Mum's the word on Internet fraud

By Jon Surmacz, CIO |  Business

Nobody likes a tattletale. And when it comes to Internet fraud, many consumers and companies are not admitting when they've been had.

The first Internet Fraud Complaint Center six-month trend report (May 8-Nov. 8, 2000), which was prepared by the National White Collar Crime Center (NW3C) and the Federal Bureau of Investigation (FBI), showed 5,273 incidents of Internet fraud resulting in losses of $4.6 million. The mean dollar loss of these cases was $864; the median was $255.

The report, which compiled data submitted through its website (, also showed that nearly all complaints were individuals (92.1 percent). Just 7.9 percent of fraud complaints came from businesses.

But silence may very well be the real story.

Despite an estimated 37.5 million visitors to the site in the first six months of operation, Don Rebovich, research director at the NW3C, says Internet fraud is seriously underreported.

"Some individuals are not reporting offenses because they think their losses are too small, or they are too embarrassed or they think nothing will be done about it," says Rebovich.

The biggest fraud danger for consumers, according to the report, is online auctions, which accounted for 64.1% of individual complaints.

Meanwhile, businesses, for a variety of reasons‹including bad publicity and a loss of shareholder confidence‹are keeping a tight lid on the subject of Internet fraud.

"Businesses will come up with a lot of reasons why they won't report fraud to the law enforcement community," says Rebovich. "There's a credibility issue there that would result in underreporting by businesses."

In its 2001 Computer Crime and Security Survey (released March 12), the Computer Security Institute (CSI), in conjunction with the San Francisco Bureau of the FBI, found that 8 percent of respondents reported financial fraud, up from 3 percent in 2000. The survey was based on 538 security practitioners in U.S. corporations, government agencies, financial institutions, medical institutions and universities.

"It's something that more people are becoming aware of," says Patrice Rapalus, director of the CSI. "As many more organizations become networked these kinds of crimes become much easier to perpetrate."

The CSI report showed that 36 percent of respondents reported security breaches, including incidents of fraud, to law enforcement. Last year, just 25 percent of incidents were reported.

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