Internet Frauds and Scams - Part I Understanding the Fraudsters and their work

The Internet is a wonderful gift for mankind. It is wonderful and unique not because of the technological marvel of connecting 160 million servers or seamless surfing across continents - but the real strength of Internet is the people in front of those billions of computers who can interact with each other and build a society free from geographical, physical and political barriers. It is a unique experience in the history of mankind and is set to bring about fundamental changes in our life including how we do business.

Unfortunately, the ability to roam anonymously in a borderless world has also given fraudsters and scam artists a new tool to trick and defraud more people across the continents - a huge scope to scale up their operation.

It is extremely important that we understand how this new generation of fraudsters and con artists defraud people so that we remain ever alert.

What is Internet Fraud ?

The age old principle of playing on greed to defraud people remains same - fraudsters have adopted new techniques. The term 'Internet Fraud' generally refers to any type of fraudulent scheme or scam that uses one or more components of the Internet, e.g. e-mail, chat, bulletin board, websites, auction etc.

Internet Frauds are more dangerous than ordinary crimes as they can affect far more people in far less time than was possible with many fraud schemes in the past.

How Large is the Rip-Off ?

The size of Internet fraud is, in all probability, much larger than you think. In the absence of worldwide scam reporting and policing system - it is extremely difficult to assess actual size of the scam but sectoral or geographical studies point to a significant scale.

For example, Internetweek has reported that more than 1 percent of total online sales (US$ 700 million) was lost due to fraudulent activity in 2001 (according to Gartner Inc.'s G2 research service). The $700 million, which represents 1.14 percent of total online sales of $62 billion, is nearly 20 times higher than the dollar value of fraud losses related to offline sales. In an Internet survey of 1,000 adult online consumers in the U.S., Gartner found 5.2 percent were the victims of credit card fraud in 2001, while 1.9 percent were victims of identity theft. (

The Royal Canadian Mounted Police estimates Canadians have lost about $30 million to Nigerian Advance Fee scam over the last ten years and reports that about 10,000-15,000 letters pushing variations of this fraud from Nigeria have circulated in Canada (

What are the Different Types of Internet Frauds ?

I have compiled following 34 scams, frauds and hoaxes by researching various Govt and NGO websites, scanning news articles and interviewing scam victims. By no means is the list comprehensive - innovative scam artists are always looking for new avenues.

  • Fake/Non-Implementable Letter of Credit

  • Pay 25% advance and forget the rest

  • Advance Fee Loans

  • Auction Fraud

  • Business Ventures

  • Chain Letters

  • Classified Directories

  • Computer Crime

  • Computer Security

  • Counterfeit - Currency

  • Counterfeit - Payment Cards

  • Credit Card Fraud

  • Credit Card Insurance

  • Domain Name Registration Scams

  • Donation Solicitation

  • False / Deceptive Invoices

  • Fraudulent Online Purchases

  • Gemstone Scams

  • Home Renovation/Repairs Fraud

  • Identity Theft

  • Investors International

  • Lottery Scams

  • Nigerian Advance Fee Scam

  • Online Shopping

  • Pentagano Scheme

  • Phoney Bank Inspector

  • Phoney Job Opportunities

  • Prime Investment Scheme

  • Pyramid Schemes

  • Spam

  • Telemarketing Fraud

  • Theft of Telecommunication

  • Work-at-home Schemes

  • Virus Transmission

We shall discuss every item in future issues.

If you are a scam victim or know of a novel scheme that is not reported here - please inform. I shall be happy to include in the list and share with other readers.

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Source: FAIDA - Newsletter on Business Opportunties from India and Abroad Vol: 3, Issue 38 January 16' 2003

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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