All that you need to know about E-Commerce and Fraud

In E-commerce we purchase goods on the internet through web services and this growing a lot these days. The Census Bureau Board of the U.S. Department of Commerce said that in 2005 the total E-Commerce sales were $86.3 billion which was a 24% increase from 2004. According to the reports, the sales will increase significantly in the future. E-Commerce sales constitute a two and a half percent of the total sales. Many legal problems and merchant concerns have been caused by an increase in E-Commerce even though it is convenient.

The consumers and electronic merchants or electronic retailers are been taken over by the fraud on the Internet. The Internet fraud and the credit card companies are a source of trouble to the businesses who deal in online selling of products. There has been a survey of more than 160 companies revealed that twelve times more fraud exists on the transactions that take place through the Internet the credit card discount rates that are paid online are 66% higher than the fees of the traditional retailer. In the cases of the internet fraud, web merchants bear the liability and costs while the fraud costs are generally absorbed by the credit card companies for traditional retailers.

There are a lot of losses incurred by electronic retailers through many illegal methods. Some of them are:

Fake Checks

Sometimes, the merchants are approached by the fraudsters are large orders are negotiated which range from $50000 to $200000. The payment is in advance through wire transfer. Then an excuse is made by the fraudsters that sending the bank wire transfer is impossible and then they tell the merchant t hat a check will be send to them and that they should wait for the check to get cleared before the merchandise is shipped. By doing this, many merchants will feel that they are safe as they are receiving the payment before shipping the goods.

What the criminals do after that is that they counterfeit the checks that would have enough funds to cover and then they imitate the signature. The checks are counterfeited from a medium to a large company and common book-keeping and applications for word processing perform this procedure. When questions are raised by the electronic retailer that why the purchaser was not associated with the check of the company, an excuse is made by the fraudster that the company owed them the money. Generally the checks are paid by the banks. When the company in whose name the fake check was issued notices that the check was not issued by them and makes a complain to the bank, the account of the merchant is debited. But by that time the goods are already shipped.

Wire Transfers

The merchants are approached by the fraudsters and they are asked for large quotes and then the quotes are accepted quickly by them. Then the wire transfer information is asked to send the payment. Mostly, the criminals use an online check issuing systems in which nothing but a working E-mail id is required. It produces the checks that are immediately required to be sent to other merchants or some other associates in order to get them cashed.

Re-Shippers

In the Re-Shipping scheme what is required is that the individuals in the United States receive the packages at their residing place. These individuals may be coconspirators or can also be unwitting accomplices. The merchandise is repackaged for shipment subsequently by the receivers of these packages which are usually abroad. Most of the times the Re-Shippers are recruited through employment offers and also by becoming friends with unsuspected victims in chat rooms. Sometimes, the Re shippers themselves become fraud victims. Their personal information is being used by people to obtain phony credit cards. Around $500 million have been lost till now due to re shipping schemes as told by the FBI electronic merchants.

Factoring

Mom-and-pop merchants are targeted by the scam artists in this scheme. Another vendor approaches the unsuspecting merchant who makes an excuse that he is not able to process online transactions for many reasons. The other vendor’s sales are processed for a small percentage by the merchant. Then the money is wired to another account by the criminals and the credit card companies leave the merchant with huge charge backs.

Internet Extortion

In Internet Extortion the criminals hack and control many industry databases. If the funds are received they promise to release the control back to the company or web administrator jobs are given to the hackers. Until and unless money is received, the criminals threaten the company to release the information about the consumers in the industry database.

These warning signs of fraudulent online purchases should be taken into consideration by the merchants:

• If there are huge sales and large dollar amounts to the same card number

• If on multiple sales orders or in sequential sale orders the same dollar amount is there

• If the same card number is there on multiple sales orders or in sequential sale orders

• If sequential sale orders are made to the accounts having same BIN number

• If the address of the place where the goods are shipped and where they are billed do not match

• If the orders are to be shipped to foreign destinations with high-risk

• If orders are made from the E-mail addresses which are free

The Merchant Risk Council coordinates the efforts of its members with the Internet Crime Complaint Center of the government and the Federal Bureau of Investigation (FBI). This council is a non-profit group which is a union of two similar groups- The Merchant Fraud Squad and the Internet Fraud Round Table. More than 6500 members are there in this council and it tries to prevent identity theft and cyber fraud by using the promotion of best practices and by education. It also assists merchants to manage online risks in a better way.

An attorney should be contacted by the merchants who have been victims of cyber crime for legal guide and assistance.