Payment Options for Export Import Trade Part V - How to Protect Yourself from Escrow Fraud

The simplicity and convenience of on-line escrow payment service has made it so popular among Internet users. Its in-built safeguards work for both buyer and seller - making it a safe and inexpensive payment option. However, the safety of escrow service depends entirely on honest conduct of the escrow operator.

Awareness about common frauds associated with escrow service and knowledge of safeguards can save you from the clutches of unscrupulous escrow operators. Here's an example of common escrow fraud

Fraudster in the guise of escrow operator

The fraudster sets up a fake escrow service, complete with professional looking web-site and phony certificates. It then joins hand with an unscrupulous auctioneer to trap unsuspecting buyer.

The auctioneer puts on sale an attractive item, often fictitious, with lucrative price tag. Buyer, unaware of the trap, bids for the item and eventually wins. The seller then suggests the fake escrow service for monetary transaction.

Unsuspecting buyer agrees and sends money to fake escrow service. The 'escrow operator' then starts harassing the buyer after receiving buyer's money. The fraudsters use various stalling tactics like asking for more information, demanding clarifications and sometimes even more money to clear the transaction.

Eventually, buyer gets frustrated and gives up any hope of receiving the auction item or refund. If the buyer is tenacious type who does not give-up easily and involve law enforcing agents or police - the fraudster closes down the 'escrow service' only to start a new one under different name.

Safeguards to be taken for selecting escrow service

  • Use auction service of well-known sites (e.g. eBay)

  • Use an escrow service recommended by the online auction site (for example, eBay recommends

  • If the seller wants you to use a specific escrow company, ask why. Be sure to check it out carefully

  • If anything seems fishy, find another escrow company

More Information on Fake Escrow Operators

For more information on fake escrow services, visit Fenton Smith, who created this site has listed over 100 sites that he labels scam escrow services - 47 of them are still active.

Happy and Safe Surfing

Dr. Amit K Chatterjee

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Source: FAIDA - Newsletter on Business Opportunties from India and Abroad Vol: 4, Issue 24 ; Feb 12' 2004

Author : Dr. Amit K. Chatterjee
(Amit worked in blue-chip Indian and MNCs for 15 years in various capacities like Research and Information Analysis, Market Development, MIS, R&D Information Systems etc. before starting his e-commerce venture in 1997. The views expressed in this columns are of his own. He may be reached at )

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