Online Fraud


“The term refers to any type of fraud scheme that uses email, websites, chat rooms (also see Chat and Online Communities), or any Internet related means to present fraudulent solicitations to prospective victims, to conduct fraudulent transactions, or to transmit the proceeds of fraud to financial institutions or to others connected with the scheme.”1)

Examples of most common online fraud schemes

A wide range of common fraud schemes exist. According to the 2010 Internet Crime Report2) compiled by the Internet Crime Complaint Center (IC3)3), the IC3 received a total of 303,809 complaints from consumers claiming to have been defrauded online. The following top 10 crime types were the most reported offenses during 2010 in the United States. Because of the various existing fraud schemes only these ten most reported offenses according to the above mentioned Crime Report are described here.

  1. Non-delivery payment/merchandise: A purchaser of goods does not receive the items ordered, or a seller does not receive payment for items sold. Additionally, if the buyer pays by credit card, the seller obtains his name and credit card number and can use this data as vehicle for credit card fraud.
  2. FBI-related scams: Scams in which a criminal poses as the Federal Bureau of Investigation (FBI) to betray victims. For example, a victim receives an email fom an FBI official and is informed that he has received an unclaimed inheritance. Then the victim is asked to click on a link and fill out a verification form with all personal information. With these information the identity is taken (see identity theft). There are many similar scams to this, most of all come in email format in which the victim is told that the FBI has been trying to get in contact with the victim.
  3. Identity theft: Identity theft occurs when a party acquires, transfers, possesses, or uses personal information of a natural or legal person in an unauthorised manner, with the intent to commit, or in connection with, fraud or other crimes.4) Identity theft counts as identity fraud scheme and is a vehicle for perpetrating other types of fraud schemes, especially payment fraud.
  4. Computer crimes: This fraud scheme comprises all categories including crimes targeting a computer or computer network, or crimes that attempt to use a computer or network to perpetrate other crimes.
  5. Miscellaneous fraud: These crimes include a variety of scams meant to defraud people, such as work-at-home scams, fake contests and sweepstakes.
  6. Advance fee fraud: A criminal asks people to pay an upfront fee to receive something of value, but does not deliver anything to the victim.
  7. Spam: Spam, or mass-produced unsolicited bulk email, is a widely used medium for committing traditional white collar crimes including financial fraud, credit card fraud, and identiy theft, among others.5)
  8. Auction fraud: Auction fraud can be described as fraudulent transactions that occur when entering an online auction site. This can be the misrepresentation of a product advertised for sale or the non-delivery of products bought through an Internet auction site (also see Market places and Auction Marketplace).
  9. Credit card fraud: A credit card fraud occurs when someone gains financial or material advantage by using a credit card, or information from a credit card, to complete a transaction that is not authorized by the legitimate account holder6) (also see Electronic payment options).
  10. Overpayment fraud: An incident in which the the victim receives an invalid monetary instrument, e. g. a cheque, with instructions to deposit it in a bank account and to send excess funds or a percentage of the deposited money back to the sender.7)

Categorization of fraud schemes

The above desribed online scams are only an extract of the numerous Internet fraud schemes which can be found. Fraud schemes can affect all areas of everyday life and they can occur together with other online crimes. For a brief overview the following categorization can help:8)

  • auction fraud (e. g. non-delivery payment/merchandise)
  • counterfeit payments fraud (e. g. counterfeit money orders)
  • financial fraud (e. g. cross-border fraud, debt elimination)
  • identity fraud (e. g. identity theft, hacking, spam)
  • online advertising fraud (e. g. botnet, browser hijacking, click fraud)
  • software piracy
  • sweepstakes/lottery fraud
  • pharmacy fraud


The rapid growth of electronic commerce (E-Commerce) has created fertile ground for online fraud and deception. Internet crimes occur every day and affect everyday live.

Further reading

There are numerous possible measures to reduce online fraud. Some examples are listed here:

1) Source: (accessed September 1, 2011)
2) , 7) Source: (accessed September 1, 2011)
3) IC3 was founded in 2000 as a joint effort between the National White Collar Crime Center/Bureau of Justice Assistance and the Federal Bureau of Investigations.
4) Acoca, B., Online identity theft, OECD Observer, July 2008, 268, p12-13
5) Baglione, S. L., Diemer, R., Zimmerer, T., The Internet: Exacerbating white collar crime, International Journal of Business and Public Administration, Volume 7, Number 2, Fall 2010
6) Sullivan, R. J., The Changing Nature of U.S. Card Payment Fraud: Industry and Public Policy Options, Economic Review, 2010 2nd quarter, Vol. 95 Issue 2, p101-133
8) Source: (accessed September 1, 2011)
risk_management/online_fraud.txt · Last modified: 2011/09/13 16:03 by Heilker
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