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A Comprehensive Look at Fraud Identification and Prevention by James R. Youngblood

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223
Chapter 11
Internet Fraud
11.1 Introduction
e cyberworld has evolved into various avenues that can be used to connect people,
purchase merchandise, communicate, advertise a business, participate in worldwide
auctions, and more. No longer do people send detailed letters through the US Postal
Service or have to get in their car to make a purchase from a store. Traditionally,
people wishing to sell unwanted items had to advertise and take a weekend morn-
ing to have a yard or garage sale. anks to the cyberworld, unwanted personal
items can be sold online through a variety of Internet auction websites. In addition
to making purchases through online auction websites, consumers can purchase
almost any item via the Internet, including clothes, books, household staples, elec-
tronics, rare coins, vintage cars, and so on.
11.2 Internet Auction Fraud
Individuals have the ability to purchase items through Internet websites on a daily
basis. Consumers have a choice to make a purchase through the website of a retailer
or locate and bid on an item via an Internet auction website. As mentioned, people
make Internet purchases on a daily basis, and a majority of the transactions are
legitimate. e consumers are shipped the merchandise promised, and the retailer
or auction site receives the proper payment.
With almost every legitimate business operation, there are those who see an
opportunity to make some sort of financial gain through fraud or deception. As the
popularity of the Internet increases in the world of consumer transactions, so do the
avenues for fraud. People conducting commerce through the Internet rely on the
growing simplicity, whereas the criminal element relies on individual complacency.
224A Comprehensive Look at Fraud Identification and Prevention
e more transactions the average person conducts through the Internet, the greater
their internal level of trust for the entire online shopping process.
Consumers conducting online purchases through well- known Internet shop-
ping websites can easily gain a level of confidence in the system. When the online
shopper strays from the trusted and well- established online shopping venues, they
can become a victim of potential fraudulent activity. One of the main reasons for
deviating their online shopping attention away from the traditional retailers is the
cost factor. When making a purchase online through a traditional retailer, the con-
sumer is offered to make a purchase of an item at a set price. In an effort to purchase
the same item at a lower price, consumers look toward Internet auction websites.
11.2.1 Internet Auction Websites
Internet auction websites create an opportunity for a person (seller) to list an
item they wish to sell.
e seller creates a personal account with the Internet auction website.
Sellers can list items they wish to sell on the Internet auction website.
Sellers provide a picture of the item for sale, along with a description.
Once the item for sale is listed, a starting bid price is generated along with a
time frame during which bids can be placed.
Buyers place bids on items they wish to purchase. e buyer can make mul-
tiple bids on an item as the price increases through the bidding process.
Once the bidding window closes, the person who made the highest price bid
is awarded the opportunity to complete the transaction.
Based on the policies of the Internet auction website, the payment transaction
can be made directly to the seller or through the website. Fees for processing
and listing an item vary based on the Internet auction website.
In the cyberworld, a buyer can choose between numerous Internet auction web-
sites. Sellers also have a choice when it comes to selecting a venue to place their item
up for bid. Based on the overall integrity of the Internet auction website, the buyer
has to be aware of the potential for fraud.
Internet auction frauds are developed to cause the buyer a financial hardship
through nondelivery, product deception, and bid rigging. e various methods of
Internet auction fraud are discussed next.
11.2.2 Nondelivery of Product
When wanting to purchase an item online through an Internet auction website, the
buyer has an option of many sites. Fortunately for the consumer, there are reputable
and well- known auction websites. Unfortunately, there are consumers who look
for the ultimate bargain and will work with sellers offering the best deal on any
Internet auction website.

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