Claims of Web Fraud Numerous, Incidents Less Likely

Web-based fraud claims are rising dramatically, accounting for two-thirds of all the fraud cases investigated by the Commercial Crime Service (CCS) of the International Chamber of Commerce for its business members in 2000.

Of the 4,139 cases referred to CCS by its members this year for checking or investigation, 2,776 were directly connected to crime, fraud, or deliberate misrepresentation by Web site traders offering bogus goods or services.

“Cybercrime is traditional crime perpetrated through a new and powerful medium. The fraudsters have not changed. Only the technology is different,” said Pottengal Mukundan, Director of CCS. “It is surprising how experienced businessmen discard their normal prudence when confronted with a profitable proposal offered over a well-presented Web site, but it is vital that businesses and consumers apply the same degree of due diligence in their Web-based transactions as they do in traditional transactions.”

While claims of fraud have increased, actual incidences may be much lower. The rate of fraud transactions online as a percentage of all business-to-consumer transactions is as low as 0.03 percent, according to eMarketer, which based its number on the incidences of online fraud reported to the Federal Trade Commission.

According to eMarketer’s ePrivacy & Security Report, 87 percent of online fraud committed in 2000 was attributed to online auction sites, and the greatest percentage of users falling victim to online fraud are Generation X members and Baby Boomers, accounting for 50 percent of all cases.

“For most Internet users, the protection of personal information is a real and valid concern,” said Rob Janes, an analyst at eMarketer. “Offerings of free services and promises of wealth lure participants into binding contracts or unbelievably great deals enticing consumers to buy products that never arrive or don’t meet the quality promised.”

As evidence of the sheer volume of auction activity being conducted online, eBay was recently placed 14th (outpacing online portals LookSmart and AskJeeves) in Media Metrix’ global audience measurement analysis. “Given that 16 million unique users may visit eBay in a given month, it’s no surprise that auctions consistently rank as the most fraud-prone online activity,” Janes said.

Other findings from eMarketer’s report include:

  • At year-end 2000, the FBI’s Computer Emergency Response Team (CERT) registered a whopping 17,672 incidents of hacking — up from less than 10,000 in 1999.
  • According to the two largest credit card companies in the world, Visa and MasterCard, the rate of credit card fraud as a percentage of all credit card transaction is miniscule. Their records show that in 1999, 22 million fraudulent credit card transactions occurred either online or offline of an estimated total of 25 billion transactions combined.
  • Less than 66 percent of Internet users have not been a victim of online fraud, while more than 34 percent have been victim a of a privacy/security breach. Per victim, the price of fraud hovers around $600, which is more than most research estimates of average online retail spending.
  • Children are, by far, the most willing to share personal information about themselves in exchange for goods and services and an issue of concern with most parents.
  • The majority of Internet users who refuse to buy online are afraid of hidden costs, leery of fraud, and question companies’ ethics.
  • The “Love Bug,” “ExploreZip,” and “Melissa” viruses are the most widely spread and damaging viruses to date. At least half of the top 20 viruses originated from outside the US. So far, the “Love Bug” virus has caused the most financial loss, exceeding the “Melissa” virus by upwards of $4 billion.

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