Consumers Beware: Top 5 Online Scams

After years of trying to recover from the dot-com hangover, the
Internet is booming again. Online retail sales increased by 26 percent
in 2004, according to comScore Networks. In September 2004, the number
of domain name registrations hit 64.5 million--an all-time high. You
know what else is on the rise? Internet crime.

Complaints about online fraud nearly doubled from 2003 to 2004, according to a December 2004 report by the FBI
and the National White Collar Crime Center. Research firm Gartner
estimates that nearly 10 million Americans were hit by online
fraudsters last year--largely due to a wave of phishing e-mails seeking
to steal users' identities.

In fact, phishing attacks seem to be the
new, hot scam. Scammers send you an e-mail that tries to lure you to a
legitimate-looking Web site where you'll be asked to enter personal
information. The thing is, it's all fake; and if you fall for it,
someone is ready to take your Social Security Number and start opening credit card accounts.


The FBI recently began warning people of
scammers posing as tsunami-relief organizations. And late last month,
the FBI warned that someone out there was even posing as the FBI
itself--sending a fraudulent e-mail with the subject line "FBI
Investigation" and trying to lure people into buying products from a
separate, fictional scam artist whom the Feds were supposedly on to.

Confusing? Sure. But just ask yourself
this: When was the last time the FBI sent a polite e-mail when they
wanted someone's cooperation in an investigation.

Thousands of con artists, grifters,
fraudsters, and other denizens of the dark are trolling for victims
online. Can you recognize online fraud when you see it? Here's a quick
guide to the Top 5 scams and schemes you're most likely to find on the
'Net'.

1. Auction Fraud    

The setup: Online auction fraud accounts for three-quarters of all complaints registered with the FBI's Internet Crime Complaint Center
(formerly the Internet Fraud Complaint Center). There are many types of
eBay chicanery, but the most common one is where you send in your money
and get nothing but grief in return.    

What actually happens: You never
get the product promised, or the promises don't match the product. The
descriptions may be vague, incomplete, or completely fake. One scammer
accepted bids for Louis Vuitton bags that she didn't own, and then
scoured the Internet looking for cheap knockoffs that cost less than
the winning bid. She managed to collect at least $18,000 from bidders
before she got nailed. A buyer thought he'd purchased a portable DVD
player for $100, but what he got instead was a Web address for a site
where he could buy a player for a $200 discount. The stories are
virtually endless.

 
The risk: You get ripped off,
losing time and money. If you spill the beans about the scam, the
seller may retaliate by posting negative eBay reports about you using
phony names.
    

The question you've gotta ask yourself: Who in their right mind would sell a $200 bag for $20?

2. Phishing Scams

The setup: You receive an e-mail
that looks like it came from your bank, warning you about identity
theft and asking that you log in and verify your account information.
The message says that if you don't take action immediately, your
account will be terminated.

What actually happens: Even though
the e-mail looks like the real deal, complete with authentic logos and
working Web links, it's a clever fake. The Web site where you're told
to enter your account information is also bogus. In some instances,
really smart phishers direct you to the genuine Web site, then pop up a
window over the site that captures your personal information.

The risk: Your account information
will be sold to criminals, who'll use it to ruin your credit and drain
your account. According to Gartner, phishing scammers took consumers
(and their banks, who had to cover the charges) for $1.2 billion in
2003.

The question you've gotta ask yourself: If this matter is so urgent, why isn't my bank calling me instead of sending e-mail?

3. Nigerian 419 Letter  

The setup: You receive an e-mail, usually written in screaming capital letters, that starts out like this:

"DEAR SIR/MADAM: I REPRESENT THE RECENTLY
DEPOSED MINISTER OF AGRICULTURE FOR NODAMBIZIA, WHO HAS EMBEZZLED 30
MILLION DOLLARS FROM HIS STARVING COUNTRYMEN AND NOW NEEDS TO GET IT
OUT OF THE COUNTRY..."

The letter says the scammers are seeking
an accomplice who will transfer the funds into their account for a cut
of the total--usually around 30 percent. You'll be asked to travel
overseas to meet with the scammers and complete the necessary
paperwork. But before the transaction can be finalized, you must pay
thousands of dollars in "taxes," "attorney costs," "bribes," or other
advance fees.

What actually happens: There's no
minister and no money--except for the money you put up in advance.
Victims who travel overseas may find themselves physically threatened
and not allowed to leave until they cough up the cash. (FYI, "419" is
named for the section of Nigeria's penal code that the scam violates.)

The risk: Serious financial
loss--or worse. Victims of Nigerian letter fraud lose $3000 on average,
according to the FBI. Several victims have been killed or gone missing
while chasing a 419 scheme.

The question you've gotta ask yourself: Of all the people in the world, why would a corrupt African bureaucrat pick me to be his accomplice?

4. Postal Forwarding/Reshipping Scam

The setup: You answer an online ad
looking for a "correspondence manager." An offshore corporation that
lacks a U.S. address or bank account needs someone to take goods sent
to their address and reship them overseas. You may also be asked to
accept wire transfers into your bank account, then transfer the money
to your new boss's account. In each case, you collect a percentage of
the goods or amount transferred.

What actually happens: Products are
purchased online using stolen credit cards--often with identities that
have been purloined by phishers--and shipped to your address. You then
reship them to the thieves, who will fence them overseas. Or you're
transferring stolen funds from one account to another to obscure the
money trail.

The risk: Sure, you can make big
bucks for a while. But after a few months, you're going to look inside
your bank account and find it cleaned out. Worse, when the feds come
looking for the scammers, you're the one they're going to nail.

The question you've gotta ask yourself: Why can't these people receive their own darn mail?

5. "Congratulations, You've Won an Xbox (IPod, plasma TV, etc.)"

The setup: You get an e-mail
telling you that you've won something cool--usually the hot gadget du
jour, such as an Xbox or an IPod. All you need to do is visit a Web
site and provide your debit card number and PIN to cover "shipping and
handling" costs.

What actually happens: The item
never arrives. A few months later, mystery charges start showing up on
your bank account. The only thing that gets shipped and handled is your
identity. (A more benign variation on this scam drives you to a site
where you're asked to cough up your contact info and agree to receive
spam from advertisers until unwanted e-mail is coming out of your ears.)

The risk: Identity theft, as well as lost money if you don't dispute the charges.

The question you've gotta ask yourself: When did I enter a contest to win an Xbox (iPod, plasma TV, etc.)?

-- Dan Tynan