1.3 Internet Fraud

The meteoric rise in fraud perpetrated over the Internet has brought about the classification of nine types of fraud, developed from the data reported to the Internet Fraud Complaint Center (IFCC) [4]. Analysts at the IFCC determine a fraud type for each Internet fraud complaint received. IFCC analysts sort complaints into one of the following nine fraud categories:

Financial institution fraud. Knowing misrepresentation of the truth or concealment of a material fact by a person to induce a business, organization, or other entity that manages money, credit, or capital to perform a fraudulent activity. [5] Credit/debit card fraud is an example of financial institution fraud that ranks among the most commonly reported offenses to the IFCC. Identity theft also falls into this category; cases classified under this heading tend to be those where the perpetrator possesses the complainant's true name identification (in the form of a social security card, driver's license, or birth certificate), but there has not been a credit or debit card fraud committed.
Gaming fraud. Risking something of value, especially money, for a chance to win a prize when there is a misrepresentation of the odds or events. [6] Sports tampering and claiming false bets are two examples of gaming fraud.
Communications fraud. A fraudulent act or process in which information is exchanged using different forms of media. Thefts of wireless, satellite, or landline services are examples of communications fraud.
Utility fraud. When an individual or company misrepresents or knowingly intends to harm by defrauding a government- regulated entity that performs an essential public service, such as the supply of water or electrical services. [7]
Insurance fraud. A misrepresentation by the provider or the insured in the indemnity against loss. Insurance fraud includes "padding" or inflating actual claims, misrepresenting facts on an insurance application, submitting claims for injuries or damage that never occurred, and staging accidents. [8]
Government fraud. A knowing misrepresentation of the truth, or concealment of a material fact, to induce the government to act to its own detriment. [9] Examples of government fraud include tax evasion, welfare fraud, and counterfeiting currency.
Investment fraud. Deceptive practices involving the use of capital to create more money, either through income-producing vehicles or through more risk-oriented ventures designed to result in capital gains. [10] Ponzi/Pyramid schemes and market manipulation are two types of investment fraud.
Business fraud. When a corporation or business knowingly mis-represents the truth or conceals a material fact. [11] Examples of business fraud include bankruptcy fraud and copyright infringement.
Confidence fraud. The reliance on another's discretion and/or a breach in a relationship of trust resulting in financial loss. A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment. [12] Auction fraud and nondelivery of payment or merchandise are both types of confidence fraud and are the most reported offenses to the IFCC. The Nigerian Letter Scam is another offense classified under confidence fraud.

The Nigerian Letter Scam [13] has been around since the early 1980s. The scam is effected when a correspondence outlining an opportunity to receive nonexistent government funds from alleged dignitaries is sent to a "victim," but there is a catch. The scam letter is designed to collect advance fees from the victim. This most often requires payoff money to be sent from the victim to the "dignitary" in order to bribe government officials. Although other countries may be mentioned, the correspondence typically indicates "The Government of Nigeria" as the nation of origin. This scam is also referred to as "419 Fraud" after the relevant section of the Criminal Code of Nigeria, as well as "Advance Fee Fraud." Because of this scam, the country of Nigeria ranks second for total complaints reported at the IFCC on businesses by country. The IFCC has a policy of forwarding all Nigerian Letter Scam complaints to the U.S. Secret Service. The scam works as follows :

A letter, e-mail, or fax is sent from an alleged official representing a foreign government or agency.
The letter presents a business proposal to transfer millions of dollars in overinvoiced contract funds into your personal bank account. You are offered a certain percentage of the funds for your help.
The letter encourages you to travel overseas to complete the details.
The letter also asks you to provide blank company letterhead forms, banking account information, and telephone numbers .
Next, you receive various documents with official-looking stamps, seals, and logos testifying to the authenticity of the proposal.
Finally, they ask for upfront or advance fees for various taxes, processing fees, license fees, registration fees, attorney fees, and so on.