Model Networking Site (Babe Warehouse) being used to scam aspiring models

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Are Internet Check Scam Artists staging a December Surge?

(Picture of counterfeit financial instruments recently intercepted in the mail by an International law enforcement task force)

In the past several days, I've noticed a surge in counterfeit check alerts from the FDIC (Federal Deposit Insurance Corporation). From December 19th to the 21st, the FDIC issued 26 alerts from various financial institutions throughout the United States reporting counterfeit activity using their information.

These checks are used in all the different varieties of overpayment scams. The basic MO (method of operation) in these scams is to trick someone into negotiating a bogus financial instrument and sending the money back to the person behind the scam. The victim is offered a small part of the money for doing this.

Of course, they are held liable for all of it when the item is discovered to be fraudulent.

Some of the known varieties of the overpayment scams are the lottery, auction, secret shopper, romance and work-at-home (job) scam(s). Please note you can search any of these "scam" terms at the top of this page for more information.

Spam e-mail is normally the vehicle in which these scams are presented, however they show up in more traditional print venues (including junk mail) from time to time, also.

One thing to bear in mind is that counterfeit checks (cheques) often appear to be legitimate in verification systems. The reason for this is simple, they use legitimate account numbers.

Victims have even asked employees at their financial institution of choice if the instrument was legitimate. Sadly, the items are often so good that the person is told that they are real. A financial institution employee verifying an item offers you no guarantee that the item is good. The person passing the instrument is the one who is liable for it.

Another tricky thing is that many financial institutions will also give their customers credit for these items in their accounts. This often gives the victim a false sense of security and causes them to send the money back to the scammer before realizing what is going on.

Federal rules dictate that banks can only put holds for a specified period of time depending on what type of check it is. The people behind the scams know about this and take advantage of it.

Although the money can be sent in a lot of different ways, most scammers prefer the use of Western Union, or MoneyGram wire transfer services. The reason for this is once the money is picked up (often within minutes), there is no recourse for the person who sent it.

Besides counterfeit checks, we've seen other instruments counterfeited on an industrial scale and sent to unsuspecting people, also. The known items in circulation are have included Postal Money Orders, Travelers Express (MoneyGram) Money Orders, American Express Gift Cheques and Visa Travelers Cheques.

The end result of these scams is that the person negotiating the item will be held financially liable. People are also getting arrested in certain circumstances for passing these items, also.

The National Consumers League recently set up a site (fakechecks.org), which is a great reference on Internet scams involving checks (complete with visual presentations), here.

Here is a post, I wrote with more information on how to verify one of these items:

Tools to verify those too good to be true financial instruments you got in the mail

Please note that if the deal you are being presented is too good to be true, or you are being asked to wire money it probably isn't worth going to the effort of trying to verify the item.

Also note that these scams have become so sophisticated that there is no guarantee that any amount of verification can guarantee the item is legitimate!

E Gold accused of being a money laundering vehicle for financial fraudsters and child pornographers

To anyone familiar with crime on the Internet, allegations of criminals using, or manipulating E Gold are nothing new. Like wire transfers, E-Gold gives their customers the ability to transfer the value of gold, electronically. To transfer the gold's value, all anyone needs is a e-mail address, account number and password.

Because of this, the accounts can be prone to phishing, and or crimeware (malware) attacks, using keylogging software. When this happens, the phishermen clean out the account and transfer it, elsewhere. E-Gold's terms of service stipulate that once a transfer is done, it cannot be reversed.

It should be noted that Internet criminals use wire transfer services (MoneyGram, Western Union) for the same reason -- they provide a lot of anonymity.

Apparently a task force from the Department of Justice has been looking into the money laundering angle, and is charging E Gold with several federal charges.

Here is a summary of the action against E Gold from the DOJ press release:

A federal grand jury in Washington, D.C. has indicted two companies operating a digital currency business and their owners on charges of money laundering, conspiracy, and operating an unlicensed money transmitting business, Assistant Attorney General Alice S. Fisher of the Criminal Division and U.S. Attorney for the District of Columbia Jeffrey A. Taylor announced today.

The basis of the DOJ charges are:

The indictment alleges that E Gold has been a highly favored method of payment by operators of investment scams, credit card and identity fraud, and sellers of online child pornography. The indictment alleges that the defendants conducted funds transfers on behalf of their customers, knowing that the funds involved were the proceeds of unlawful activity; namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes. The indictment further alleges that the defendants operated the E Gold operation without a license in the District of Columbia or any other state, or registering with the federal government, and thereby violated federal and state money transmitting laws. The indictment alleges that this conduct occurred at various times from 1999 through December 2005.

It appears a lot of different federal agencies worked on this investigation:

The case is being investigated by the U.S. Secret Service with the assistance of the IRS and the FBI. The case is being prosecuted by the U.S. Attorney’s Office for the District of Columbia and the Computer Crime and Intellectual Property Section of the Criminal Division. Assistance is also being provided by the Child Exploitation and Obscenity Section and the Asset Forfeiture and Money Laundering Section of the Criminal Division.

Full DOJ press release, here.

Besides allegedly being used to launder money, E Gold is often used in advance fee and auction scams, which trick people into sending their hard earned cash to fraudsters. I've written about the auction, secret shopper, romance, lottery and job variations of advance fee scams on this blog, frequently.

Like the problems with accounts being phished, or their value being drained because of crimeware, little can be done once the gold (converted to a monetary value) has been transferred.

When password details can be stolen, accounts can be taken over, also. This happens happens frequently on auction sites; when trusted accounts are compromised, then used for fraudulent purposes.

Wikipedia has an extensive article about Advance Fee (419), here.

It will be interesting to see how this plays out!

If you own a small business it pays to be aware of scams and exercise due diligence

Individuals and eBay warriors aren't the only people being targeted by advance fee and overpayment scams. Businesses, especially smaller ones, are now suffering losses with ever increasing frequency.

The Association of Certified Fraud Examiners noted in their last report to the nation that small businesses suffer "disproportionate fraud losses," when they become a fraud victim.

Part of the reason for this is large businesses employ people to deal with fraud. The other part of the reason is they can't afford the exposure (as well as) larger businesses can.

Report, here.

Rich Mintzer (Entrepreneur.com) did a pretty detailed article in January about how small business is targeted by fraudsters. He has some smart tips for business owners:

Smart Tip: Don’t ship any products to a buyer on a pre-paid basis unless you’ve done business with the company previously or can verify the legitimacy of its payment method.

Smart Tip: It’s better to be safe than sorry. Never send products or refunds to a first-time buyer until their check has cleared the bank.

Smart Tip: The bottom line is, if you haven’t seen a directory before and can’t verify that it’s actually distributed, you’d be wise to steer clear of any such offers.

Smart Tip: If it’s the vending machine business you’re interested in, do your own homework and contact companies you’ve done your research on. And be leery of local ads for new vendors that offer a toll-free number and a chance to make "big bucks."

Rich's tips (with more detail), here.

Michael Webster, an attorney practicing in Toronto, has an excellent site, which educates all of us on business scams:

Misleading Advertising Law (Due Diligence for Income Earning Opportunities).

A little awareness and (due diligence) can stop most fraud dead in it's tracks!

American Express Gift Cheques Being Circulated in Internet Scams

A couple of weeks ago, I updated an earlier post about counterfeit American Express Gift Cheques and asked my readers to help me discover exactly how these items were surfacing.

Prior to this, I knew they were showing up over a wide geographical area, but no one was "sharing" how they happened to get them.

One reader wrote in and said:

"I was almost duped into this. I responded to an ad on indeed.com. I was told that this person was an artist that needed a way of getting his money from clients in the US. This person was going to give me 10% of every artwork he sold. I bought in to this hook, line and sinker. However, when the payment came it was from Nigeria that made me suspicious. I checked online and verified these with American Express they asked me for all the information I had on the person I received these cheques from and had me write a series of numbers and letters on the back of the cheques and send them back to them. Thanks to your website I was able to prevent this from happening to me."

Several other readers wrote in and reported getting them as a result of being hired to process payments a.k.a. (also known as) a "job scam," or as an "overpayment scam" for something they were selling online. The goal in an "overpayment scam" is to have the amount "overpaid" wired to a far-away locale.

In every report, the reader had been asked to negotiate the items and wire the majority of it (minus a commission) to either Nigeria, or the United Kingdom. The return addresses (where they were being sent from) were from all over the United States and as stated above, Nigeria.

Interestingly enough, I haven't seen any warnings in the press, or from American Express about this.

The best way for someone to protect themselves is to verify them with American Express by calling their verification number at 1-800-221-7282. American Express claims that if you do this, they will either tell you the item is fraudulent, or reimburse you if they make a mistake.

If you spot any of this activity, I would report it to:

Internet Crime Complaint Center (FBI)

If it involves receiving these through the mail, you can also report it to the Postal Inspectors, here.

Besides counterfeit cashier's checks - which seem to change "affected financial institutions" daily - we have seen (mostly) counterfeit money orders (U.S. and Travelers MoneyGram) being used in Internet misdeeds in the past couple of years.

Here are some previous posts about similar, or the same activity:

Counterfeit American Express Gift Cheques

Counterfeit Cashier's Checks Fuel Internet Crime

Counterfeit Postal Money Orders Showing Up in IScams Again

Postal Money Order Romance Scam

Counterfeit Travelers Express (MoneyGram) Money Orders Showing Up ...

Counterfeit American Express Gift Cheques

Counterfeit American Express Gift Cheques might be the latest form of fraudulent financial instrument circulating via the Internet. The items seen thus far are for $500.00 - note the largest denomination issued legitimately is $100.00.

If you receive one of these items - it is recommended you verify it before negotiating it. For the information to do so - link here.

Counterfeit financial instruments being used in Internet scams are nothing new. Here are some previous posts, I've done on this sort of activity:

Counterfeit Cashier's Checks Fuel Internet Crime

Counterfeit Postal Money Orders Showing Up in IScams Again

Postal Money Order Romance Scam

Counterfeit Travelers Express (MoneyGram) Money Orders Showing Up ...

In most Internet scams involving counterfeited financial instruments - a person is duped into negotiating the item and wiring the money back to the sender (scammer). If someone asks you to cash an item and wire them money - take a deep breath - and just say "no thanks."

From Russia With Cash?

Advance fee fraud (419) scams never seem to go away. They mutate into another form and move forward. The news media and internet trace these scams to shady internet cafes in Lagos (Nigeria), but there is a lot of evidence that Nigeria isn't the only place they comes from.

The latest version is a solicitation to make a "cool" $45 million for helping a jailed Russian Billionaire invest some money. Of course, the end result for anyone who gets involved in this is having your account cleaned out.

Here is the latest twist as reported by Alex Nicholson from the Associated Press:

"Russia has more in common with Nigeria these days than just oil. Following up on the politically charged jailing of oil tycoon Mikhail Khodorkovsky, a wave of scam e-mails in the style of Nigeria's notorious spammers have been popping up in inboxes from Moscow to Kentucky."

Here is the full story: Russian Tycoon Is Spammers' New Target.

We can't even blame Nigeria for inventing the scam. The evolution of Advance Fee started with letters from (allegedly) rich merchants during the middle ages AND "a rash of Russian Letters that appeared in the 1920s, with money supposedly needed to rescue people held by the Bolsheviks."

Here is another mutation of the scam that stereotypically, we blame on Russians:

The internet is full of stories of Russian Romance Scams, where men and women are duped into sending money to someone they meet in a chatroom, or dating site. If you were to talk to the people at Romance Scam 419 Yahoo Group (US), my guess is that they would tell you that the scams not only originate from Nigeria and Russia, but several other places, also.

With the evolution of the internet, scams inducing people to send money in advance of a promise (which never materializes) are becoming epidemic. The original letter scam has led to romance, lottery, auction, check cashing and job scams. Undoubtedly, it will continue to mutate into different varieties as new events occur and different things become popular.

They are also no longer exclusively from Nigeria and Russia, but can come from anywhere. Recently, Canada and the Netherlands seems to be fertile breeding grounds AND in the future, who knows?

The internet with it's borderless environment has caused an explosion in this activity. Furthermore, with computers and internet access becoming cheaper all the time, more are more potential victims are getting on-line daily.

The reason why this scam continues to work is that it plays on human emotion and recognizing that is key to teaching people how to avoid being victims.

"If it seems to good to be true, it isn't."

For a good resource on definitions on all the various mutations of Advance Fee, Wikipedia does a pretty good job in their Internet fraud section.

Here is another well put together page on Advance fee activity from Caslon Analytics (Australia): the 419 Scam: basis, statistics, regulation.

Scammers Posing as Victims?

Lately, we have seen a surge of fraudulent financial instruments circulated through the internet. Daily, there are alerts by the FDIC on counterfeit cashier checks (FDIC: Special Alerts) and other alerts on counterfeit postal money orders, counterfeit money orders in general and counterfeit Qchex items (checks mailed to your e-mail).

These counterfeit instruments are often (as you will see maybe not always) used to commit Advance fee fraud, where the goal is to get someone to wire money (normally overseas) after cashing one of these instruments. There are many versions of these scams and victims are harvested off of job, dating, auction and lottery sites.

Thus far, it seems that law enforcement has had little success in prosecuting these advance fee crimes because the people passing the fraud checks are considered victims and since the money is wired to some faraway locale, the senders are also hard to go after.

While there are millions of victims out there, we are starting to see the criminal element take advantage of a general apathy in prosecuting these crimes by posing as victims.

Here is a story out of Montana from the AP (Man admits depositing bad check), where a man opened an account with one of these checks, drained it and never wired the money back to Nigeria. In this story, the culprit admitted, he felt it was a scam and didn't really think the bank would honor the check.

I doubt if he communicated his concerns to the bank!

The key to spotting these counter-scams is that no wire transfer takes place. Even when a wire transfer takes place, the person passing these items is sometimes getting money for something they sold in addition to (normally) a "little extra" for negotiating the item. Another key-factor indicating collusion is when the passer suffers no personal financial liability for doing so. Many of these items are passed at institutions that cash checks for a fee, which include grocery stores and even Walmart.

These institutions often bear the initial and often final costs of accepting the item when the passer tells their collection department that they no longer have any of the money. Of course, maybe they are just claiming to no longer have the money?

I've recently seen evidence (sent to me by readers) in the form of e-mail correspondence that advance fee scammers are directing people to these establishments, partially because the banks are becoming wiser and these businesses often offer wire transfer services, also.

When these people collect a substantial amount of money, plus a "tip" and then claim they can't pay it back without being able to show money being wired; serious consideration should be given towards further investigation.

This is especially true in the case of auction scams. In most cases, the advance fee scammer isn't interested in the money and only the cash, which is wired to them. In theory, the auctioneer (who never sent the merchandise and cashed the check) could very well be laughing all the way to the bank. Some of these counter-scammers could doing this over and over again and if they are confronted, they cry "victim."

After all, most of the auction sites flash a warning about this type of scam when people are posting to sell something. It make one wonder how many people could be posing as a victim out there?

This leads me to believe that although we must protect the victims, we also need to take a hard line on those attempting to take financial advantage of the situation. The bottom line is that pretending to be a victim, or even attempting to pass an item that one suspects to be fraud makes the person making the fraud claim as guilty as the person, who sent it to them.

What is needed is more through screening of fraud claims, making it mandatory to produce evidence that money was wired and in cases (where the passer suffered no personal financial liability) that everything makes sense and they never received any financial gain from it. There should also be mandatory reporting of these incidents from which data bases could be created that would identify "repetitive victims." One of the reasons this activity continues to grow is the continuing lack of reporting and investigation when it occurs. In the long run, failure to get aggressive on this matter will only inspire more of it, which makes all of us victims.