A Case For Online Escrow

The 2008 IC3 report on cyber crime is just out, and the news is not good: cyber crime is up again. This, of course, is hardly surprising seeing as the cyber criminal is getting smarter, and more numerous, by the day; while law enforcement continues to play catch-up.

What is a little surprising, however, is that Internet Auction Fraud-which was the most reported online crime for the last two years-no longer heads the pack, though at 25.5% of all reports, it runs a close second; instead, the most reported online crime for 2008 is Non-Delivery of Merchandise and/or Payment, which comprises 32.9% of all reported instances of internet fraud.

The IC3

The Internet Crime Complaint Center (IC3) began operating on May 8, of 2000, as the Internet Fraud Complaint Center-a partnership between the National White Collar Crime Center (NW3C) and the Federal Bureau of Investigation (FBI)-to serve as a vehicle to receive, process, and refer cyber crime complaints.

IC3 was intended for and continues to serve the broader law enforcement community, including federal, state, and local agencies, and since its inception, IC3 has received complaints running the full gamut of cyber crimes, including online fraud (in its many forms), intellectual property rights matters, computer intrusions (hacking), economic espionage (theft of trade secrets), child pornography, international money laundering, identity theft, and a growing list of additional cyber crimes.

The 2008 Internet Crime Report is its eighth edition.

The Numbers

From January 1, 2008 - December 31, 2008, IC3 received 275,284 online complaints. This is a (33.1%) increase over 2007, which saw 206,884 online complaints.

Of all complaints received, IC3 referred 72,940 of them to federal, state, and local law enforcement agencies around the country for further consideration. The vast majority of these cases was of a fraudulent nature and involved a financial loss on the part of the complainant.

The total reported dollar loss from all referred cases of fraud was $264.6 million with a median dollar loss of $931.00 per complaint. This is up from $239.1 million in total reported losses in 2007. Other significant findings related to an analysis of referrals include:


Non-delivered merchandise and/or payment was, by far, the most reported offense, comprising 32.9% of referred complaints-this is a 32.1% increase from the 2007 levels of non-delivery of merchandise and/or payment reported to IC3.

Internet Auction Fraud and Other Scams

Internet auction fraud accounted for 25.5% of referred complaints. Credit/debit card fraud made up 9.0% of referred complaints. Confidence fraud, computer fraud, check fraud, and Nigerian letter fraud round out the top seven categories of complaints referred to law enforcement during the year.

Access Method

E-mail (74.0%) and WebPages (28.9%) were the two primary channels over which the fraudulent contact took place.

A Closer Look at Non-Delivery

Doing the non-delivery math paints an unpleasant picture:

Since Non-Delivery constitutes 32.9% of the 275,284 reported cyber crimes in 2008, this means we saw 90,568 reported non-delivery cases. Now, since according to the National White Collar Crime Center's August 2005 report, The National Public Survey on White Collar Crime, only one cyber crime in seven is actually reported to police or a regulatory agency, we will have to multiply this number by seven to get an accurate count of perpetrated non-delivery crimes for 2008, which ends us up with 633,976.

This in turn means that 1,736 such crimes occur every day, or 72 ever hour, 24/7.

Or, to put it in another light, here in the United States, every minute of ever day (24/7), a product is fraudulently sold (and gullibly purchased and paid for) online.

Not a laughing matter.


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