Escrow Fraud: Alive and Well and Living Online
The following email exchange is between an eBay buyer and seller. Unknown to the seller, the buyer has no intention of paying for the item, a diamond gemstone. The buyer is perpetrating what's known as escrow fraud. The "buyer" has sent the seller a link to a site that is purportedly an escrow site that will act as a trusted third-party.
The names, items, dates and some of the verbiage were changed to protect the identity of the victim.
Buyer - March 1, 2005
I want to know about final price , i will setup a transaction .
Seller - March 1, 2005
I signed up at XXX-ESCROW-XXX, my user name is XXXXXXXX - the same as my Ebay id. The escrow fee will be 106.125, and shipping via FedEx is $80.00 arriving in 48-72 hours. If this is acceptable to you please let me know. Just out of curiousity, I thought Belgium was one of the diamond centers of the world - why are you buying in the US?
I have insurance on the stone, but I'm not sure if it would be covered if I shipped it abroad. You may want to get insurance of your own, just in case. I've never used escrow or shipped abroad before, so could you please explain the escrow process to me?
Buyer - March 1, 2005
Just a short note to let you know I have started a new transaction at WWW.XXX-ESCROW-XXX. Please take your time to review it and if you agree please e-mail me back and I will send payment shortly.
The extra $100 is for Fedex Express (or UPS Express) shipping.
Seller - March 1, 2005
Good morning XXXXX,
This looks fine to me. If you send payment, I will ship it out tomorrow and you should have it by this weekend.
Buyer - March 1, 2005
This is to inform you that I have transferred the amount of $7206.5 to the www.XXX-ESCROW-XXX.com company. It should get there within 24 hours. However XXX-ESCROW-XXX will notify you via phone or e-mail as soon as the payment is confirmed by their bank.
For your records here is my shipping address:
Name: XXXXX XXXXXXX
Address: XXX XXXX
ZIP Code: 4100
Also there is a very important matter I want to discuss with you. Due to very high customs rates I would have to pay 50% customs fees for values exceeding $500. I need you to ship my package with no invoice attached (or any documents at all) and send the invoice separatelly by regular mail. However if you are required please write down a value of $200 on the customs forms and please list it as a gift. Please get back to me with the tracking number after you ship the package.
Seller - March 1, 2005
I will agree to do this on one condition - you will be fully responsible for the full appraised value of the stone ($14,950.00 USD) if anything should happen to it. With this request, I cannot not declare a value via FedEx, and my personal liability insurance will NOT cover it after it leaves the US. I will mail the invoice, along with a copy of my personal appraisal and a copy of the GIA certificate sperately today. I will hold on to the original GIA certificate until after you have approved the stone and the final monetary transfer has been made. Please reply to me and copy this original message and state that you agree with these terms. If you do not agree, I will cancel this transaction.
I wish you had mentioned this before we processed the transaction
Buyer - March 1, 2005:
Haven`t heard back from you.
Can you please give me an update on shipping?
Seller - March 2, 2005:
Hi XXXX -
I will be shipping the stone this afternoon via FedEx. I will email you with the tracking number this evening (around 7:00pm CST - US).
Buyer - March 2, 2005:
Thank you for update
Seller - March 4, 2005:
Hi XXXX -
I just checked and the package has reached Belgium, I would expect that you'll receive it sometime today or tomorrow! Let me know what you think!
Buyer - March 4, 2005:
I will let you know
God bless you
Seller - March 7, 2005:
I was contacted by Ebay about selling this item outside of Ebay - I did not know that this was against Ebay policy and I would like this item returned to me IMMEDIATELY! I will pay for the delivery charges to have it returned to me. I cannot access the XXX-ESCROW-XXX website and my emails to them have been returned as undeliverable. Contact me IMMEDIATELY to arrange to return the diamond to me. My phone number is XXX-XXX-XXXX If I do not hear from you in 24 hours I will be contacting the Federal Bureau of Investigation here in the US and the liasion office in Brussels.
Seller - March 8, 2005:
Dear Mr. XXXXX,
I am now advising you that I have contacted the XXXXXXX Division of the Federal Bureau of Investigation and opened a case regarding this matter. It is now my belief that you deliberately planned this from the very first time you contacted me, and I want you to know that I WILL NOT just let this matter go. I will pursue every possible law enforcement avenue and recourse. You are a liar and a thief. In addition, I have reported you to the Ebay Fraud Investigation Department.
Some reading this will have little sympathy for the seller, believing that a scam this obvious should have been detected from the outset.
It's human nature to convince ourselves that something we want so badly is legitimate. A car, computer, a Rolex watch - in this case, the promise of a $7000 payday for a piece of diamond jewelry - can entice ordinarily rational people to throw logic out the window. This is exactly the behavior that scammers are counting on from potential victims.
As is typical in online fraud, the perpetrator in the above example convinced the victim to go outside of eBay. And while buyers are often the victims in online fraud, sellers can also be targeted, as in this case.
In October 2002, when AuctionBytes first wrote about online escrow fraud, eBay acknowledged that they were aware of fraudulent escrow sites, but because eBay did not consider it a significant problem, there were no warnings on the site (http://www.auctionbytes.com/cab/abn/y02/m10/i25/s01).
Fast forward to 2005 and Escrow.com managing director Brandon Abbey says that he is reporting between 10-15 fraudulent escrow sites each week to their hosting ISPs. "I personally think the hosting companies should be held more accountable for the content on their sites," says Abbey, who also reports the offending sites to the FBI.
Customer Service manager Andee Hill has been with Escrow.com since its start in 1999. In that time, she's seen a dramatic increase in scam escrow sites. "It's profitable, that's why it's getting more prevalent," said Hill. Because escrow is usually used on higher ticker items, escrow fraud can result in a significant financial loss for the victim.
Escrow.com tries to help educate users by including a Fraud Information Center on its website and updating it regularly with the latest scams. "We feel that it's our job to provide a service to people, and part of that service is sharing information with them," explained Brandon Abbey.
Other sites bury their fraud warning on back pages, perhaps feeling that making warnings too visible will put off potential customers. "You've got a lot of people who don't want to talk about it," says Escrow.com's Hill. "Companies and agencies that don't want to address that this is a problem."
At one time, fraudulent escrow sites were easier to recognize. Unprofessional-looking pages, with many misspellings, was an indicator of an escrow site's questionable legitimacy. While that may still be the case in some instances, scammers are much more sophisticated with their presentation these days. But just because a site may look slick does not mean that it's authentic. A fraudulent escrow service may even be sporting Verisign Secure, BBB, or TRUSTe seals on their site.
So how can a person tell if an online escrow service is legitimate?
"Call the company and make sure you're able to speak to somebody at the number posted on their web site," advises Hill. "If you don't feel completely comfortable, hang up and call back and ask to speak to someone else. If you can't contact the company that's requesting you send them $40,000, there's something wrong."
Checking out a site's domain registration can also give you some important information. Doing a WHOIS search, using tools such as http://www.whois.sc or Network Solutions' lookup tool (http://www.networksolutions.com/en_US/whois/index.jhtml. There are dozens of these tools available on the Internet.
A WHOIS lookup will, among other things, show when the domain name was registered. If it's a recent registration (remember, scammers move quickly) and the site is only a few days or a few weeks old, you can safely assume that the site is not legitimate.
You may also see that the registrant is an individual, located in a different state from where the escrow site purports to be. Since fraudulent escrow sites are typically registered using stolen credit cards, the credit card holder is often listed as the owner of the domain.
If the registration information is hidden, using services such as Domains by Proxy, that's another red flag that the site is not legitimate.
There is only one domestic and four international escrow services, listed below, that are approved by eBay. According to eBay, if your trading partner insists that you use a specific escrow service not approved by eBay, you should decline the transaction and report the user to eBay.
www.eBay.it and www.eBay.es users:
iloxx Safe Trade
www,ebay.fr, www.ebay.nl and www.ebay.be users:
Triple Deal Related Help topics
The bottom line is to approach an escrow site with some healthy cynicism. Common sense dictates that you don't send large amounts of money via the Internet without some assurance that your money will arrive safely and you will receive the merchandise that you paid for.
Some have tagged P.T. Barnum with saying, "There's a sucker born every minute." Scammers are counting on them logging online.
Don't be talked into engaging in an off-marketplace transaction. eBay offers no protection for off-eBay transactions.
Never, ever wire-transfer money for an auction transaction (Escrow.com clearly states on its website that it does NOT accept payment through Western Union or Money Gram)
Beware of websites that claim to be escrow sites. Call and verify, do your homework! Don't rely on your trading partner to recommend an escrow site.
Look for sites that capitalize on brands of trusted sites. Escrow.com and SquareTrade are legitimate services; fraudsters can use fake sites to make you think you are on those legitimate sites. Make sure the site you are on really is the trusted organization you think it is!
If it looks to good to be true, it usually is.
AuctionBytes Fraud Resources Center
eBay's "Using Escrow" page
California Department of Corporations 10 Tips to Avoid Online Escrow Fraud
Fenton Smith's Database of Fraudulent Escrow Sites
About the author:
David Steiner is President of Steiner Associates LLC, publisher of EcommerceBytes.com and the EveryPlaceISell.com merchant directory. David, a former television producer, handles business development and advertising for EcommerceBytes. You can reach him at firstname.lastname@example.org
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