Sales Scam
Sales scams are a type of crime associated with online retailing, where money is snatched from the users without delivering the products. On the other hand, a scammer solicits payment and delivers counterfeit goods. Sales scams are also known as “consumer scams” or “business fraud”. Scammers use a variety of e-commerce fraud methods to commit crimes and fool customers:
Types of Sales Scams
Classified Scam
In a classified scam, an online retailer lists merchandise on classified websites like Craigslist, eBay, or Backpage without actually possessing that merchandise. A scammer lists photos, details, and “reviews” to fool a customer into purchasing, but steal information from legitimate listings. They often advertise a lower price compared to similar items in that category, further enticing a customer to buy it.
However, once the buyer shows interest, the scammer dodges face-to-face interaction. They claim to have moved and that a friend or agent will deliver following payment. The customer pays, never receives the goods, and cannot contact the seller or the “agent” for a refund.
Scammers take these same steps when listing cars or rental properties, making excuses as to why the customer cannot inspect them. They increase the urgency of the purchase by saying that they’re being deployed or have to leave their property soon. They ask for payments as a “deposit” for interest, but the customer never receives keys to the rental properties or for the car.
Health and Medical Product Scam
This type of fraud takes advantage of both the trustworthiness of health professionals and distrust of common medical practices. In some cases, a scammer builds a fake online pharmacy with listings that resemble legitimate items found at recognizable retailers. On this website, they list wellness products, medicines, and drugs at cheap prices without prescription requirements.
When the customer pays the retailer for these goods, they never deliver them. If the customer does receive the products, they are likely counterfeit and filled with dangerous chemicals that damage their health.
Furthermore, scammers offer “miracle cures”, quick and easy remedies for a health issue or medical condition. These scams weaponize alternative medicine, advertising as cure-alls for serious conditions. They claim to be able to treat AIDS, cancer, the common cold, and many other diseases, but are not backed by reputable doctors or studies.
Scammers deflect criticism by claiming a “medical industry conspiracy” to silence them, and some customers believe them and buy their products. However, these products are usually not proven safe for human consumption, lack reputable research, and interact with current medications, all potentially harming the customer.
Cosmetic and Skincare Product Scam
Scammers list counterfeit cosmetics, often manufactured using cheap and harmful materials, on several online retailers or sell them in street stalls in major cities. They advertise products as reputable legitimate goods, label them with benefits such as “anti-aging”, and sell them at a major discount compared to the real product. Unfortunately, counterfeit products contain cheap or dangerous ingredients like arsenic and cadmium, high levels of abrasive metals, and bacteria from urine or feces. These products cause adverse skin reactions such as eye infections, acne, and rashes. They may also cause various forms of cancer due to the highly carcinogenic materials.
Psychic/Clairvoyant Scam
Most people recognize this type of scam. Scammers claim a customer is in some sort of trouble or “see” a positive event in their future. They offer a solution or help through “winning” lottery numbers, removing a jinx, or offering protection. If the customer refuses to bite, some scammers threaten to invoke a curse or bad luck charm on them. When a customer does pay, the scammer sends them a worthless item or absolutely nothing, or warns of a future event and promises to protect them for ongoing payment. Often, clairvoyant scams lead to a customer being added to a victim list, leading to more scam approaches like lottery or inheritance scams.
Lottery/Sweepstakes Scam
In these, scammers tell victims that they can access lottery winnings or inheritance if they pay a fee. They say a customer has been “selected” as part of a sweepstakes or to use an offer. If they send the message through email or text, they often ask the customer to click a link leading them to a fake web page and pharming their information. Also, that link may be corrupted and make the customer vulnerable to a phishing attack. On the other hand, if they call, they often ask for a credit card or identity information to then use for fraudulent purchases and identity theft.
Auction Scam
Scammers advertise on auction sites like eBay, misrepresenting the product, shipping a low-quality counterfeit, or delivering nothing at all upon sale. They often relist the item with the same information to scam another customer. These scams tend to reap a high reward for scammers due to the nature of online auctions. In addition, foreign auction websites prevent domestic customers from rectifying issues if they don’t receive the product they bid for.
Affiliate Scam
Scammers pose as international companies willing to ship goods to domestic sellers for commerce. They contact individuals, offering a chance to sell high-end items at reduced prices but fail to deliver once the individual makes the sale. Consequently, the buyer at the end of the chain pays for something they never receive, and the seller (if they’re not in on it) loses their reputation and/or profits.
Ticket Scams/Scalping
Scammers advertise tickets to a show whose seats are in high demand or sold out. They sell fake, or “scalped” tickets that often do not work. Scammers may also solicit money from a customer but never deliver tickets.
The variety of sales scams seems daunting, but there are steps customers (and businesses) can take to protect themselves.
Methods to Avoid Sales Scams
Pay Attention to Warning Signs
Scammers use similar methods to commit sales scams - look out for a few signs:
- Listing the product at an unbelievably low price, or advertising amazing benefits and features.
- Insistence on immediate payment or payment through gift cards, money orders, or wiring funds. Scammers want customers to pay quickly and will make excuses as to why they should pay immediately.
- The store is new and selling items at low prices, with limited information about the seller or their policies.
- Retailers that do not provide information about privacy, dispute resolution, or ways to contact.
- Contact information that cannot be verified or is false.
- Resistance to accepting payment through more secure means like credit cards or third-party services like PayPal.
Scam-Specific Warning Signs
- Lottery, sweepstakes, or inheritance scam: insistence on paying upfront to access deals or rewards.
- Health and medical product scam: emails offering pills or treatments that are hard to get or only available through prescription. Moreover, the pharmacy is based overseas or lacks contact information, and/or the product lacks scientific evidence.
- Cosmetic and skincare scams: advertising as "secret formulas" or "breakthroughs", and without any sort of unbiased approval process.
- Classified scams: Sellers who refuse to meet in person or let the buyer physically inspect the merchandise.
- Ticket scams: charging prices much higher than face value. Also, tickets printed with imperfect English or unusual phrases, with the wrong date and time, or with seat numbers or sections that do not exist. Sellers have unverifiable or false addresses, negative reviews, and insist on money orders or gift cards as payment.
Be Proactive
Every time customers shop, they can take a variety of steps to avoid being scammed:
Verify, Verify, Verify
- Verify the identity and contact information of the seller, the product information, and the sales and return policies. Scammers often have addresses or phone numbers that don't exist or don't match their identity, and often have no refund or return policy. If purchasing a used or secondhand item, ask for proof of the original purchase when possible.
- For classifieds, avoid sellers who refuse to meet in person or allow inspection of the product before purchase. If purchasing a vehicle, look up the vehicle identification number (VIN) and the license plate. Look up the name of the last owner to verify, too.
- Avoid doing business with international sellers - these sellers are not beholden to domestic laws if an issue arises. Look up the contents of the product (if purchasing health and wellness products or skincare). Avoid products with ingredients not backed by reputable doctors or studies, or domestically banned.
- If the name of the seller looks like one that you recognize, look up the original seller and verify that they sent you a message. Scammers send emails or promotions that may differ from the legitimate seller's behavior, so keep an eye out for strange wording or behavior. A promotion that the legitimate seller doesn't advertise is most likely a scam.
Use Secure Transaction Methods
- Instead of money or gift cards, money orders, wire transfers, and other forms of payment that are not secure, pay with a credit card. Disputing charges on a credit card is much easier if a customer receives a counterfeit good or nothing at all.
Avoid Unfamiliar Sellers
- When dealing with a new seller, do not make any payments until you verify the seller's identity and reputation. Scam sellers often have little to no reviews or overwhelmingly negative reviews.
- Do not open unfamiliar texts or emails or click links from non-trusted senders. Block unfamiliar senders and do not click on unsubscribe links for clearly fraudulent senders. Clicking the unsubscribe link may be a phishing or pharming ploy.
How Do I Protect My Business?
Fraud.net offers a variety of products to assist with securing online retail sites and preventing fraud. Fraud.net's product offerings are powered by AI and machine learning, to detect and block scammers in real-time. By taking actions to secure online storefronts, fraud becomes less daunting to conquer.
Contact us for a demo or product recommendations today.
Swindling
The term 'swindler' refers to a person who takes advantage of others through deceit. Swindling occurs when a person defrauds another, causing the victim to suffer damage through unfaithfulness or abuse of confidence. Swindling can be committed by a group of people or individuals involved in defrauding actions to get financial benefits or property by exploitation or fraud. These schemes often are deployed within organizations, as a form of insider or friendly fraud.
While "swindling" potentially applies to all forms of fraud, it is mostly attributed to sales and investment scams, such as:
Ponzi Schemes
Named after Charles A. Ponzi who defrauded hundreds of people in the 1920s, this scam targets inexperienced investors by promising high rates of return. A "promoter" offers to pay an initial investor their principal plus the rate of return, and in order to pay those "returns", targets other investors. Then, more investors become interested because the opportunity seems legitimate and profitable, putting their money into the scheme.
The initial promoter never invests the principal amount, instead siphoning off funds from the investors' initial investments. They pay off "profits" using funds from other investors, and the chain continues until the promoter disappears and the scheme collapses.
Pump-and-Dump Market Manipulation
This scheme is a form of market manipulation, in that the swindler employs this to inflate or deflate prices to earn a profit. Swindlers use false reports, social media, and message boards or chat rooms to manipulate investors into investing their money and inflating share prices, or dump their stocks and make money on a short.
Market manipulation is illegal, and many investors actually lose money in the process.
Pyramid Schemes
In these, the original buyer or swindler obtains the right to enlist others in the "marketing process". This marketing process is most recognizable in beauty product pyramid schemes, in which each seller obtains a supply, and with every buyer and new investor, earns a commission. While this method, also known as "multi-level marketing", isn't technically illegal, the method of recruiting and the language of potential profits mirror those of other swindling schemes. The recruiting method also mirrors that of a Ponzi scheme, in that the most profits come from recruiting new members rather than the product or investment.
These schemes frequently target people in affinity groups (people with shared interests or beliefs), as they often find it easier to recruit investors within these groups.
Fraud.net vs. Swindling
Fraud and swindling are illegal in the US with Title 18 US Code § 1341, which states that those found guilty of fraud are punished with up to 20 years of imprisonment, or a fine of one million dollars. Despite this codification, many businesses choose to mitigate fraud rather than prosecute it. Often, it is easier to mitigate due to the volume of fraud attacks, than prosecute and seek damages.
For this reason, many businesses and institutions employ preventative measures through fraud detection and prevention services. In combination with security best practices training, institutions (and consumers) can avoid being targeted by these schemes or losing money due to dishonest investment recommendations.
Fraud.net offers a wide variety of security solutions to combat money laundering and insider fraud, among other issues. Contact us for a free demo today, and recommendations for fraud prevention.