California Bank And Trust Online Banking

Internet crime is up again—and substantially, at that—for 2009. This, of course, should come as no surprise; it is no secret that this plague is spreading farther and deeper by the hour.

And here’s another unsurprising piece of news: at the head of the pack, same as the last many years: Internet Commerce Fraud.

The FBI Numbers

The Internet Crime Complaint Center (IC3), a partnership between the FBI and the National White Collar Crime Center (NWC3), recently released its 2009 figures on cybercrime complaints received and referred to law enforcement.

From January 1, 2009 through December 31, 2009, the (IC3) Web site received 336,655 complaint submissions. This was a 22.3% increase over 2008 when 275,284 complaints were received. Of the 336,655 complaints submitted to IC3, 146,663 were referred to local, state, and federal law enforcement agencies around the country for further consideration.

The vast majority of referred cases contained elements of fraud and involved a financial loss by the complainant. The total dollar loss from all referred cases was 9.7 million with a median dollar loss of 5. This is up from 4.6 million in total reported losses in 2008, and is a 111.2% increase over the 2008 figures, a sad indication that Internet crime seems to pay.

Again, the numbers showed that crimes related to Internet commerce—which include Non-Delivery of Merchandise/Payments, Advance Fee Fraud, Overpayment Fraud, as well as Auction Fraud—were by far the most reported offense in 2009, comprising at they did 34.7% of all complaints (see Chart below).

(Source: IC3 2009 Report)

The Top 10 Complaint Types—Definitions

FBI Scams—Scams in which it appears that the FBI is trying to get something from the complainant (e.g., money, identity information, etc.).
Advance Fee Fraud—An incident involving communications that would have people believe that to receive something, they must first pay money to cover some sort of incidental cost or expense.
ID Theft—An incident in which someone stole or tried to steal an identity (or identity information), but only when there is no other discernible crime involved (e.g., credit card theft).
Non-Delivery of Merchandise (non-auction)—An incident in which the complainant bought something, but it never arrived.
Overpayment Fraud—An incident in which the complainant receives an invalid monetary instrument, with instructions to deposit it in a bank account and to send excess funds or a percentage of the deposited money back to the sender
Miscellaneous Fraud—Incidents involving a fraudulent attempt to get the complainant to send money and where nothing is bought or sold.
SPAM—Unsolicited and unwelcome email, usually mass distributed.
Credit Card Fraud—An incident in which someone is attempting to charge goods and services to the complainant’s credit card or account.
Auction Fraud—A fraudulent transaction or exchange that occurs in the context of an online auction site.
Computer Damage—(Destruction/Damage/Vandalism of Property)– This category is used to classify complaints involving crimes that target and cause damage.

Buying and Selling Online

You can view the Internet as the largest garage sale ever, and still growing.

However, the problem with this garage sale is that you don’t know the seller (or the buyer). In a world of universal honesty and mutual trust, this would not be a problem, but, alas, this is not the world we live in (as evidenced by the new Internet crime figures above).

As a seller—whether you purchase on an online auction, or via an online classified such as Craigslist—your worry is whether the buyer will in fact pay, and that his or her check will not bounce.

As a buyer, your worry is whether the seller will indeed send you the item once the payment is received.

These problems are all too familiar in the area of high-ticket items such as real estate—whether online or not—and that is where (bona fide) escrow companies shine.

Internet Auctions

What far too many users fail to realize is that when something is purchased via an Internet auction, it is not bought from the auction house (say eBay, or Yahoo) but from an individual or company. The auction site—acting as a go-between—merely provides a forum where individuals can trade with one another, and it usually adopts—and prominently displays—a firm policy of washing their hands of legal responsibility for any loss suffered from using their service.

Once the bidding has concluded the payment for and delivery of the goods bought and sold is negotiated between the purchaser and seller. If the item is not delivered after it is paid for or is not what was represented on the auction site, the auction house will not refund any money. It is up to the buyer to approach the seller to negotiate a fair and proper settlement.

The statutory warranties that normally cover trade do not cover goods bought at on-line auction. The seller’s only obligation is to give clear title.

Therefore, keep the following in mind when dealing with on-line auctions, or whenever you buy anything online, especially from a private party:

Understand how the auction works, what your obligations are as a buyer, and what the seller’s obligations are before you bid;
Find out what actions the auction house will take if a problem occurs, and consider insuring the transaction and shipment;
Be aware that if a problem does occur with an auction transaction, it will be more difficult to resolve if the seller is located outside the United States—laws can differ widely country to country;
Learn as much as possible about the seller, especially if the only information you have is an e-mail address;
Before you make a payment for an auction purchase, you should verify the seller’s identity and contact details in case there is a problem with the delivery of the item;
Ask the seller when delivery can be expected and whether the merchandise is covered by warranty if you need to exchange it;
Use registered or certified mail to enable tracing; this will eliminate claims that the parcel was sent but must have been “lost in the mail;”
Check that the auction account information matches email, phone number and any bank account and location information;
Use auction house feedback forums to check out the seller’s history before agreeing to pay any money. Please note however, that sellers sometimes post positive feedback on themselves or organize other people to do so on their behalf.

And here is the most important advice of all:

If you have any doubts about the integrity of an on-line auction seller—and even if you’re not: use an escrow agent. An escrow agent or company is an independent third party, which holds payment in trust until the buyer receives and accepts the item from the seller. While this service does incur a fee, it protects the buyer because the third party will hold the money until the goods have been received in good condition, inspected, and accepted; and only then released to the seller.

Internet Escrow

The principle and process of Internet escrow is the same as with buying and selling real estate—where, of course, the escrow company is deemed indispensible due to the amounts involved.

The buyer or seller opens an account with the online escrow company;
The prospective buyer of an item sends payment by wire transfer, check or credit card to the escrow company;
The escrow company verifies that the funds indeed do exist, or that the buyer is who he represents himself to be and is in possession of the credit card used;
Once this checks out, the escrow company asks the seller to ship the merchandise;
Merchandise is shipped, and seller submits tracking information;
Once the shipping site shows the merchandise as delivered the escrow company double checks to ensure the buyer has the goods in hand;
The buyer now has an agreed-upon amount of time to either accept the goods or return it to the seller;
Once accepted by the buyer, the escrow company releases the funds to the seller, less any processing fees and commissions.

Straightforward enough. If, that is, you are dealing with a legitimate online escrow company.

Internet Escrow Fraud

But the world, as we know, likes to throw us curves; and in this instance in the curve comes in the guise of escrow fraud.

Handling, as it does, substantial amounts of money, the escrow company is often itself a target of fraud—where look-alike phishing sites try to con you into using them rather than the bona fide site; and the escrow company concept itself is also flagrantly abused by criminals who set up fraudulent escrow sites where money will only travel one-way: you guessed it, away from you.

In fact, the problem of fake on-line escrow sites is so substantial that some reputable and legitimate escrow sites have simply thrown in the towel.

Buyer Guardian, for example, some time ago shut its doors due to Internet fraud stealing their business, and posted the following note on their site: “We are sad to report that after careful and lengthy consideration we have made the decision to cease operations at BuyerGuardian.com. This is a very difficult decision, and one that is made primarily due to the rapid growth of online escrow fraud.”

Many of these apparently bona fide escrow companies, established for the sole purpose of enriching the criminal, are set up off-shore—predominantly in Russia or China—where lax cyber crime laws (and sometimes questionable cooperation with U.S. Authorities) makes it more difficult to shut the sites down and bring the perpetrators to justice.

Enter: Escrow.com

Actually, Escrow.com