Online Fraud, Maturing, Makes Compelling Reading

David Schatsky | April 08, 2008, 01:24 PM

The New York Times recently published a story about online fraud citing FBI stats that place the value of online fraud at $239 million in 2007 or about $2,530 per incident on average. The increased sophistication and specialization of scammers are cited as evidence that online fraud is maturing. But the dollar value of the fraud may be another sign of the maturation of online scamming.

The article draws on a report recently released by the Internet Crime Complaint Center (IC3). It contains some handy statistics and some colorful descriptions of some of the more common types of online scams, including those "involving pets, checks, spam and online dating sites, all of which have proven effective as criminal devices in the hands of fraudsters." The section on "romance fraud" is particularly heart-rending: After meeting someone at a dating or social networking site

... the fraudster tries to gain a person’s trust through false displays of affection. In most cases, the fraudster lives far away, usually in another country. The fraudster expresses an ardent desire to visit the person, but the fraudster cannot afford to make the trip. The scam is successful when the two agree to meet and the fraudster convinces the victim to send money to cover his travel expenses. Then, invariably, an unforeseen event (often an accident of some sort) prevents the fraudster from making the trip (or, at least, so goes the fraudster’s lie). The fraudster lands in the hospital, and now the victim’s money has to be used to cover medical expenses. The fraudster’s brother has been kidnapped, and now the money has to be used to set him free. The fraudster was mugged on her way to the airport, and now she has no money at all. In any event, the fraudster always needs more money; and, if the fraudster’s success continues, he is able to obtain more money from the victim while making more promises to visit. The fraudster, however, always has an excuse for missing the plane, and the rounds of false promises and excuses continue until the victim loses patience and stops sending money.

Besides the increasing sophistication of fraud tactics, the dollar value of online fraud may be another indicator of its maturity. According to the IC3, the amount lost to online fraud in 2001 was $31 million, just .06% of online retail sales, based on our online retail figures. That percentage rose rapidly over the succeeding several years to reach .17% in 2005 but has edged up to just .19% of online retail sales in 2007. Greater vigilance by authority and by increasingly tenured online users no doubt can help restrain the growth of online fraud.