Internet Fraud Essay

The Internet is recognized as tremendous means for investors, students, and common people to easily, economically and efficiently access plenty of source and opportunities to accomplish their task. In parallel, it also invites fraudsters to grab excellent opportunity to become rich by applying impostor schemes. Among its many uprising effects, the Internet has changed the manner in which investors learn of and research prospective investments (Richard H. Walker, pg 405). As Internet is growing explosively, online criminals try to present fraudulent plans in ways that look, as much as possible, like the goods and services that the vast majority of legitimate e-commerce merchants offer. Internet fraud is simply the extended actions that subsisted long before information technologies broke into the sphere of cyberspace (Jason Whittaker; pg: 232). These fraudulent tricks are continually threatening to Internet users and it will not be surprised when people will loose faith on Internet business in future if proper measures are not taken to curb these acts. In present scenario, there is a necessity to arrest numerous Internet frauds by creating awareness among people, and to protect them from being victimized by genius fraudulent. People take notice of frequently in their surrounding that some or other person is gripped under E-mail Spam or credit card fraud. For smooth working on Internet and entirely utilizing such a vast technological advancement, everyone must be geared up to combat any challenge. Thus the present paper concentrates on how Internet fraud tactics emerged, various ways these frauds have been executed while working on Internet and develop ability to escape from fraud by adopting control measures. Basically Internet fraud is a type of fraud scheme that uses one or more technique of the Internet such as chat rooms, e-mail, message boards, or Web sites to present fraudulent solicitations to potential victims, to conduct fraudulent business, or to pass on the proceeds of fraud to financial institutions or to other connected with the scheme. Very often it has been observed that fictitious merchants publicize goods for very low prices and never deliver. Victims are then left to deal with credit card companies for recompense. Fraudsters are very clever and choose small and expensive products, such as watches, jewelry, laptops, digital cameras, vehicles and camcorders. These items are usually available in the market in broad range and can easily be purchased by anyone. Internet has several traits, which provides fabulous benefit to the global economy and to people around the world. These same positive qualities also make the Internet a near-perfect implement for fraud such as the regular and omnipresent availability of the Internet and its vast content, the broad distribution of Internet access, and the simplicity with which such access can be established. Other facilities like the rapidity with which content can be published and delivered online and the almost complete physical detachment between Internet content and the individual or entity selling that content, also attract fraud shooter to be successful in their mission (Emile Loza, pg:55). People seek to take benefit of the Internet’s exceptional potentials for example, by sending e-mail messages worldwide in seconds, or posting Web site information that is readily accessible from anywhere in the world. These advanced techniques provide fraudster to carry out various types of fraudulent schemes more quickly than was possible with many fraud schemes in the past. The Internet fraud trade is thriving at the Federal Trade Commission where the agency gets thousands of complaints each month from individual and business consumers deceived by online operators. The FTC is quite alert and already has taken action to prosecute plenty of Internet fraud cases. The FTC’s vigorous prosecution of Internet fraud shows few signs of dwindling, with new cases announced almost every day ( Richard H. Walker,pg:- 405). Those spreading fake and deceptive statements online, intending to affect a stock’s price, do not realize that the securities laws apply to their conduct. Perhaps some view fraudulent acts as less immoral in the impersonal world of the Internet where victims are faceless, distant, and known only by a screen name. Others may fail to appreciate the harm their actions may cause innocent investors. The SEC has faced a host of novel, but unsuccessful, arguments from those engaged in Internet securities fraud seeking to justify their conduct. These arguments include claims that the First Amendment protects all speech online; that trumpeting a stock online is no different than what Wall Street analysts do daily; and that the federal securities laws do not apply neatly to conduct in the new online world ( Richard H. Walker, pg: 405). Internet fraudsters use numerous ways to trap innocent Internet users in their web. Fraudulent schemes appearing on online auction sites are most recurrent form of Internet fraud reported by the Federal Trade Commission and Internet Fraud Watch. Initially, auction sites had tended to take a lenient attitude to activities on their sites, where buyers did not receive goods, incited many of them, such as QXL, to remove fraudulent sellers. Nor are all auction scams particularly small: one of the most celebrated was the sale of a fake Richard Diebenkorn painting on eBay in 2000 for $135,000, with fraudsters offering fake bids to drive up the price (Jason Whittaker; pg: 238). Business Opportunity/†Work-at-Home† Schemes Online type of fraudulent schemes often use the Internet to market supposed business opportunities that will allow individuals to earn thousands of dollars a month in â€Å"work-at-home† ventures. These schemes classically entail the individuals to pay wherever 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 prospect a potentially practicable dealing. In identity Theft and Fraud, various Internet rackets also engage in identity theft. They obtain and use someone else’s personal data in illegal way that involves fraud typically for economic gain. Internet user does not even know that his information is being misused by someone. Under Market Manipulation Schemes, Cheaters use two basic methods for trying to manipulate securities markets for their personal profit as indicated by the Securities and Exchange Commission and criminal prosecutions. At first, in very popular â€Å"pump-and-dump† schemes, they in general propagate forged and fraudulent information in an effort to cause striking price increases in thinly traded stocks or stocks of shell companies then immediately sell off their holdings of those stocks to realize substantial profits before the stock price drops back to its original low level. Second, in short selling or â€Å"scalping† schemes, which takes a similar approach, by propagating false or fraudulent information in an effort to cause price decreases in a particular company’s stock. One of the most outspoken of this new breed of cyber-scofflaws has been Jonathan Lebed, who at age fifteen was charged with securities fraud by the SEC. The Commission charged Lebed with using the Internet to devise a series of â€Å"pump and dump† manipulations. Lebed repeatedly bought low-cost, thinly-traded stocks. He then used the Internet to spread hundreds of false and deceptive messages concerning the stocks- generally baseless price predictions- for the affirmed purpose of driving up, their prices ( Richard H. Walker,pg:- 405). Crackers in the mid 1990s invented phishing to steal AOL accounts â€Å"Phishing† is the act of attempting to deceitfully obtain sensitive information, such as passwords and credit card details, by masquerading as a reliable person or business with a genuine need for such information in a apparently official electronic notification or message (most often an email, or an instant message). It is a kind of social engineering assault. To conduct this fraudulent scheme, the message is mailed and the victim is asked to reveal his or her password, for the purpose to verify your account or to confirm billing information. Once the victim provides the password, the assailant gets success and accesses the victim’s account and utilizes it for illegal intentions, such as spamming. With phishing, pretext e-mails are sent to consumers by the millions. Lawful addresses are either purchased on the â€Å"cyber black market† or parsed together by programs that at random join common last names and first initials with common domains mark@gmail. com. By random probability, some â€Å"phish mails† will happen to correspond with legitimate addresses where the user has a bank account (Lauren Bielski, pg-46). Fraudsters exercise phishing widely by using spam messages camouflaged as large banks (Citibank, Bank of America) or PayPal. These fraudsters copy the code and graphics from legitimate websites and use them on their own sites to create a legitimate-looking scam web page. They also link to the graphics on the legitimate sites to use on their own scam site. These pages look so genuine that most people cannot identify that they have visited to a scam site. Fraudsters are also put the text of a link to a genuine site in an e-mail but use the source code to links to own fake site. Pharming is executed when criminals misuse the susceptibility in the DNS server software that permits a hacker to obtain the domain name for a site, and to forward that website’s traffic to another web site. DNS servers resolve Internet names into their real addresses. In financial computers crime, Credit card fraud is the most frequently performed. Online thefts, particularly from banks, have reasonably been a cause of alarm to authorities. In 1993 for the theft of ? 122,000 from the Agricultural Bank of China, one convicted hacker, Shi Biao, was even executed. The more complex crimes include using the Internet to manipulate information. The posting incorrect financial information in cyberspace typically takes place for reasons of fraudulent profit making, which is very different from insider dealing where someone uses valuable and confidential information to trade in company shares before that information becomes wide spread available. Inaccurate information, on the other hand, is aimed at falsely inflating or lessening share values. This helps to sell with considerable profit or buy more cheaply. One vastly publicized example of this took place in 2000 when a securities trader based in Houston, Fred Moldofsky, issued nineteen false press releases claiming that Lucent Technologies, the world’s leading Telecom company, expected its earnings to fall short of market expectations, causing Lucent’s share price to fall by 3. 6 per cent during march in that year. He was found guilty of securities fraud a year after (Jason Whittaker; pg: 238). As everyone knows, the recent downturn in the web world has hit the stock market, especially the NASDAQ, hard lately. According to one report, online use of credit cards is rising over 50% a year in the United States and Internet spending is also on climbing. Though Internet credit card use has a long way to go, and while consumers increasingly prefer to shop online, but they are reluctant to provide credit card details on the Internet, under the apprehension that someone will obtain the information and use it to make fraudulent purchases (Kevin Blair; pg: 55). Lottery scams are very widespread on the Internet. Even if a person never entered a lottery, he/ she receive an email containing authentic information that he has won a prize. When a person shows interest then he was told to send some % of money to claim the prize. These e-mails are very well copied from authentic lottery system so that normally people get attracted. As an intelligent Internet user, one must ask for legal and bank information. It must be noted that in any transaction, amount should deducted from money being transferred. The pyramid schemes are another way to cheat people who want to earn online. They assure you money in return for the number of people you employ to join the scheme. Person will receive an email describing attractive earning details. But these claims are misleading. Moreover, pyramid schemes are unlawful. Another type of scam, Click fraud takes place when publicity network associates force paid views or clicks to ads on their own websites using Spy ware, the affiliate is then paid a commission on the cost-per-click that was falsely created. Affiliate programs such as Goggle’s Ad sense capability pay high commissions that drive the creation of bogus clicks. In international modem dialing, lots of consumers connect to the Internet using a modem calling a local telephone number. Some web sites, normally containing adult content, use international dialing to ploy consumers into paying to view content on their web site. Often these sites claim to be free and advertise that there is no need of credit card. These fraudsters provoke the user to download a â€Å"viewer† or â€Å"dialer† to allow them to view the substance. Once the program is downloaded it disconnects the computer from the Internet and proceeds to dial an international long distance or premium rate number. An international block is recommended to put off this, but in the U. S. and Canada, calls to the Caribbean can be dialed with a â€Å"1† and a three-digit area code, so such numbers, as well as â€Å"10-10 dial-round† phone company prefixes, can avoid an international block. Various procedures to hold back Internet fraud are presently being contemplated by industry experts. Most effectual and practical measures are increasing investor education and awareness, increasing the SEC’s â€Å"firepower,† increasing penalties and jail time for offenders, furthering coordination of federal and state efforts, and creating a â€Å"seal of approval† for traders and brokers. Lacking an improved effort in a combination of some or all of the anticipated solutions, Internet stock fraudsters will carry on to take advantage of the â€Å"easy pickings† created by Internet investors (Byron D.Hittle, pg:-165). The SEC is attentive of the current and future threats posed by Internet fraudsters. Federal statutes provide defrauded investors personal grounds of action for illegal falsification, and state enforcement agencies that keep an eye on the securities markets offer some protection against Internet fraud. But due to the immensity of both the securities markets and cyberspace, these protections fall dolefully short of successfully curbing Internet fraud (Byron D. Hittle, pg 165). The mail and wire fraud statutes have developed and lengthened into powerful prosecutorial tools. During 1994, both the mail and wire fraud statutes were expanded when Congress propagated the SCAMS Act as a means of skirmishing telemarketing ploys directed at the elderly. The SCAMS Act acted in response to the growing risk of new schemes and the increasing use of private carriers in such schemes by amending the federal mail fraud statute to cover not only the United States Postal Service but also private interstate commercial carriers (e.g. , UPS, FedEx, DHL). The SCAMs Act also particularly criminalized telemarketing fraud, finally, the SCAMS Act increased the penalties for conviction for mail and wire fraud schemes targeted at individuals aged fifty five and above. The mail and wire fraud statutes have been used as a â€Å"first line of defense,† that is, a â€Å"stopgap† device which permits the prosecution of a newly conceived of fraud until such time that Congress enacts particularized legislation to cope up with the new fraud. The mail and wire fraud statutes have thus been referred to as a â€Å"secret weapon† in the possession of federal prosecutors ( Anne S. Dudley, pg: 1025). Governing securities activities in this contemporary frontier is a flexible set of laws accepted more than a half-century before the increase of the Internet. Enacted in the 1930’s, the antifraud provisions of the federal securities laws declare it illegal to make a material misstatement or omission of fact, or to employ a manipulative or deceptive device, in connection with a securities transaction. These same laws authorize criminal prosecution when the conduct involved is â€Å"willful† (Richard H. Walker,pg:- 405). The FBI and police agencies wide-reaching have people allocated to fight Internet fraud; Since February 1999, when the Department of Justice recognized its Internet Fraud Initiative, the federal government has been intensifying its efforts to merge criminal prosecution with coordinated analysis and investigation as part of a comprehensive approach to warfare Internet fraud. Similarly, it is very difficult to enforce law against online fraud. It is hard to notice. Investigations are hindered by the difficulties related with recognizing and locating the individuals and entities in charge for the online frauds. Other obstacles are the relative lack of physicality involved in online fraud makes difficult issues of personal jurisdiction, service of process, and the freezing of assets to secure them for consumer redress. Compliance monitoring of online conduct is necessary, but entails an extensive and ongoing commitment of investigative proficiency and other resources. The resources required to examine an online bar imposed against a particular defendant, who by now may have metamorphosed or otherwise masked his or her online, corporate, or individual identity, are extraordinary and likely much similar to the costs associated with finding one very small spine in one very outsized barn full of hay. These burdens and others considerably impact the procedures and budgets of federal Internet prosecutors like the FTC and can outstrip the resources of state and local law enforcement agencies (Emile Loza, pg: 55). In spite of laws made by government to control Internet fraud, it is responsibility of users to be vigilant and knowledgeable at their end. Most people find it hard to believe that they could become victims of fraud, but one should never undervalue the cleverness of tricksters who make money by misleading others. State and federal laws and agencies have inadequate power to guard customers from Internet fraud. The consumer must keep on alert to the likelihood of fraud. One must be careful about giving out precious individual data online such as Social Security number, credit-card number, or password. Criminals have been identified to send messages in which they make believe to be a systems administrator or Internet service provider representative in order to convince people online that they should reveal valuable personal data. Internet is an enormous new terrain for crooked marketers. As the Internet is used to perform many activities, which were earlier done by manually, these encourage swindlers to involve in deceptive and misleading promotions. Swindlers are paying attention to the Internet because they find this media is a superb way to reach thousands of consumers inexpensively, quickly, and secretly. Few limitations exist on the Internet, making it easy to place deceiving or misleading information online. It is a major challenge for consumers to judge the accuracy and reliability of online information. References: 1) Anne S. Dudley,Daniel F. Schubert . 2001. Mail and Wire Fraud. Journal Title: American Criminal Law Review. Volume: 38. Issue: 3. Page Number: 1025. 2) Byron D. Hittle. 2001. An Uphill Battle: The Difficulty of Deterring and Detecting Perpetrators of Internet Stock Fraud. Journal Title: Federal Communications Law Journal. Volume: 54. Issue: 1. Page Number: 165. 3) David M. Levine, Richard H. Walker. 2002. You’ve Got Jail†: Current Trends in Civil and Criminal Enforcement of Internet Securities Fraud. Journal Title: American Criminal Law Review. Volume: 38. Issue: 3. Page Number: 405. 4) Emile Loza . 2002. Publication Information: Article Title: Internet Fraud: Federal Trade Commission Prosecutions of Online Conduct. Journal Title: Communications and the Law. Volume: 23. Issue: 2. Page Number: 55. 5) Jason Whittaker . 2004. The Cyberspace Handbook. Publisher: Routledge. Place of Publication: London. Page Number: 254. 6) Julia K. Cronin, Amanda R. Evansburg, Sylvia Rae Garfinkle, Securities Fraud. Journal Title: American Criminal Law Review. Volume: 38. Issue: 3. Page Number: 1277. 7) Kevin Blair. 2001. Moving Fast: Competition Heats Up on Credit Card Security. Journal Title: ABA Banking Journal. Volume: 93. Issue: 4. Page Number: 63. 8) Lauren Bielski . 2004. Phishing Phace-Off: Online Fraudsters and Vendors Do Battle to Gain Control of Electronic Information. Meanwhile, Incidents Rise and Consumer Confidence Suffers. Journal Title: ABA Banking Journal. Volume: 96. Issue: 9. Page Number: 46.