FBI: Auction Fraud No. 1 Online Complaint

Internet auction fraud accounts for close to half of all the complaints made to the FBI’s Internet Crime Complaint Center, according to a report released Friday.

Of the 207,492 complaint submissions made to the Internet Crime Complaint Center (IC3) in 2006, Internet auction fraud accounted for 45 percent, the Internet Fraud Crime Report found. That figure is down from about 63 percent of complaints in the IC3’s report in 2005. The IC3 is a joint project of the FBI and the National White Collar Crime Center.

High Stakes

In addition to auction fraud, the report includes complaints relating to nondelivery and credit/debit card fraud, as well as nonfraudulent complaints such as computer intrusions, spam and unsolicited e-mail, and child pornography.

Most instances of fraud are conducted via e-mail and Web pages, according to the report. Losses were highest among victims of Nigerian letter fraud, for whom the median reported loss was US$5,100, followed by check fraud, for which the median reported loss was $3,744, and other investment fraud, which had a median reported loss of $2,694.

“This report demonstrates how widespread and sophisticated Internet crime has become,” said Cyber Division Assistant Director James E. Finch. “The FBI remains committed to working with our partners in both law enforcement and in the private business sector to help investigate and combat these types of crimes.”

A Question of Reporting

One point that’s important to note about this data is that it focuses on instances of fraud that get reported, Liz Gasster, acting executive director and general counsel for the Cyber Security Information Alliance, told the E-Commerce Times. Not included are the countless ones that don’t.

“What I would take away from this is that Internet auction fraud is a big problem, but I would not assume the reverse — that is, I don’t think other types of fraud that got reported less frequently are necessarily less common.”

Other types of fraud, particularly credit- and bank-card fraud, may be reported less often because banks and credit card issuers tend to “make good” when fraud affects their users, Gasster noted, so “you don’t have as many uncompensated consumers as you might in the case of online auction fraud.”

In other words, victims of online auction fraud may be more motivated to report the fraud because they don’t generally have banks or other third parties helping to compensate them the way victims of credit card fraud do.

Another Take

The Federal Trade Commission (FTC) maintains a database of similar data tracking consumer complaints made to the FTC, as well as to other agencies such as the offices of state attorneys general and Better Business Bureaus. Interestingly, the FTC’s data tells a slightly different story.

“In 2006, roughly 5 percent of fraud complaints received involved Internet auctions, or about 32,800 out of more than 428,000,” Frank Dorman, an FTC spokesperson, told the E-Commerce Times. By comparison, there were about 80,400 such complaints in 2005, representing about 12 percent of all fraud cases reported.

Most auction complaints dealt with late shipments, no shipments, or shipments of products that weren’t the same quality as advertised; bogus online payment or escrow services; and fraudulent dealers who lured bidders from legitimate auction sites with seemingly better deals, Dorman added. The majority of the cases involved sellers, but in some cases, the buyers were the subject, he said.

Cybercrime: A New Career?

Though the numbers may change from year to year and across different tracking organizations, one trend that seems to be consistent is that more and more Internet crimes are committed for financial gain.

“It used to be a lot of pranksters and hackers, but now [cybercrime] is a real career,” Gasster explained. In the past, the highest volumes of cybercrime activity were seen at night and on weekends, but today “it’s almost a 9-to-5 job,” she said. “The volumes go up during the business day and down in the evening.”