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What You Need To Know About Online Scamming and the Law

Anyone who has spent time on the internet knows that things online aren't always as they seem. The general anonymity of the internet has provided fertile ground for new types of crime. Cybercrime often involves identity theft, scams, and other forms of fraud. Citizens reported losses of $5.8 billion to fraud in 2021, the Federal Trade Commission reported. Many of these losses occurred through internet scams.

Read on to learn more about common types of internet fraud schemes and the steps to take if you've been the victim of such fraud.

Common Types of Internet Fraud Schemes

Online fraud scams can take many forms. Unfortunately, they are a common form of white-collar crime today. Here are just a few of the most common types of online fraud:

Phishing

In a phishing scheme, the scammer attempts to obtain private information from a victim by posing as a reputable entity in an email or other electronic communication. For example, the scammer may send you an email posing as a representative of a bank or other financial institution.

They claim that your account requires verification. The email would then direct you to a fake banking site where you would be asked to provide sensitive information like your account number, username, password, and more. With this information, the scammer would then have access to your account.

Work at Home

You've probably seen ads online for jobs that seem too good to be true. Unfortunately, most of them are. Although many companies are open to remote work or hybrid employment (where you can work from home certain days per week or month), pay attention to details in job descriptions.

Many work-at-home schemes require you to purchase expensive materials or pay upfront fees without providing you with the means to earn a living. They may be pyramid schemes or Ponzi schemes, requiring you to recruit others in exchange for a cut of the fees.

Health Care Fraud Schemes

If you or someone you know receives or qualifies for Medicare, it's not unusual to get phone calls or emails offering programs to cover gaps in your health insurance coverage. Not all of these solicitations are legitimate. Always take great care not to divulge personal information such as your date of birth, Social Security number, or driver's license number to strangers trying to sell you some service.

The Department of Health and Human Services (HHS) warned citizens about scams involving COVID-19 tests and services from early in the pandemic. The Department of Justice (DOJ) has investigated and filed charges in several health care fraud scams involving billions of dollars.

Fake Apartment Rentals

Like work-at-home opportunities, rental ads are sometimes too good to be true. In a rental scam, the perpetrator places an ad on Craigslist or another classified site advertising a rental unit for a good price. The photos and other information are often stolen from legitimate listings.

When potential renters show interest, the scammer claims to be out of town and asks them to wire the first month's rent or other fees to an out-of-state location. Once the offender receives the money, they disappear. The would-be renter finds out there is no apartment or valid lease.

Phantom Hacker and Malware Attacks

phantom hacker scam involves offenders who pose as technology, financial, and government officials to coax victims into providing their bank account information. This crime often targets the elderly and preys on their concerns about losing their savings.

In the first part of the scheme, someone posing as a technology security agent contacts the victim via email, text message, pop-up message, or phone call. They tell the victim that their financial account may have been compromised. They encourage the victim to download software and open their accounts so they can check their account remotely. This permits the hacker to decide which account they will target.

In the second part of the scheme, an imposter claiming to be a bank representative contacts them. They tell the victim that a foreign hacker has accessed the target account. They instruct them to move their funds to a "safe" third-party account run by the "government." The instructions include making a wire transfer or cash withdrawal of their funds from their legitimate account and sending them to an account controlled by the scammers.

In the last part of the ruse, an offender posing as a government representative (say the Federal Reserve) also encourages them to move their funds as directed. In the end, the victim often delivers their life savings to the hackers.

Law enforcement reminds citizens to never provide access to their computer to an unknown person. When you download software from the internet, you may place malware on your computer that only helps the scammer.

When an unusual request like this comes to you, get the person's name, phone number, and information about the company. Do not give out your information. Take time to investigate and decide whether there is any reason to call back. You can contact your bank directly (at a number you confirm or in person) to see if someone on their staff contacted you over a legitimate concern.

'Catfish' Scams

A "catfish" is someone who creates a fake social media account to pursue an online romance. Sometimes, catfish convince their victims to send money or gifts or pay for travel or other expenses.

Unexpected Prizes

The internet is littered with pop-up ads telling you you've won an iPod or qualified for a free vacation. Are they telling the truth? Probably not. These "contests" often require you to pay certain fees or shipping costs to receive your "prize." Of course, there is usually no prize, and the perpetrators pocket the fees.

Credit Card Scams

One of the most popular scams involves conning people to give up their credit card information to commit credit card fraud. A scammer may use an email, text message, or phone call.

It appears legitimate, say from Amazon, Ebay, or Walmart. They indicate that you were overcharged, and they need your credit card number to correct the record. They ask questions geared toward getting your personal information. Once they have access to your card, they are off on a spending spree. You are left negotiating with your credit card company to set things right.

Credit card scams may also come into use right after a natural disaster covered by the news media. These emails and text messages play on people's sympathy for those who suffered devastating losses. Again, once the scammer has your information, they charge hundreds or thousands of dollars on your card for themselves and not the charity they mentioned.

If You've Been the Victim of an Internet Fraud Scheme

If you think you've been the victim of an internet scam, you might first ask for a refund. If that fails, you can file a complaint with the Federal Trade Commission (FTC) or your local consumer protection office.

The FTC investigators bring fraud charges in cases involving a wide range of online fraud, including identity theft, fake sweepstakes, credit scams, and more. You can also file fraud complaints with the Federal Bureau of Investigation (FBI) and local law enforcement. The FBI sponsors an Internet Crime Complaint Center to help citizens file reports. The center also provides information and alerts for scams circulating throughout the U.S.

Federal and State Crimes for Online Fraud

The perpetrators of online scams may face traditional theft or fraud charges under state or federal law. When federal agencies such as the FBI take the lead, you may also see offenders charged with federal wire fraud and mail fraud crimes.

Wire fraud is similar to regular fraud, except that it involves interstate electronic communications, including email, instant messages, or other online activity. If the perpetrators of an online scam are convicted, they may be ordered to pay restitution to their victims. Restitution is a payment that's intended to financially restore victims of a crime to the point they were at before the commission of the crime.

The federal crime of wire fraud is found at 18 U.S.C. Section 1343. It provides the following elements of the crime:

  • Devise a scheme to defraud another from money or property by false pretenses or misrepresentation
  • Participate knowingly and intentionally in the scheme
  • Transmit by wire, radio, or television communication in interstate or foreign commerce
  • Any writings, signs, signals, pictures, or sounds to execute the scheme

The penalty for wire fraud can include fines, restitution, and up to 20 years in federal prison.

Another federal offense available to prosecutors is computer fraud. This crime is located at 18 U.S.C. Section 1030. Under this statute, the federal government may proceed against various computer crimes.

This includes hacking, damaging, or using a computer for purposes of extortion. It includes provisions specific to trespass or misconduct involving government computers. This could be for purposes of ransom or espionage. Penalties vary from fines to a prison sentence of 1 to 10 years, depending on the section of the statute at issue.

Federal and state legislators have taken additional steps to help prevent online scams. In 2003, Congress passed the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act to combat "spam" email.

The law required businesses that email advertising to consumers to adopt the well-known "opt-out" or unsubscribe provisions we see. But it did not permit individuals to bring civil suits against companies. State attorneys general and the FTC have the authority to file suits and seek injunctions as appropriate. The pursuit of criminal prosecutions falls to the discretion of federal prosecutors.

There are state laws that also prohibit crimes associated with online scams. In California, for example, the state created offenses against phishing and the placement of computer spyware. In its anti-phishing law, California states that it is unlawful for any person:

  • By means of a webpage, electronic mail message, or otherwise through the use of the internet
  • To solicit, request, or take any action
  • To induce another to provide identifying information
  • By representing itself to be a business without the authority or approval of the business

Remedies include civil actions against the person or business by affected individuals, business owners, the state attorney general, or the district attorney. Financial penalties and damages can be significant.

Get Legal Help With Your Internet Fraud Case

Internet fraud schemes can be subject to federal and state laws depending on the circumstances. If you've been charged with running an internet scam or any other crime, it's in your best interests to consult with a local criminal defense attorney who can help craft the best defense based on the specific facts of your case. On the other hand, if you're the victim of such a scheme, use the links provided above to file complaints with either the FTC or the FBI.

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