Mum's the word on Internet fraud

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.

"Law enforcement has been making great strides in helping organizations with this kind of crime," Rapalus says. "There is a definite growth of confidence in law enforcement. But there are so many gray areas in legislation. It's still an area of great concern, but there is an increased comfort level among corporations that there is recourse if they're victims of serious attacks."

According to Sandra Michioku, spokesperson for the California attorney general's office, prosecuting Internet crimes is difficult because it often crosses interstate and even international boundaries.

"Perpetrators can be anywhere in the world. That's one of the complexities when you're dealing with Internet fraud and crime," Michioku says. "The Internet represents a whole new arena in which to perpetuate these types of crimes. And the level of sophistication on the Internet is so much greater than other channels."

This story, "Mum's the word on Internet fraud" was originally published by CIO.

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