Deposed Nigerian Prince Now Buying Your Goods Online

NEW YORK ( BankingMyWay) -- You're a small business retailer of women's apparel selling your clever design online. Let's say it's a small, weighted decorative magnet -- maybe in the shape of a poodle or flower -- that can be affixed to a summer skirt so when the wind blows or the subway grate bellows, your skirt doesn't go "Marilyn Monroe" on you.

A payment by check for an order comes in, (but whoops!), the buyer paid way too much for that item. You check to make sure they didn't mean to order 100 of them. Nope, just one. And so when the buyer asks politely that you deposit the check and then send back to them the overpayment, the ethical person in you does just that. The only problem is, the buyer you were dealing with is about as far from ethical as a person can be. In fact, you, the small business owner and online retailer, have just become the latest victim of a pervasive (and lucrative) online sales fraud scheme.

How pervasive? The crime described in the above example, known as overpayment fraud, is listed among the top five crimes in the 2011 Internet Crime Report, from the U.S. Department of Justice, the F.B.I, and the National White Collar Crime Center.

Bank fraud is an onerous and draining problem for everyone involved in an increasingly virtual world -- including consumers, vendors, banks and law enforcement officials.

Javelin Research, which annually issues a comprehensive report on U.S. consumer fraud, says in its most recent review that I.D. fraud increased by 13% in 2011, although banks and financial institutions are doing a much better job protecting their customers against fraudsters.

The Javelin study says that "consumer out-of-pocket costs have decreased by 44 percent since 2004, likely due to the improved prevention and detection tools that have come available as well as fraud alerts leading to reduced detection time."

The give and take between fraud and fraud prevention forces the fraudsters to remain a crafty lot, and seemingly every time banks catch on to what criminals are doing, they come up with a new and more pathologically clever way to separate bank customers from their money.

In a report on overpayment fraud out from Western Union ( WU), it says that con artists are increasingly fleecing people via online sales transactions, using overpayments as the bait.

Here's how the scam works (against everybody including that poor, unsuspecting women's apparel retailer selling her weighted skirt magnet), directly from the Western Union report:
  • 1. Fraudsters play the role of buyer and target consumers selling a service or product, generally online.
  • 2. The "buyer" sends the seller a legitimate-looking check for an amount higher than the agreed-upon price.
  • 3. They concoct an explanation for this overpayment ("Oops, my mistake." or "Some of the overpayment is a commission for you.") Then they ask the seller to deposit the check and wire back the excess money.
  • 4. Weeks later, the victim learns the check is a fake but is still on the hook to pay the bank back for any money withdrawn.
  • Most interesting about the latest and greatest in online fraud is that it turns existing conventional wisdom about predatory online behavior on its head by making the seller, as opposed to the buyer, the target of the scheme.

    "It's a common misconception that only people who buy online are at risk for fraud, but sellers are at risk too," Shelley Bernhardt, director of consumer protection at Western Union, said in the report. "They're susceptible to clever con artists who use counterfeit checks to get them to send real money."

    To help online vendors avoid being victimized by the online sales scam, Western Union offers some tips:
  • Don't close the sale unless you know who you're dealing with. Make sure you get all the contact information from the buyer, including name, address, phone number, e-mail address, and web site, if applicable. If you can't verify any of those contact sources independently, don't go through with the sale.
  • Reject an overpayment. If the buyer pays by check or money order, and the figure is more than the agreed price, don't deposit the payment. The overpayment is the hook: Once you deposit the check and make up the difference, you've left yourself wide open for fraud.
  • Ask if the buyer uses PayPal or another online payment service. PayPal won't process a payment until it knows the payment is legitimate. When possible, insist on PayPal for your online deals -- it is a great firewall against the online sales scam.
  • Never wire money to a buyer. If there is an overpayment issue, don't wire money to make up the difference. Scammers love bank wire payments because they can pick up the money as cash, making it almost impossible to trace for law enforcement officials.
  • Wait for the check to clear. Another good idea -- wait for the check to clear before you deal with the aftermath of any overpayment issue. A few days of patience can avoid a few weeks of pain, especially if that check is bogus.
  • Some simple common sense goes a long way in fighting online sales scams aimed at your bank account.

    Just be vigilant, be patient upon receiving a check, and avoid bank money wires, and you should be able to easily avoid becoming an easy mark for the latest schemes dreamed up by nefarious online fraudsters. As for that deposed Nigerian prince, he really does need the money. In fact, maybe you should overpay him.

    More on fraud:

    Beware bank transfer scams

    ATM pins tied to financial fraud

    Mortgage fraud declining

    By Brian O'Connell

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