Growing Global Internet Menace

Fraudsters in cyberspace: Part One

By Craig R. Ehlen, DBA, CPA, CFE; Robert E. Holtfreter, Ph.D.; John Langione, CFE, CIA, CLU; and Anna M. Green

Global Internet fraud is increasing so quickly and wildly that no one can devise a reliable rate of growth. But all fraud examiners know that they need to recognize the major types of Internet fraud and adhere to the "best practices" of protection. 

Recently, a 19-year-old Houston, Texas, man pleaded guilty to tricking hundreds of Internet users into providing him with their credit card and bank account numbers through a classic "phishing" expedition.

He sent e-mail messages indicating that an account would be suspended unless the customer updated the personal information requested. A hyperlink then took the customers to a copycat Web site that appeared to be legitimate but actually was controlled by the fraudster. Fortunately, this perpetrator was caught but there are thousands of others perpetrating the crime. Internet fraud is still flourishing.

Scope of Internet fraud could be indeterminable
Internet fraud is defined by the United States Department of Justice as "any fraudulent scheme in which one or more components of the Internet, such as Web sites, chat rooms, and E-mail, play a significant role in offering nonexistent goods or services to consumers, communicating false or fraudulent representations about the schemes to consumers, or transmitting victims' funds, access devices or other items of value to the control of the scheme's perpetrators." (1)

Obviously, global Internet fraud is likely to increasingly occur as more computer users access the Internet. For example, 88 million U.S. adults used the Internet in some manner in mid-2000. However, by the end of that year the number had reached more than 104 million. (2) This increase in Internet use has resulted in a corresponding increase in online crime and deception because anyone with access to the Internet can create a very lucrative fraud scheme. Also, a Web fraudster can construct an enticing site for little cash.

No one knows the full extent or magnitude of Internet fraud. Most probably go unreported to authorities as victims experience confusion about exactly where to report the acts. In fact, recent studies indicate that only one quarter of Internet fraud is ever reported to authorities. (3) In addition, even if complaints do get directed to some type of authority, they are usually lost or misdirected due to the nature of the Internet itself. Furthermore, Internet fraud reaches beyond traditional boundaries thus requiring new technology-based investigative procedures. Tracking the location of a fraudulent Web site or the origin of an e-mail address is often impossible.(4) 

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