Dramatic rise in web-based fraud reported

  • 21 December 2000

New figures released by ICC's Commercial Crime Services show that web-based fraud is rising dramatically, accounting for two thirds of all the fraud cases CCS investigated for its business members in 2000.

According to the report, 2,776 of the 4,139 cases referred to CCS by its members this year for checking or investigation were directly connected to crime, fraud or deliberate misrepresentation by website traders offering bogus goods or services.

The survey showed that in 2000, CCS saved its members around $2.3 billion by warning them away from trading with criminal websites that it had investigated.

“Cybercrime is traditional crime perpetrated through a new and powerful medium. The fraudsters have not changed. Only the technology is different.” said Pottengal Mukundan, Director of CCS.

“It is surprising how experienced businessmen discard their normal prudence when confronted with a profitable proposal offered over a well-presented website, but it is vital that businesses and consumers apply the same degree of due diligence in their web-based transactions as they do in traditional transactions,” he said.

The findings coincide with the launch of a due diligence service for e-commerce. Run by the CCS Commercial Crime Bureau (CCB) with the support of its Cybercrime Unit, the new service checks the credentials of potential partners so that businesses know who they are dealing with before they enter into a contract over the Internet.

“Many companies have been caught out by fraudulent websites, particularly in banking, insurance and shipping, and there is a lot of distrust out there,” said CCB Assistant-Director Jon Merrett, who runs the new vetting service. “This service will help restore confidence between businesses.”

Jon Merrett explained how communication with Internet Service Providers (ISPs) is vital to fighting fraud on the web. “Our analytical software helps to establish the relationship between the different entities involved and thus show the various cybercrime trends that are emerging. We have the technology to research any website, to see how it is set up and by whom. We can trace its origins back far beyond the ISP to specific individuals and then investigate them further.

“From our research it is clear that part of the answer lies with the ISPs. If they can be persuaded to take action promptly when notified of a fraudulent site on their system then it may help deter the operators of these bogus sites.

“Along with all other businesses on the web, if ISPs were to exercise some due diligence before opening an account it would go a long way towards preventing frauds. CCS has an extensive database developed over the past 20 years which ISPs can use to make their checks.”

CCB recently investigated an online bank registered in Grenada that was offering financial investment products including ‘Blocked Funds Letters’, which, according to the US office of Comptroller of Currency, are “not known to exist in the legitimate bank ing industry”. The bank also claimed to have links with a number of financial authorities, including the UK Financial Services Authority, all of which denied any association.

A second case was a site that claimed it could provide the new PlayStation 2 consoles and guarantee delivery before Christmas. The site is registered in Canada, operated from the United States and directed from Europe.

CCB informed the site’s ISP that the offer was highly suspicious, since production of the new consoles was still strictly limited by the manufacturers. Additionally, the machines are formatted differently according to various zones of the world, so to offer them for sale on a global basis would have been unlikely to satisfy most customer requirements. The company has now admitted that it is unable to supply ordered consoles, even those that have been paid for.

“Examples of fictitious websites and virtual banks are not hard to find,” says Jon Merrett. “Often, it’s just a matter of looking for sites offering outrageous deals, high returns on investments or extremely low interest rates. Even in cyberspace, if it seems too good, then it probably is!”


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