, provided a measured response to a growing problem. However, the current laws have not stemmed the tide of fraudulent schemes proliferating over the Internet. Most of the current issues and cases in the United States have focused on the First Amendment and intellectual property laws, not on consumer fraud. Regardless, the debate about the need for more government control or interference with the Internet versus the ability of the Internet community to police itself is still ongoing. Either way, there will be people who will be unsatisfied with the outcome of this debate. Until there is an effective way of enforcing and preventing fraud, the average surfer should be very cautious and informed before entering into a substantial transaction with someone he or she does not know at least by reputation.

Already, several sites have attempted to warn Internet users about the various scam artists cruising around the information superhighway. The National Fraud Information Center, a consumer organization, operates Internet Fraud Watch. A more specialized site, 419 Coalition Website warns surfers about the "Nigerian" scams. This site provides advice about how the "Nigerian" scams work and what people should do if they encounter one on the 'Net (this site has advice for U.S., Canadian, and international victims and also links for those victims) and believe they have been victimized. Sites such as

• Scam Watch;

• Cybercops (n.b.,this site is presently undergoing renovation);

• Web Police; and

• Internet Scams;

as well as the United States Federal Trade Commission and the United States Securities and Exchange Commission, among others, provide tips, warnings about popular scams, and advice to the unwary Internet surfer. Another site, InterGOV International, provides links and e-mail addresses to other sites devoted to fighting crime and fraud over the Internet.

The FTC distinguishes two forms advertising fraud over the Internet: "classified advertising" and "disguised advertising." The FTC publication Potholes on the Information Highway describes "classified advertising" as your everyday advertising -- promoting false claims about products and too-good to be true business and investment opportunities through the Web or bulletin boards. "Disguised advertising," on the other hand, is described to be an insidious form of fraud where comments about the quality of products or services posted on bulletin boards and in chat forums are designed to be sales pitches rather than objective sharing of information, thus undermining the very heart of the Internet and luring unsuspecting consumers, who think these comments are real, to a substandard product.

Although the FTC article identifies two methods being used to defraud Internet consumers, specific examples of ‘Net scams are more helpful. One site devoted to explaining specific Internet scams is Online Fraud Reports. This site compiles reports by the National Fraud Information Center and provides warnings of specific Web sites, suspicious e-mail advertisements and also news about FTC enforcement attempts.

Most of these sites also provide basic tips on how to recognize scams in general. Although it is impossible to track down and describe every scam in the world, the basic axiom is that most scams are variations of one another and entice the unwary to invest in something too good to be true.

While many sites are devoted to helping Internet users fight fraud, the truth of the matter is that Internet users must affirmatively inform themselves against these scams. So be on the lookout for sites which can give you a head start on recognizing and avoiding scams and frauds. It is critical that surfers be cognizant of attempts by these purveyors of fraud to infiltrate commerce over the Internet. If you believe that you have been victimized by fraud over the ‘Net or recognize sites that are scams, please do not hesitate to contact the SEC (for investment scams), the FTC, the Better Business Bureau in your area and your state consumer regulatory and criminal law enforcement authorities (consumer affairs bureaus, postal inspectors, FBI, city and state police, district attorneys, state attorneys general, etc.). Many of the sites mentioned above will give you links and e-mail addresses of enforcement and reporting agencies for victims. In addition, informing these sites of new scams may also help other ‘Netizens to avoid being hooked into these scams. Honest ‘Netizens' best weapon against infosuper-highway fraud is to spread the word!