Avoiding Frauds and Scams On-Line

A fraud is a deliberate trick to cheat you, to get something from you unfairly; and a scam is a scheme or a plan to make someone else richer through fraud, and you a victim. Every year, more money is lost through frauds and scams than is spent on all the armies of the world. Governments, business, the young, the old -- anyone can be a victim of fraud.

It has been estimated that one half of one percent of all transactions at stores and businesses involve fraud, but 5 percent of all on-line transactions involve fraud.

People fall for scams because they don't use good judgment and they don't get all the facts. Scammers succeed because they know how people feel and think. Look at this list of things that most people will say about themselves:

These things may all be true, and may be admirable qualities, but they are also things that scammers can use to get us to turn off our good judgment, stop short of finding out all the facts, and to fall victim to fraud. Lets look at them more closely.

"I can usually tell when someone is lying."
It's harder to spot a liar on-line where you can't watch how they look and move, and scammers are experts at lying. Scammers know what people trust, and they try to look like that. They know what to say to make us believe them.
"I understand people who are like me."
Scammers are good at pretending to be like you, when they really aren't.
"I trust my parents, my friends, my teachers, reputable businesses and people in authority."
This is reasonable in almost all cases, but it's easy to pretend to be someone on-line that you aren't. We'll talk about how they do that later.
"I'm pretty smart about things in everyday life."
This may be true, but most scams are outside your everyday life. You can meet people on-line that are very different from those you come in contact with in real life. Scammers are smart, too and they've had a lot of practice.
"I never have enough money."
 And no one is giving it away. Greed may override your good judgment.
"If I do really something stupid, I'd rather not let people know it."
So scammers have a good chance to get away with their scam when you don't report it and you may even be tricked into losing more money if you try to cover up your mistake.
"I hate to disappoint people and saying 'no' to someone that is being nice is difficult."
 Scammers will ask you do to things that are not in your best interest. Trying to hurt you is not being "nice" no matter how politely they do it.


Suppose you were walking down a city street and you saw a $100 bill blowing by in the wind. There's no one around that looks like the owner.

You could really use the money, so you almost instinctively start chasing it. The wind blows fast, and you run hard. If you use good judgment, you won't follow it out into the street when a car is coming -- if all you can see is that $100 getting away, you could be seriously hurt.

That same instinct that makes someone chase the blowing bill can lead them to fall for a scam on-line, and the same good judgment that makes us look both ways before crossing the street can protect us.

True Story

An excited fourteen-year-old boy went to his father and said "I know you always taught me that if something looks too good to be true, that it probably is. I got this deal in an e-mail that certainly looks too good to be true, but I can't see any catch in it."

The e-mail was the notorious Nigerian Petroleum scam and the only unusual thing about this story is that this scam, the losses from which are estimated at US $1,000,000 EVERY DAY, went to a young boy rather than to the president of a company or business owner (where this scam is usually directed).

Let's look briefly at how this scam works because it shows many of the things we've talked about.

The Nigerian Petroleum Scam

This scam used to come as a fax, but now it is more often found in an e-mail; here's part of one version:

Dear Sir:

I have been requested by the Nigerian National Petroleum Company to contact you for assistance in resolving a matter.

The Nigerian National Petroleum Company has recently concluded a large number of contracts for oil exploration in the sub-Sahara region. The contracts have immediately produced moneys equaling US$40,000,000. The Nigerian National Petroleum Company is desirous of oil exploration in other parts of the world, however, because of certain regulations of the Nigerian Government, it is unable to move these funds to another region.

Your assistance is requested as a non-Nigerian citizen to assist the Nigerian National Petroleum Company, and also the Central Bank of Nigeria, in moving these funds out of Nigeria. If the funds can be transferred to your name, in your United States account, then you can forward the funds as directed by the Nigerian National Petroleum Company.

In exchange for your accommodating services, the Nigerian National Petroleum Company would agree to allow you to retain 10%, or US$4 million of this amount.

The lure of US$4 million may be enough to make someone fail to ask some obvious questions: Why don't they hire a lawyer who will charge a whole lot less than 4 million? Why would they trust a fourteen-year-old boy with their money (or for that matter some business executive they never heard of)? What's the catch?

The way the scam plays out is that the business executive will be wary. They will reply and ask for some proof that the scam is legitimate. Given that that this scam nets US $1,000,000 every day (and this is just from US victims), they can afford to print some pretty authentic looking official documents to send back!

Eventually, there are demands for fees, bribes, taxes and other money for various reasons before the big transfer can take place. If the business executive pays some of these, they are ashamed to admit their mistake and may pay even more money in hopes of finally making the big deal. If they pay a bribe, they may be blackmailed. The payoff never comes. When they finally realize that they are victims, they may be too ashamed to report the crime.

If it's too good to be true, it probably is!

Auction Fraud

Bidding on on-line auctions is fun and a great way to save money. However, over 60% of complaints to the Internet Fraud Complaint Center over a recent time period were about on-line auctions. On-line auctions are relatively new, and it's not always easy to protect yourself from someone who auctions something they don't really own. On-line auction sites may provide "feedback ratings" for buyers and sellers and while theses can be faked, they are better than nothing.

If the auction site or the payment method provides insurance, take advantage of that.

Work at Home Schemes

Elderly and disabled people may find it difficult to leave their homes to work at a regular job. Being able to work at home is great for them, as long as the work is a real job. Most work at home schemes are scams.

"We'll pay you money to read books at home." For a fee, the scammer will send you a list of publishers. If you contact them you will learn that they generally do not pay people to read books at home, particularly if they don't have special qualifications."

"Stuff envelopes and make 25 cents each." Modern mailing machinery have made hand stuffing of envelopes obsolete. There's no money to be made there.

"Assemble toys at home for major manufacturer and earn up to $300 a day." The scammer will sell you machinery, toy parts, and instructions. When you're finished, no one will buy them. Maybe you can sell a few at the local flea market.

There are real jobs for home workers in the area of telemarketing, customer service, and computer programming with reputable companies. However, no reputable company will offer you a job in an unsolicited e-mail.

Credit Repair

"Erase Bad Credit Legally and Quickly!" "Bad Credit? We have the answers!"

Credit repair companies offer to erase negative information from your credit report (for a considerable fee) by using consumer protection laws to force credit reporting to remove the information. In reality the best they can hope to do is to get inaccurate or obsolete information removed--this you can do yourself without paying a huge fee. No one can get accurate and verifiable information removed from your credit report.

Companies that actually provide a service (even if it is useless or overpriced) and don't just take your money and run, may say that you can check them out with the National Business Reporting Bureau. This company is a commercial enterprise that gives good reports on companies that pay them a fee to do so.

Multi-level Marketing (MLM)

In these schemes, you are not asked to sell goods and services, but to recruit other people to sell them for you, or better yet, to enroll people to recruit other people to sell them. The result is level upon level of product distributors. The people on top make a lot of money. The ones in the middle or at the bottom do not. If you get such an offer in junk e-mail, rest assured you are on the bottom.

Dealing with Unsolicited Commercial E-mail (SPAM)

Spam e-mail uses language in some ways that you might not be familiar with. Here are some "spam terms" and what they really mean:

"Targeted e-mail" - We sent this to every e-mail address we could get our hands on.

"This e-mail was directed to you because of your interest in ..." - We sent this to every e-mail address we could get our hands on.

"You can make big money if you reply" - We can make big money if enough of you reply.

"Click here to remove your name from our list" - Click here to let us know your e-mail address is valid and you are reading it.

"This is not a multi-level marketing scheme." - This is a multi-level marketing scheme.

The first thing to do when receiving SPAM is to NOT respond. Various Internet providers provide spam-blocking software (with varying degrees of effectiveness). Check the web sites of anti-spam organizations such as cauce.org.

Free Adult Content

To view the adult content, you may have to download a special viewer. The special viewer will silently disconnect your phone from your current Internet connection and dial a 900 number that charges huge fees to your phone bill.

Web-based schemes

With billions of dollars lost to fraud and the ability to host a web site for $5 a month, it only makes sense that the same scams that you see in e-mail are offered on web sites too. With all that money at stake, scammers can hire professional web designers to make their sites look just as good as those of legitimate companies. "You can't judge a company by its home page."

One thing to watch out for is impersonation. If you get an e-mail that says to go to "MAKEMONEY.XER0X.COM", you might think you were going to a reputable company web site--unless you noticed that the "0" in XER0X was a zero, and not the letter "O".

Chat Room Scams

This is a true story. A new computer user was all excited about getting their new machine and they were very proud to install the America On-Line free trial disk and get it working. They went to a new user chat room and a few minutes later an official-looking window popped up on the screen saying "There has been a system failure and your account information has been lost. Please type in your Name, Address and Credit Number again".

A scammer just got a new credit card.

Never give out any personal information, credit card number, social security number, phone number, address, or password to anyone in a chat room, no matter who they say they are, because you can never know who someone in a chat room really is.

Identity Theft

Identity theft is a rapidly growing problem. Someone who gets enough information about you can pretend to be you, get credit cards in your name and conduct financial transactions. Your credit rating can be ruined as you are flooded with bills for things you never bought. Correcting the damage from identity theft can take years. This is another reason not to give out information about yourself on-line. If you become the victim of Identify theft, contact the three major credit reporting services (for US victims) and tell them to put a fraud watch on you, as well as contacting the appropriate government agencies for your area.

Protecting Yourself

  1. Take the Pledge - Never reply to SPAM e-mail EVER!
  2. Read the fine print.
  3. Count to 10 before making a commitment.
  4. Never use someone else's credit card without permission.
  5. Never give out a bank account number or social security number except as required by law.
  6. Don't send a credit card number in e-mail.
  7. If you're a minor, check with your parents before sending money or giving out any personal information such as your real name, address or phone number.
  8. If you make a mistake, get help, no matter how embarrassed you are.
  9. Trust your instincts. If it makes you feel uncomfortable, if you feel pressured to do something you know probably isn't right, if someone tells you not to tell your parents because they will spoil everything, just say no, hang up, leave the chat room or don't reply.

Reporting On-line Fraud

The following web site is available for anyone in the world to report on-line fraud. It has received reports from persons aged 10 to 100. This site is run by the US government but will refer complaints to authorities in other countries.

Internet Crime Complaint Center

Here are some excellent sources for more information about fraud on-line:

Kevin (kevin@davnet.org)

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