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National Fraud Awareness Week

By Damon Marturion
New Business News Staff Writer

August 4-10, 2002 marks the third annual National Fraud Awareness Week. NFAW is a time set aside to educate both businesses and consumers about the threat of fraud and to raise awareness about the impact of fraud and white-collar crime upon our society. Take the FraudIQ Test and find out how much you already know.

The Association of Certified Fraud Examiners, in conjunction with leading public and private sector supporters, utilizes National Fraud Awareness Week to educate people about the prevalence of fraud and how to deter it. The 13th Annual Fraud Conference & Trade Show kicks off NFAW and provides a meeting place for fraud professionals from around the world to discuss the latest in fraud detection, deterrence, and education.

With the costs and prevalence of fraud continuing to rise at alarming rates, The Association and Official Supporters of National Fraud Awareness Week are proactively taking the first step toward curbing fraud - education. Fraudweek.com provides a single source for anyone interested in learning more about fraud, how to report it and basic fraud statistics.

The National Fraud Information Center has a current frauds action center that tracks all the latest activities. There is an online Incident Report Form where you can report current issues that the organization may not be aware of.

A new spin on Internet fraud is to attempt to use unsolicited emails to discredit a business competitor or organization. This is highly effective because the use of spam-mail is a highly charged issue. The culprit can reconfigure his machine and email client to appear to be a particular business and/or organization, then launch the fraudulent email campaign.

The good news is that the FTC has caught wind of this and considers this a Federal offense falling under the category of, "Identity Theft." If you feel that someone is posing as you and/or your business or organization and fraudulently engaging in an unauthorized email campaign, you can report the issue online with the Federal Trade Commission via their Identity Theft Complaint Input Form, you should also report the incident to the FBI for investigation (it's best to phone your report to your local FBI office found listed in your phonebook).

If you are, or have been, a victim of an Internet fraud, the Department of Justice has an online Office for Victims of Crime advocating for the fair treatment of crime victims. Their site has many online resources available for victims of crime.

According to the DOJ, the following are the most prevalent types of Internet crime:

  • Auction and Retail Schemes Online. According to the Federal Trade Commission and Internet Fraud Watch, fraudulent schemes appearing on online auction sites are the most frequently reported form of Internet fraud. These schemes, and similar schemes for online retail goods, typically purport to offer high-value items - ranging from Cartier® watches to computers to collectibles such as Beanie Babies® - that are likely to attract many consumers. These schemes induce their victims to send money for the promised items, but then deliver nothing or only an item far less valuable than what was promised (e.g., counterfeit or altered goods).
  • Business Opportunity/"Work-at-Home" Schemes Online. Fraudulent schemes often use the Internet to advertise purported business opportunities that will allow individuals to earn thousands of dollars a month in "work-at-home" ventures. These schemes typically require the individuals to pay anywhere from $35 to several hundred dollars or more, but fail to deliver the materials or information that would be needed to make the work-at-home opportunity a potentially viable business.
  • Identity Theft and Fraud. Some Internet fraud schemes also involve identity theft - the wrongful obtaining and using of someone else's personal data in some way that involves fraud or deception, typically for economic gain. In one federal prosecution, the defendants allegedly obtained the names and Social Security numbers of U.S. military officers from a Web site, then used more than 100 of those names and numbers to apply via the Internet for credit cards with a Delaware bank.
    In another federal prosecution, the defendant allegedly obtained personal data from a federal agency's Web site, then used the personal data to submit 14 car loan applications online to a Florida bank.

    Investment Schemes Online

  • Market Manipulation Schemes. Enforcement actions by the Securities and Exchange Commission and criminal prosecutions indicate that criminals are using two basic methods for trying to manipulate securities markets for their personal profit. First, in so-called "pump-and-dump" schemes, they typically disseminate false and fraudulent information in an effort to cause dramatic price increases in thinly traded stocks or stocks of shell companies (the "pump"), then immediately sell off their holdings of those stocks (the "dump") to realize substantial profits before the stock price falls back to its usual low level. Any other buyers of the stock who are unaware of the falsity of the information become victims of the scheme once the price falls.
    For example, in one federal prosecution in Los Angeles, the defendants allegedly purchased, directly and through another man, a total of 130,000 shares in a bankrupt company, NEI Webworld, Inc., whose assets had been liquidated several months earlier. The defendants then allegedly posted bogus e-mail messages on hundreds of Internet bulletin boards, falsely stating that NEI Webworld was going to be taken over by a wireless telecommunications company. At the time of the defendants' alleged purchases of NEI Webworld stock, the stock was priced between 9 cents and 13 cents a share. Ultimately, in a single morning of trading, NEI Webworld stock rose in 45 minutes from $8 per share to a high of $15 5/16, before falling, within a half-hour, to 25 cents per share. The defendants allegedly realized profits of $362,625.
    In another federal prosecution in Los Angeles, a man who worked for a California company, PairGain Technologies, created a bogus Bloomberg news Web site which falsely reported that PairGain was about to be acquired by an Israeli company, and posted fraudulent e-mail messages, containing links to the counterfeit Bloomberg news site, on financial news bulletin boards. On the day that the bogus report was posted on the Internet, PairGain stock rose approximately 30 percent before PairGain issued its own press release stating that the report was false.

    Second, in short-selling or "scalping" schemes, the scheme takes a similar approach, by disseminating false or fraudulent information in an effort to cause price decreases in a particular company's stock.

    For example, in one recent federal prosecution, a man who described himself as a "day trader" allegedly posted (more than 20 times) a bogus press release falsely stating that a major telecommunications- and Internet-related company, Lucent Technologies, Inc., would not meet its quarterly earnings estimates. The day trader allegedly traded approximately 6,000 shares of Lucent stock the same day that he posted the bogus press release. The false reports allegedly drove the stock's price down 3.6 percent and reduced Lucent's market value by more than $7 billion.
  • Other Investment Schemes. Other types of fraudulent investment schemes may combine uses of the Internet with traditional mass-marketing technology such as telemarketing to reach large numbers of potential victims.
    In a federal prosecution in San Diego, a major fraudulent scheme used the Internet and telemarketing to solicit prospective investors for so-called "general partnerships" involving purported "high-tech" investments, such as an Internet shopping mall and Internet access providers. The scheme allegedly defrauded more than 3,000 victims nationwide of nearly $50 million.
  • Credit-Card Schemes. Some Internet fraud schemes, which appear to be variations on the online auction schemes described earlier, involve the use of unlawfully obtained credit card numbers to order goods or services online.
    One widely reported and intricate scheme, for example, involves offering consumers high-value consumer items, such as video cameras, at a very attractive price (i.e., below the price set at legitimate e-commerce Web sites). When a potential consumer contacts the "seller," the "seller" promises to ship the consumer the item before the consumer has to pay anything. If the consumer agrees, the "seller" (without the consumer's knowledge) uses that consumer's real name, along with an unlawfully obtained credit card number belonging to another person, to buy the item at a legitimate Web site. Once that Web site ships the item to the consumer, the consumer, believing that the transaction is legitimate, then authorizes his credit card to be billed in favor of the "seller" or sends payment directly to the "seller."
    As a result, there are two victims of the scheme: the original e-commerce merchant who shipped the item based on the unlawfully used credit card; and the consumer who sent his money after receiving the item that the "seller" fraudulently ordered from the merchant. In the meantime, the "seller" may have transferred his fraudulent proceeds to bank accounts beyond the effective reach of either the merchant or the consumer.
  • Other Schemes. Some Web sites on the Internet have purported to offer those who want a "quick divorce" an opportunity to obtain a divorce in the Dominican Republic or other foreign countries for $1,000 or more, without even having to leave the United States. These sites often contain false, misleading, or legally inaccurate information about the process for obtaining such divorces (e.g., that neither spouse has to visit the country in which the divorce is being sought). Typically, people who have sent money to one of these schemes eventually receive false assurances that they are legally divorced. In fact, victims of the scheme have neither received legitimate legal services nor obtained valid divorces. People who are interested in obtaining a divorce, whether in the United States or elsewhere, should seek a lawyer with whom they can speak personally, and not rely solely on e-mail exchanges or online information.

    According to the Department of State's Bureau of Consular Affairs, many Americans are familiar with Nigerian advance fee business scams and the vast amounts of money lost in these fraudulent transactions. However, unbeknown to many until recently, advance fee business deals and investments of this sort have also been initiated in other countries such as Togo, Ghana, and Benin. Some of these businesses are rooted in one country, and the final deals are carried out in other places such as Europe and Canada. This form of fraud has and is moving swiftly to an international level.

    Advance fee fraud is expanding so rapidly that within recent years there has been a surge of websites and private industry businesses developed to specifically combat fraudulent business propositions.

    Identifying A Business Scam

    Each week, many U.S. embassies and consulates deal with "scams." The scam artists seek businesspeople and common people alike. Many of those scammed experience significant loss, ranging from thousands to millions of dollars.

    Most often, when persons go overseas to "finalize deals," they find themselves not only losing money, but they also risk bodily harm from their business associates.

    WHAT TO LOOK OUT FOR

  • Any deal that seems too good to be true;
  • Any offer of a substantial percentage of a large sum of money to be transferred to your account, in return for your "discretion" or "confidentiality;"
  • Requests for urgent air shipment, accompanied by an instrument of payment whose genuineness cannot immediately be established;
  • Solicitation letters claiming the soliciting party has personal ties to high-ranking officials;
  • Request for payment in U.S. dollars, in advance, of transfer taxes or incorporation fees;
  • Statements that your name was provided to the soliciting party either by someone you do not know or by "a reliable contact;"
  • Resistance from your business associates to your checking in with the U.S. Embassy;
  • Any offer of a charitable donation.

    Types of Scams & How They Work

  • Money Transfer: The operator claims to have a large sum of money, usually millions of dollars worth of ill-gotten gains, which needs to be transferred to a "safe" bank account abroad. You, as the bank account owner, are promised a percentage of the huge sum, in exchange for use of your account. You may be asked to provide blank, signed invoices, letterhead and bank account information, or to send money for transfer taxes in advance.
  • Fraudulent Order: The operator usually places a small order ($1000 or so), paying with a genuine cashier's check drawn on a European bank. A second, somewhat larger order is placed, again paid for legitimately. Then, you receive an order from your overseas partner urgently requesting that a large quantity of your product be air-shipped. Confident in your previous dealings, you send the product prior to receipt of payment. When the cashier's check (which looks the same) finally arrives, you learn it is fake, while attempting to make a deposit.
  • Charitable Donation: The operator offers to donate to your organization, and asks for bank account information (see Money Transfer, above).
  • Contract: The operator claims to have a foreign government contract and needs your company's expertise to carry out the job. The operator scams you by collecting thousands of dollars in "fees" before you can do business. When fees are legitimate, they are published by Ministries and do not exceed $215 USD.

    How Scam Artists Contact You

    These fraudulent operations use the internet, e-mail and fax correspondence to troll for and then reel in potential victims. If you receive such a solicitation, contact your local law enforcement officials immediately.

    Real Life Examples of Scams

    John Doe, who was adopted at birth and raised in the United States, was contacted from abroad by phone, and convinced that his birth parents had left him a $7 million dollar inheritance at a bank in Lome. After lengthy discussions with U.S. Embassy officials, Mr. Doe realized he had fallen prey to a scam. He lost a total of $7,000 in "lawyer's" fees.

    Jane Doezer, who by age thirty, became a self-made millionaire by distributing cosmetic supplies and jewelry, found herself a victim of international business fraud. One day at her shop, she sold hundreds of dollars of products to a merchant couple from Cotonou, Benin. Before leaving, the couple asked for her card so they could contact her if her products sold well at their store back home. Weeks later, she received a call from the couple with an order, and everything worked out fine. This business arrangement went on for several months. One day, the couple called with an extremely large order for products that they needed as soon as possible. Without thinking twice, Jane told them she would send the products out the next day. Despite assurances of prompt payment, Jane is still waiting for a $5,000 check from her entrusted business associates in Benin.

    Is It A Reputable Business?

    To check on a businesses legitimacy in the U.S., contact the country Desk Officer at the International Trade Administration, Room 3317, Dept. of Commerce, Washington, DC 20230. (Tel: 1-800-USA-TRADE or 202-482-5149, fax: 202-482-5198)

    If you are abroad, contact the nearest U.S. embassy or consulate.

    Am I Being Scammed?

    If you are in the U.S., contact the country Desk Officer at the Dept. of Commerce (see address above). You may want to contact local police as well, if threats have been made against you. If you are abroad, contact the nearest U.S. embassy or consulate.

    What Can The U.S. Embassy Do?

    The U.S. embassy or consulate officers will help you by directing you to the appropriate local law enforcement authorities, to report the details of the scam and any threats made against you. They can facilitate the replacement of your passport, provide communication with relatives in the United States and, if necessary, provide an emergency repatriation loan. But, the U.S. Embassy or Consulate cannot recover a scam victim's money.

    Traveling Abroad? Please consult our web site before you go. You will find Consular Information Sheets (and Public Announcements or Travel Warnings, if applicable) for the countries you plan to visit.

    Copyright 2001 by New Business News.
    All rights reserved.

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