Auction Fraud Tops FBI's '06 Crime 'Net Crime Report

Online auctions schemes rank higher than "Nigerian letter fraud"

When it comes to online crime, auctions are the new fraud favorite. The FBI's just-released 2006 Internet Crime Report reveals that just under half of all Internet crime complaints last year concerned auction fraud.

Last year, the FBI's Internet Crime Complaint Center (IC3) processed 200,481 complaints that "support Internet crime investigations by law enforcement and regulatory agencies nationwide." Of these, the IC3 referred 86,279 complaints to various law enforcement agencies around the country. Internet auction fraud was "by far the most reported offense" with nearly 45% of referred complaints.

That total means that online auction fraud now beats out the tried-and-true "Nigerian letter" scam - wherein one is asked to transfer funds to assist a financier in the African nation, with the promise of a high return upon the resolution of his momentary liquidity crisis (yep, people fall for it) - as the web's crime topper.

Though the 2006 totals reveal a 10% decline from 2005, the total dollar losses are up - $198.44 million last year vs. $182.12 million in 2005.

The report is worth a read, especially if you are a big e-commerce customer, and even more so if you run an online business. More than just the security of your transactions is at stake; your ability to compete and grow is compromised - to the benefit of the Big Guys. As Steve Swoda observes on his blog, the big winners in all this, beside the crooks, are the big merchants with well-established brands online:

"The problem is that the big winners in a "scary" Internet are the huge brand names that already dominate the Internet industry (you know all the names). Unfortunately, the big guys know this, and so they view this problem as something that gives them a long-term competitive advantage over the emerging Internet businesses."

To underscore the threat, Ina Steiner of AuctionBytes reported earlier this week on a growing new fraud that uses the "Ask Seller a Question" feature on eBay as a way to harvest email addresses. With the FBI IC3 report citing e-mail as one of the primary mechanisms used to commit online fraud, it pays to proceed with caution. Hey, we've got your back.