Web Scams

by Gisle Hannemyr

This page is a collection of advice and links to online resources about web scams and Internet fraud (e.g. fake webshops, online banks and escrow services; advance free fraud, aka. Nigerian 419; and miscellanious financial frauds including high yield invest­ment programs, ponzi schemes, and pyramids).

it's plain horse sense - don't be scammedDon't be Bitten

The Internet makes it possible to play some strange identity games. For a fistful of dollars, anyone can set up a slick website and claim to be an attorney, bank, escrow agent, employment recruiter, lottery, parcel service, publisher, or webshop. And the game does not stop there - on the Internet, somone can claim to reside at the world's most exclusive addresses, from Amsterdam to Zürich, while in reality, that someone is sitting in a dingy internet-café in Lagos, Nigeria, buying Internet access by the half-hour.

Below are a list of some warning signs to look for, and some suggestions for things to check out, in order to identify possible scams and fake websites.

And for good measure, here is some additional advice:

eBay and PayPal

eBay is an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. eBay owns and operates its own system for payment, PayPal, and recommends that it is used for for all transactions resulting from activity on eBay.

Protection against fraud on eBay is very weak. While legitimate buyers and sellers make up the majority of eBay users, at any time there are also a number of scam artists operating on eBay. If you buy or sell goods on eBay, you need to do so with caution.

The main protection afforded on eBay is trough Paypal. eBay tells you that when you pay for goods using PayPal to transfer funds, your transaction will be “protected” by PayPal's Buyer Protection program.

However, this program is not very user friendly, nor is it fair. For starters, the fine print in PayPal's User Agreement (§ 13.3.a) sets a number of requirements a transaction must meet. All the requirements must be met, otherwise the transaction will not be covered by the Buyer Protection program. To be eligible for protection, you must:

This is exploited by eBay scammers by using some ruse to get the buyer to pay into a different account than the account associated with the listing. In such cases, there are no protection for the consumer, and PayPal can (and will) refuse to cover the transaction. As PayPal do not require account holders to authenticate themselves, the owner of such accounts may not be possible to trace and any funds paid into them impossible to recover.

Being eligible for protection does not mean that PayPal will honour the protection. It only means that you will be permitted claim protection in cases of blatant fraud, limited to:

Whether such a claim will be honoured is entirely up to Paypal, and PayPal does not have a good track record about honouring claims that may cost PayPal money.

For example, counterfeit goods abound on eBay, and PayPal actually claims it protects the buyer against this. I.e. it says that the SNAD clause apply if: “The item was advertised as authentic but is not authentic.” (see Paypal's User Agreement § 13.7.)

However, in the following case, involving a countefeit copy of Photoshop CS4, reported in a forum message by newbie@pcworld, PayPal flatly refused to honour the Buyer Protection, citing the following reason:

“Our investigation into your claim is complete. As stated in our User Agreement, the claims process only applies to the shipment of goods. It does not apply to complaints about the attributes or quality of goods received. Therefore, we are unable to reverse this transaction or issue a refund.”

If you are an eBay seller and accepts payment through PayPal, and a customer disputes the charge, PayPal response is usually to freeze your funds and suspend your account until the conflict is resolved by independent means. There is an anti PayPal-site that campaigns against this practice.

The problem with PayPal, from a user point-of-view, is that the any dispute is in the end to be decided by PayPal. However, in many cases, PayPal seems to be uninterested in making any effort to investigate anything or to resolve the dispute. Instead, PayPal may opt to freeze funds and suspend accounts in order to make life miserable for both parties – perhaps hoping that this will motivate them to come to an agreement that does not cost PayPal anything (work or money). If the conflicts drags on, and it becomes appearent that it will be impossible for PayPal to recover the disputed funds, the User Agreement gives PayPal the option to unilaterally close the case without honouring any claim. At least in some cases, this is the route that PayPal will opt for.

Funding a PayPal transaction with a credit card may give the buyer a little better protection. Because PayPal is owned by, and “part of”, eBay, most credit card companies will in this situation view PayPal as the merchant. This means that PayPal may be forced by the credit card company to accept a chargeback in cases where the merchandise is counterfeit, damaged or not delivered.

(I guess that forcing PayPal to accept a chargeback is one of the things that will result in your PayPal account being considered not in good standing – so make sure you have no funds deposited with PayPal if you try this.)

If You are Bitten

If you've become aware that you have been tricked to participate in a money laundering operation, or you yourself is the victim of an online scam, your should always start by reporting the crime to your local police. Do not waste time trying to contact law enforcment at the place of business given by the fake website itself. It is probably just as fake as the site. Your local police should be able to give you advice of what other steps you may need to take, and also coordinate the investigation with foreign law enforcement.

After reporting it to the police, you may want to do the following to get the fake site taken of the net and stop others from being scammed:

Dealing with Your Loss

Internet scams are operated by dangerous criminals. If you are scammed, you should never try to handle the situation yourself. As soon as you realize that you are involved with criminals, you must report it to your local police. Ask for, and follow, their instructions. Under no circumstance should you maintain communication with, or agree to physically meet, the criminals. Such communications or meetings may lead to further monetary loss, extortion, physical violence, or even murder.

In many scams, the setup cleverly involves the victim in some criminal activity, such as money laundering, tax evation or financial fraud. By setting the scam up this way, the con artist hopes to dissuade the victim from contacting the police. Do not fall into their trap. In such cases, you've probably been set up to be the “fall-guy”. The best defense is a good offense: Go to the police before they come for you.

Be extremely wary of any organization or individual that claim to be able to help you recover your loss or part of it. Such claims are usually fraudulent and money paid for such “help” will also be lost.

Following the Money

The police has some means to “follow the money” involved in web scams:

Western Union has been required to maintain records of pay-outs. If Western Union wire transfer has been used to transfer money across borders, this information can be obtained through the use of a subpoena or court order.

Con artists that maintain web sites posing as shops, banks and escrow agencies need to register the Internet address of these web sites with an Internet Registrar. The sites themselves must be hosted by an Internet Service Provider (ISP). While the names and addresses that can be extracted through an WHOIS Search may be as genuine as a four pound note, the services that Internet Registrars and ISPs provide must be paid for. Again, by use of subpoena or court order, law enforcement can gain access to financial records that show who paid for those web sites.

However, tracking down the real criminals is not an easy task. They hide behind stolen identities and “mules”. (A “mule” is in this case a stooge hired as a local “accountant” or “representative” that handles the money laundering and setting up Internet services without knowning that their work is part of a scam.) To see behind the smokes and mirrors of stolen identities and local dupes, law enforcement need to piece together many different pieces of evidence, spanning jurisdictions, technologies and organizations.

Link farm

Law Enforcement and other GOs

Consumer Groups, Services and other NGOs

Report Fraud and Seal Abuse



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