Internet fraud has become one of most pressing and hot-spot issues of online business owners. Unfortunately, it is very common for such industries as fintech, online lending, insurance, banking, travelling, betting, gambling and dating. Online fraud causes billions of losses to online businesses every year. In general internet fraud may be regarded as any action on the internet, committed with bad faith. There are numerous types of online fraud, such as identity theft, chargeback fraud, online shopping to name a few. However today we are going to take a closer look at online fraud and shed some light on the question what is online fraud?
What is online fraud?
Online fraud is related to any kinds of financial losses caused by a scammer. It can be connected with either stolen credentials or data falsification and may be performed in dozens of different ways, however the result of such unfaithful actions inevitably leads to online business operational and reputational losses and for the client it usually means unexpected financial damages if a fraudster uses user’s stolen credentials.
Facing the challenges related to internet fraud many online companies come to a conclusion, that in order to optimise costs and improve efficiency it is really necessary to implement new solutions, which help to fight online fraud.
Online shopping fraud
This type of fraud may be described as one of the most dangerous for online shoppers. Usually scammers use fake retailers web-sites or applications in order to propose different products to customers. Generally fraudsters imitate web-sites with rather expensive or luxurious goods such as as jewellery, electronics and home appliances, where the average check is high enough. Apart from the goods online scammers can also create a fake online tickets web-site. After adding a good or a ticket to the cart consumer has options either to pre-pay the purchase or to make payment in full. As a result, a customer will never give the money back and will never get a good or a ticket, because they actually never existed.
According to the latest researches, e-commerce lost about 20 billions of dollars due to various types of internet fraudulent activities, including online shopping fraud. With the penetration of the internet to our everyday life many customers got used to the fact that ticket or goods can be purchased rather easily - all you have to do is to press a few buttons and make payment. In order to protect oneself from online shopping a customer should be really attentive to the web-sites he visits.
Online charity fraud
This type of fraud is based on people noble feelings and needs to donate to charity. Referring to statistics, there are up to two millions of non-profit organizations formally registered all over the globe, and much more of them, which are not registered. Sometimes a person who would like to contribute to charity has no information about the legitimacy of the actions of a charity organization he or she is willing to donate to. Also it is very common when fraudsters start to collect money after some kind of natural disaster or war conflict in order to help the victims. Of course, in fact such online scammers have no intention to help anyone, they just ask for donations and disappear with all the money they managed to collect. Sometimes it’s may be hard to check whether the money people donate goes to charity or to someone’s pockets. In order to spot and prevent online charity fraud people need to take a closer look at the organizations they want to contribute to.
Online dating fraud
This type of fraud sometimes may be called as romance fraud and also appeals to basic human feelings. No need to say that most of those who are exposed to this type of fraud are lonely people. A fraudster uses stolen or fake account in dating apps or on the web-sites and a victim believes that they have made a connection or got a match with another person on dating web-sites, applications or in social media. The main aim of a scammer is to gain victim’s trust. Usually after that a fraudster starts to ask for money on various pretexts. For example, it may be a significant amount to cover a cost of a flight. A scammer may even convince the victim that they need to get married in order to receive an inheritance and demand reimbursement of lawyer expenses from a victim.
Another type of online dating fraud is when fraudsters disseminate harmful malware or collect victim’s personal data such as credit card numbers, passwords by sending the malware links. Often the victims of such scammers simply have no one to tell that something wrong is happening. Also it is much more easier to manipulate those people who trust you and believe that you are in a relationship.
Public holidays and the New Year’s eve for many online-businesses is not only a pleasant time that you can spend reviewing the results of the year past, planning your long-term prospects and making gifts to your employees and clients. Unfortunately, holidays is also a pickup increase of online-fraud. The companies have to keep a subtle balance in order to provide the clients with the opportunity to use financial products online via web and mobile apps and at the same time take efficient risk prevention measures. Let us introduce some numbers: total losses from online fraud in 2020 amounted to $ 32.4 billion, and experts predict that this figure will grow to $ 40.6 billion by 2027. The amount of online-fraud attacks usually rises dramatically before the holidays along with the consumers’ need for shopping and, as a result, the need for additional credit means. However we are witnessing the largest growth of online-fraud just before Christmas holidays. According to our data, cases of online fraud increases two times in high season.
People need to do some shoppings in order to acquire gifts for the loved ones and, as a result, they need additional funds such as credits and loans. Online scammers use this high season in order to apply for a loan. they hope to slip through online lender overloaded system and make a lot of applications, using stolen or fake credentials. Many online companies really can't handle the large influx of applications and sometimes may issue a loan which no one will ever repay. The good news is that such “holiday” fraudsters are usually not really well-prepared and do not have sophistical tools and technologies in order to bypass the system. So, as a rule, they can be easily handled with by means of applying more conservative approach connected with new applications evaluation policies and rules in. a decision making system. Also online lenders should pay great attention to the applications with high-risk markers - attempts of device or internet connection manipulation as well as user’s shady behaviour.
Ticket fraud sometimes also can be related with public holidays and high-season. However it is also connected with the most popular vacation seasons. It may refer to a long Christmas holidays or to summertime, when most of the people prefer to go abroad and have a good time by the sea. Using such opportunity, fraudsters can create fake web-sites for buying tickets online. Also it should be noted that the pricing on such fake web-sites is really fair and the tickets may be sometimes two times cheaper than on the other web-sites. Under the pretexts of discounts fraudsters push customers to buy cheap tickets. Of course all the tickets may be purchased only for a full pre-payment. No need to say, that a victim will never get either a refund or the tickets, which actually never existed. When there is a critical number of complains on this web-site, fraudsters just delete the old one and create the next fake online tickets web-site.
Unexpected prize & lottery scams
Basically this type of fraud usually starts with a letter sent by email or a social media message, where a user is informed that he or she has won in the lottery. Surprisingly, but many people do not see any catch in such messages, despite the fact that they did not even buy a lottery ticket. Many of them are confused by the huge amount of winnings and they do not want to see the obvious thing - the message was sent by scammers. So, after a person replies to a message and is willing to claim for his prize, a scammer is making up an unforeseen difficulty. A victim may need to refund a lawyer expenses who is going to represent a victim in court, because the lottery was conducted in other country. Also fraudster may use this situation in order to steal victim’s credentials - they ask a person who “won” to fill in an application form with sensitive and personal data. It may be bank account login data (in order to “send the money prize”), credit card number, password and any other credentials required to steal the money.
Online gift card fraud
We all like to make gifts, but was can be better than to receive an unexpected gift from somebody else? It may be a pleasure to get one, but not if you receive a gift on the internet from a complete stranger, because there are numerous cases of fraud with online gift cards. In fact, many online stores provide their clients with gift cards in order to amplify their brand, boost customers’ loyalty and attract new clients. So online gift card fraud is based on the trust of loyal customers and the desire to get benefits from an online store. This type of internet fraud usually occurs when a fraudster get a free of charge gift card and want to monetise it. In many cases online scammer may use stolen information or credentials for obtaining such gift cards. Sometimes gift cards may be stolen from online shops. It may be rather difficult to spot such cases of online fraud, mostly because there is a lack of information attached to the gift cards. However it may be traced using various risk management solutions.
Internet money muling
There are two types of money muling. The first one is when a person launders money and all the parties of this incident know exactly that they are making a crime. Usually one person just transfer the money from his account to someone else's taking some small commission for it. In some countries such actions can be prosecuted and punished by the law. The second type of menu muling is when a person who transfers the money is sure that he is not doing anything wrong - he is just helping someone, his friends or a relative and just transfers money. Sometimes a victim does no take a commission for such action because he or she really thinks that he does a good job helping. So, in the first case all the participants are frauds, in the second one - there might be one victim, a person, who was used, may also be heavily sentenced for money laundering despite of the fact that they did not know anything.
Miracle health online scams
This type of fraud is really hard to talk about. Usually fraudsters offer some kind of miracle cures from dangerous, chronically or even incurable and terminal illnesses. There is no need to say, that terminally sick people and their relatives are ready to believe in anything if someone tells them that their awful situation can be handled. However it does not have to be all that bad, sometimes fraudsters just sell miracle pills which help other people to stay healthy or come fit. Actually, this kind of online fraud is really hard to determine and even more harder to prove. People buy vitamins or some medical supplies all the time. Miracle healthy or fit pills sellers usually do not promise anything specific or particular. Like, these pills are going to turn you into a model even if you weight 300 lbs, but there is no concrete term or anything, so before buying this kind of stuff, try to find any reviews on the pills if they really have ever helped to anyone or there is no information apart from the advertisement on the internet.
Identity fraud is related to the situation when a fraudster uses someone’s stolen credentials in order to make a purchase. Since the Internet has penetrated all spheres of our lives, many people do not hesitate to leave their personal and sensitive data anywhere on the Internet and do not worry about the consequences. In turn, the consequences can be quite sad. If a scammer finds them, he can use a fake credit cards for bad faith. Identity fraud is one of the ****types of online scam that is growing very fast. The point is that if a fraudster grabs someone’s credit card, it might be hard to spot the fraud case. However if online business uses such risk management solutions based on device fingerprinting, it is really hard to fake user device fingerprint, this is why such solutions considered to be rather useful and one of the most effective in terms of online business protection.
This type of fraud occurs, when a user makes a purchase anywhere on the internet and right after he gets a good he or she requests a chargeback for this purchase from the bank. Since the good has been acquired with the use of user’s credit card and all the credentials had already been verified and checked before, bank has no doubts that it deals with a real customer itself, however he has no idea that a client has already got what he ordered and a merchant looses money after the bank repays the full amount and gives the money back to the client. Not necessarily a fraudster squires only physical goods, it may be also some kind of virtual services. The may point is that there are three parties - a fraudster, a merchant and a bank. Taking all there three parts together chargeback fraud may occur.
Authorized push payment fraud
Authorised push payment fraud also known as APP in short is really dangerous type of online scam, which is related to the situation when fraudsters somehow makes a victim to make payment and to transfer money on their bank account, but the person is convinced that he pays to the company he has already worked with and this is not mere than just a regular payment. So, practically APP does not require any sophisticated technological skills from a fraudster. The most often way to get information about victim’s contacts and payments is to hack his personal or work email. After that a fraudster or even a fraud ring takes a lot of time, studying what contacts and collaborations a victim has, what regular payments he or she does and try to disguise themselves, posing as a company, to which a victim needs to cover a mortgage, for example.
Work from home scams, easy money scam and business opportunity
Unfortunately, most of fraud types we regarded in this article a related to the situations, when people’s kind and generous feeling and emotions have been used in a bad way. This type of online fraud may be regarded as a severe disaster - it is targeted at the most vulnerable category of people, at disabled or old people, who need to support themselves and apply for a really modest salary, because they are limited to their physical abilities. So, the situation often happens as the following: a fraudster offers a job on the internet, it may be placed as an ad at some job website or sent directly to the email, the content is about the same: we offer a remote work from home, which is fully suitable for disabled people, the only requirement is a medical certificate or healthcare book/any other document, which can be obtained only by means of the job offer. Thus, the applicant is required to pay some small amount in order to issue the required document in a proper way. No need to say that no job ever existed and a victim just looses the money.
Easy money and business opportunity online fraud types are quite similar, only a fraudster offers to become business partner or to make fast money to anyone on the internet. Again, he requires some about of money under any pretext and disappears.
Fee fraud and internet classifieds fraud
Fee fraud became very common in early 2000s, when people started to use internet almost everyday, but no one actually yet got acquainted that you should be really careful with internet stranger. So, the fraud scheme is really simple: a fraudster sends an email to the victim and promises someone a considerable sum of money or some kind of a prize, but the main condition in order to obtain it is to transfer some small amount in advance. This some may either stand for some kind of taxes, fees or charges - no mater what, the prize has never existed, so after getting this prepayment a fraudster simply disappear as usual.
Internet classified fraud is when a fraudster places some kind of a goods or services advertisement anywhere on the internet, for example, in social media. When a victim gets interested in a proposal, scammers claim for advance payment in order to obtain this good or service.
Online fraud has a lot of different types, but, to tell the truth, application fraud is one of the most well-known and common. A fraudster uses stolen credentials or a fake or synthetic ID in order to apply for any kind of a financial service: it may be a loan or a credit, also some kind of an insurance certificate. This kind of scam is related to such industries as online lending, fintech, e-commerce, insurance. Thus, a fraudster gets access to financial products and gets away with the money. After that I financial institute claims for the repay to a person, who has no notion about this situation, because his credentials - card number, bank account or any other personal information have been stolen. Yes, it is really convenient and easy to use clients’ personal data. However this may lead to massive data breaches and the company will loose its reputation due to such situations. As usual, no one has any plan to give the money back, as a result, financial organizations gets additional losses and a client, whose data has been stolen, also has a lot of troubles due to this situation.
New account fraud
New account fraud sometimes is correlated with application fraud. Though it has similar nature, but still it is quite different. A fraudster may also use someone’s stolen credentials or documents, but he creates a new bank account in order to look like a complete new user. After that he exceeds the limits amount of credit applications and disappears wit the money. However sometimes a fraudster may also use his own credentials, the point of this online fraud type is that he creates and uses a brand new account and a bank or online lender has really little information about this new user and issues loans without any doubts. A way to solve this problem for online lenders may be rather simple. The answer to this situation could be to apply more strict approval policy during the first 30 days. Acting like this, online companies will make new account fraud less attractive for fraudsters, because they will have to wait until using their new account.
This type of online fraud also occurs rather often. On the contrary to some other fraud types which we have talked about before, transaction fraud requires some kind of technical skills in order to be performed by fraudsters. A scammer is trying to conduct an unauthorised transaction, so this means that he has to get the access to victim’s bank account or payment card account. So transaction fraud simply implies an illegal transaction, because it has been conducted not by a card holder, but by a fraudster. For those financial institutes, which do not pay much attention to device identification or fraud detection tools, based on behavioural biometry, usually bump into situations related to transaction fraud really often. So in order to avoid such situations, a company simply has to use the most effective fraud detection and prevention tools, such as JuicyScore, because it is not using any personal and sensitive data and works best against account takeover, new account fraud and transaction fraud.
Sources of online fraud
Speaking of online fraud sources, we would not be wrong if we say that the primary source of it is a simple and villainous desire to profit from those who simply are more trustful or not careful enough on the internet. At the same time, apart from particular people, online fraud harms immensely to different online institutions, such as banks, online insurances, fintechs, in a word, to anyone who has gone online in order to be more competitive on the market.
Social media and dating websites
Unfortunately, in a modern world most people sometimes may be careless enough to publish their personal information on the internet. They just want to communicate, which is natural, by showing their personal data, they just sometimes try to find other people who they would like to talk with, be in a relationship, in order to find out that they have a lot in common. If we find out that we graduated from the same university or we follow the same bank page on social media and we find more and more common grounds, we can initiate a conversation or get involved to some activities maybe. However this is not only about communication and friendship. When we publish our personal data, we have to be prepared that one day we find out that someone was trying to get access to our payment card accounts and we just hope that financial organization we trust to is careful enough in order to spot and stop fraud before it happened.
People are using emails everyday. Globally, the whole humanity sends 306 billion s of emails everyday. It may be either a work email, or a personal one. But again, carelessness may become the root of all the problems. People press on some malware and rather harmful links without any second thought. In turn, it may lead to email hacking and after that a lot of bad things may happen. Why people are so sure that they email boxes are protected enough? In order not to get in trouble, be sure that you have explained to your colleagues or personnel perfectly clear, that there are rules of online user behaviour and anytime we should remember that fraudulent emails are closer than we think.
SMS-mailing and mailing in messengers
We get texts all the time. The situations may be different - either you are invited to some kind of event, or you won a prize or want to see some celebrity’s photos - you just click to a link which has been attached to a fraudulent message or text in messenger and malware can be downloaded to your device. Again, we should always remember that we are sure who sent us this message, what are the reasons of it and is it worth to click some strange links. Someone may even say that many people are a bit high-strung, nervous or even paranoid, however they change their opinion really fast when they find themselves in a situation of severe fraud.
Hacking a phone or computer
Sometimes a lot of companies, which store sensitive or secret data on their computers or any other devices, do not even have access to the internet. Because if you are not online, your phone or computer may be hacked by means of a fraudster’s physical presence inform of your work desk. This might be a really clever and smart move if we speak about government organizations. However not necessarily to apply such strict measures. Sometimes it is enough to follow the rules which are commonly known. So an online organization owners need to be sure that they protected their online infrastructure well enough.
Fraudulent sites and clone sites
Create a new web-site was kind of a secret knowledge about two decades ago. It required rather sophisticated technological skills. However nowadays literally almost everyone in the world can create their own web-site, either by means of using some third-party service providers or by themselves. Fraudsters usually can create like a dozens of web-sites in a week in order to collect fake credentials and to sell unexacting goods for the existing money. So, there are a lot of online fraud cases related to fraudulent and clone web-sites and sometimes it is hard to distinguish which one is the real one. So, it is really important to be really attentive and check every web-site where you are going to make a transaction.
Computer viruses, ransomware and malware
They say that the first computer virus has been invented long ago. Indeed, the first ones were rather primitive and could not do much harm to a user. However today’s advanced technologies let fraudsters to improve their skills along with the viruses. So, when a fraudster achieve his goals and someone downloads his malware due to some kind of a virus, he may use your computer in order to get access to your files and documents and to see what you have been doing online (what shops do you make, what financial habits and intentions you have etc.) It also should be noted that those fraudsters who create malware and viruses are sometimes really good at what they do and consider it to be their job, because they spend a lot of time on it and, as a result, have rather high technological skills.
Hacking company systems
Speaking about a single fraudster, there are no doubt that most of them may be rather unexperienced. However, if we speak about fraud rings or, so to say, organized group, they can even create a whole system which may be really harmful and dangerous and, in case of fraudsters’ success, may also completely paralyse the work of a whole company and do much harm, causing operational reputation and any other kinds of losses. So, by all means any organisation should pay attention to safety regulations as well as security rules. Keeping n mind all the above mentioned, it is really important to create some kind of a working plan in case of the emergency: how to act and to react if some fraudsters hacked your company’s systems.
Fraudulent phone call
Fraudsters usually prefer to call to rather old people, who do not know much about fraudulent activities online or on the phone. A fraudster tries to disguise himself and acts either like a police officer or some other authorised person and demands money from the victim. A lot of people may loose thousands of dollars especially if they think that their loved ones are in trouble. A fraudster usually asks some kind of a bribe, for example, for releasing victim’s child from prison. The only way to spot and protect oneself from fraudulent phone call is to keep a cool head and not to panic. It would be better to end a call immediately if you feel that something wrong or suspicious is going on and to call to your family or to the bank and to find out whether your personal account is really in danger or there are just some fraudsters who hoped to get your personal account credentials and just steal your money.
Online fraud statistics
There are numerous fraud cases all over the globe. However, we can not say that we have much statistics on every country. But let’s review one as an example. According to different reports, about 7 percent of goods in Netherlands were not delivered to the customers yet they were paid for. It means that there was committed fraud. This country is one of the most safe and prosperous, yet online fraud cases are not really rare even there. It should be noted, that, according to statistics, only one out of five victims of online fraud reported about this case to the police. Online scams fraud trends to be the most common one. Meanwhile, many victims shared the information that they had some mental disorders, panic attacks or other health problems due to online fraud.
How to avoid becoming a victim of internet fraud
There are three rules which have to be applied during your internet surfing if you don’t want to become a victim of online fraud. First of all, we need to stay focused and really attentive, visiting different web-sites and making purchases online. If you visit any online store, at first you need to be sure that this is not a phishing or malware web-site. Also please do not click any links before you really understand that they were sent by the people you actually know offline.
The second point is to calm down. If there is a banner on a web-site which tells you to enter your credential as soon as possible in order to get a prize or there is a rush in making a payment - you should think twice before entering your personal bank account number or payment card data. There is nothing strange about taking your time and thinking twice if there is any danger around here. Do not act in a rush.
The third thing is about asking for help if you are not sure about something - don’t hesitate to cal your relatives or contact one of your acquaintances, who know computer better than you. Also Don’t be shy to skip or finish any unpleasant conversation with complete strangers online. By thinking that you might hurt someone’s feeling you can do harm to yourself - there are a lot of reasons to double check those who are trying to befriend you in social media. Also it is highly unlikely that a person who really like to communicate with one another will ask for someone’s personal data. Taking into consideration all this, one can be protected from the internet fraud.