The Internet Crime Complaint Center (IC3) is a partnership between the FBI and the National White Collar Crime Center. Their 2008 Report on Internet Crime revealed a disturbing and dramatic 33.1% increase in online crime over the year before. The total loss linked to online fraud was estimated at $265 million, or $931 per complainant.
Different scammers target specific demographics; some prey on widows or widowers, others on children or the elderly. The following scams are known to target online businesses and business owners.
The Asian Invasion
Perpetrators of The Asian Invasion, or Asian Extortion Scam, gather information online about the intended victim. They seek private, personal data about the target business owner, who is usually of Asian descent, although people of other backgrounds have been targeted less frequently. The scammers use the information they've collected to intimidate and threaten the business owner. Their goal is to extort tens of thousands of dollars from the business owner in exchange for that person's own personal information. In some cases, the scammers don't have sensitive personal information about the business owner at all, but intimidate the person into believing they do.
The FBI notes in an IC3 news release from June 10, 2009, that the business owners are usually contacted by phone, and that the calls seem to be originating from outside of the United States. Affected business owners are urged to call law enforcement and file a complaint with IC3.
Small Business Loan Online Scam
In this scam, new business owners or entrepreneurs are usually contacted by email and offered a start-up business loan. New or potential business owners are a prime target because they have often been rejected for financing through traditional banks and are not sure how to raise the seed money needed to start or grow their business.
These loan offers generally require an application fee, sometimes as high as several hundred dollars. However, the loan is never fulfilled. To add insult to injury, the business owner's name may end up on a "sucker list," resulting in dozens more emails trying to trick them into sending more money.
For legitimate ways to fund a new business start up or expansion, see 3 E-Commerce Business Financing Options: Find Investors and Funding to Expand an Online Business.
The Free Small Business Grant Scam
There are many grant options available to new small business owners, depending on their qualifying factors. However, grant scammers target business owners through emails, direct mail, and even newspaper ads with promises of free grant money that just don't deliver.
Some even contact their victims by phone, posing as government officials notifying the small business owner of their receipt of a government grant. The government does not operate this way and will not ask for bank account information over the telephone.
These scammers make claims that are impossible for cash-strapped small business owners to resist, often guaranteeing a certain amount of money with no chance of rejection. They claim to have the inside track to grant funding, and charge an application fee ranging from a few dollars to over a hundred dollars. Worse, applicants may disclose sensitive personal and business information to these scammers, making them more susceptible for identity theft and other types of fraud.
Small business grant information is available for free at most public libraries.
Identity Theft and Fraud Protection for Online Businesses
E-commerce operators can protect their storefront from fraudulent purchases and chargebacks by using an approved payment gateway solution. Is it crucial to encrypt all sensitive information used to operate the website, process purchases, and contact customers. Also:
- Never reveal sensitive banking, social security, employee identification or other information in response to a telephone call or emailed request.
- Keep company and employee files in password-protected computer files and in locked, fireproof cabinets in the office.
- Report any suspected fraud or scam activity immediately; do not feel intimidated into giving out any more information or paying off the scammers.
Remember that online scam artists are pros at deception, trickery and bravado. They may make threats and demands, but most are just hoping for a sucker. Don't be a good target!
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