Internet fraud
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There are several ways used by criminals to commit internet fraud. The FBI has people assigned to combat this type of fraud; according to their figures, U.S. companies' losses due to internet fraud in 2003 surpassed $500 million USD. In some cases, fictitious merchants post excellent prices for goods and never deliver. However, that type of fraud is minuscule compared to criminals using stolen credit card information to buy goods and services.
Stolen credit cards
Most internet fraud is done through the use of stolen credit card information, which is obtained in many ways; the simplest being copying information from retail sites (online or offline). There have been cases of hackers obtaining huge quantities of credit card information from companies' databases. There have been cases of employees of companies that deal with millions of customers, in which they were selling the credit card information to criminals.
Geographic origin of fraudulent orders
In some cases internet fraud schemes originate domestically (in the U.S.). But a significant proportion of organized internet fraud seems to come from Africa, particularly Nigeria and sometimes from Ghana and Egypt. Some originate in Eastern Europe and Southwest Asia. For some reason, many fraudulent orders seem to originate from Belgium, from Amsterdam in Holland, from Palestine and from Malmo in Sweden.
Popular products
Fraudsters seem to prefer small and valuable products, such as: watches, jewelry, laptops, digital cameras, and ink cartridges.
Cash the check system
In some cases, fraudsters approach merchants and ask for large orders: $50,000 to $200,000, and even agree to pay via wire transfer in advance. After negotiation (which usually doesn't take too long because they agree on whatever price they are quoted), they invent some excuse about the impossibility of sending a bank wire transfer, so they tell the merchant they will send a check that the merchant can deposit and wait for it to clear, before shipping. In that case, many merchants feel safe because they will have the funds before shipping. What the fraudsters do is counterfeit checks from a medium to large U.S. company that usually has enough funds to cover the size of check they intend to send, imitating very well the signatures. This is performed usually with common bookkeeping and word-processing applications. When asked why was it a company check from a company that is not their company, they state that it was a payment that the U.S. company owed them. Banks usually pay those checks. Only when the U.S. company notices that they did not issue the check and complains to the Bank, the Bank debits the account of the merchant. By then, the merchant has already shipped the goods.
In some cases, the fraudsters don't tell the merchants that they will not issue the wire. They agree to the wire but ask the merchant for their Bank's address. The Fraudsters send a check directly to the merchant's Bank with a note asking to deposit it to the merchant's account. Unsuspecting Bank Officers deposit the check, and then the fraudster contacts the merchant stating that they made a "direct deposit" into the merchant's account. Since the check is a good counterfeit, it is paid by the Bank (like explained in the paragraph above).
Re-shippers
In case of services, fraudsters just use the stolen credit card info to obtain them. However, most fraudsters prefer goods. The problem presented is how to ship and safely retreive the goods without being caught. Somehow, they invented the "Re-Shippers"
Nigerian version
In the Nigerian version, the fraudsters have armies of people actively recruiting single women through chat & matchmaking sites. At some point, the fraudster promises to marry the lady and come to the U.S. in the near future. Using some excuse, the fraudster asks permission to her "future wife" to ship some goods he is going to buy before he comes to the U.S., to her house. As soon as the woman accepts, the fraudster uses several credit cards to buy at different internet sites simultaneously. In many cases, the correct billing address of the cardholder is used, but they shipping address is the home of the unsuspecting "future wife". Around the time when the packages arrive, the fraudster invents an excuse for not coming to the U.S. and tells his bride that he urgently needs to pick up most or all the packages. Since the woman has not spent any money, she sees nothing wrong and agrees. The next day or a very short time after, she receives a Fedex or UPS package with pre-printed labels, that she has agreed to apply to the boxes that she already has at home. The next day, all boxes are picked up by UPS or Fedex and shipped to the fraudster's real address (in Nigeria or elsewhere). After that day, the unsuspecting victim stops receiving communications from the "future husband", because her usefulness is over. To make matters worse, in most cases the fraudsters were able to create accounts with UPS/Fedex, based on the woman's name and address. So, a week or two later, the woman receives a huge freight bill from the shipping company, which she is supposed to pay because the goods were shipped from her home. Unwillingly, the woman became the fraudster re-shipper and helped him with his criminal actions.
This is a variant of the Nigerian Version, in which fraudsters recruit people through job postings. The fraudsters present themselves as a growing European company trying to establish a presence in the U.S. and agree to pay whatever the job applicant is looking to make, and more. The fraudsters explain to the unsuspecting victim that they will buy certain goods in the U.S., which need to be re-shipped to a final destination in Europe. When everything is agreed, they start shipping goods to the re-shipper's house. The same is similar to the Nigerian Version. Sometimes, when the frausters send the labels to be applied to the boxes, they also include a fake check, as payment for the re-shipper's services. By the time the check bounces unpaid, the boxes have been picked up already and all communication between fraudster and re-shipper has stopped.
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