In the 21st century, online fraud is so prevalent that it has become an everyday occurrence. Our spam folders are filled with emails from fake delivery services and Nigerian princes, and pop-ups claiming we've won a prize or unlocked a free trial lurk on our favorite websites.
In 2023, there were 880,000 incidents of cybercrime and online fraud in the U.S. It's not surprising that these days we're more likely to fall victim to fraud online than 'in the real world.' But, as well as making scams more prevalent, the Internet has transformed the face of fraud in several more malicious ways.
In this article, we'll explore how the World Wide Web made it easier for fraudsters to find and target victims, why these scams are becoming increasingly sophisticated, and how you can use the Internet safely in the face of such widespread cybercrime.
What's Changed?
First, let's take a broad view of the ways in which fraud has changed in the digital age. The effects of the Internet on how these crimes are carried out can be split into two main categories:
- Frauds that existed before the Internet, which have adapted and expanded online.
Traditional forms of fraud existed long before the digital era. In fact, even ancient Greek insurance firms fell victim to fraud. However, the Internet has allowed these scams to evolve, increasing their scale, sophistication, and reach. Below are a few examples.
Identity Theft: Once limited to physical documents like checks or Social Security numbers, modern fraudsters can obtain vast amounts of personal data through hacking, phishing, data breaches, or simply reading through your social media posts. Stolen information is then traded anonymously on the dark web or used to commit further fraud such as imposter scams. Disconcertingly, U.S. citizens are at a higher risk of identity fraud, with nearly three times more identity theft scenarios compared to other countries.
Financial Scams: Ponzi schemes and investment fraud have existed for decades, but have found a new lease of life online. By setting up fake investment websites, sending mass email campaigns, and creating fake profiles on social media, scammers can defraud unsuspecting individuals worldwide much more easily. In fact, investment scams are the most common type of fraud, with $4.6 billion of reported losses in 2023.
Counterfeit Goods: Previously sold in local markets or through mail-order services, counterfeit products have proliferated in the digital world. Fake online shopping sites are filled with these items, sold by scammers who, once they've deceived enough victims, shut down the store and disappear. The anonymity and scale of online transactions make it difficult to track down fraudsters, allowing counterfeiters to operate unhindered. A study by the World Intellectual Property Organization found that, in Canada, two in three shoppers had purchased counterfeit products, making it even easier for these fraudsters to appear legitimate.
The Internet has breathed new life into traditional forms of fraud and amplified their impact. What once required physical effort and 'local' targets can now be executed globally, with little risk of repercussion.
- New frauds that have emerged because of the Internet.
This category, though smaller, contains some of the most damaging types of fraud in terms of monetary loss. These frauds leverage the Internet's unique qualities, such as anonymity, instant communication, and decentralized networks, to create scams that couldn't have existed in the pre-digital age.
Phishing: Carried out through deceptive emails, text messages, or fake websites, mailing lists and forms, phishing attacks trick individuals into revealing sensitive information. While some phishing attempts, like asking potential victims to input financial details to win a prize, are easy to catch, others are much more sophisticated. For example, Facebook and Google were scammed out of $100 million in a phishing scam that used fake invoices.
Ransomware Attacks: Inconceivable before the invention of computers, ransomware fraud involves hackers encrypting a victim's files and demanding payment, often in untraceable cryptocurrencies, in exchange for restoring access. Not even governments are immune to ransomware attacks, and they often have far-reaching consequences that can take years to correct.
Social Media Scams: Like phishing, social media scams are an umbrella under which many different types of fraud exist. Using platforms like Facebook, Instagram, and X, fraudsters can spread fake advertisements, impersonate celebrities or your loved ones, and promote fraudulent investment opportunities. Nearly two-thirds of the planet's population uses some form of social media, meaning these frauds often proliferate before platforms can take action against them.
If established businesses and international governments are susceptible to fraud, the situation looks bleak for individuals who use the Internet every day. Thankfully, even though fraud is evolving, so are the ways we combat it. Cybersecurity has become a major concern for organizations, and you can use the same preventative techniques they do. We'll take a closer look at how to stay safe from online scammers later in the article.
What's Stayed the Same?
Despite the Internet's effect on how fraudsters carry out their crimes, many of the most fundamental fraud techniques are still in use. These include:
Baiting - Gaining victims' trust by promising something desirable, such as free items or exclusive content. Often takes the form of malicious downloads disguised as free software or attractive advertisements on social media. Victims may inadvertently provide sensitive information, or get a 'switch' and receive malware or a worthless item instead.
Impersonation - Fraudsters pretend to be trustworthy people, such as bank representatives, government officials, or friends and family members, to gain sensitive information and prompt specific actions.
Social Engineering - A manipulation tactic that exploits human psychology rather than relying on technical methods like hacking. For example, a victim receives a phone call from what they believe to be a loved one in distress and asking for money. Panic and fear compel them to transfer funds to a scammer without thinking twice.
Fake Documents - The creation and use of counterfeit documents to support ongoing scams. With the help of software like Photoshop and A.I., these documents are often indiscernible from their genuine counterparts.
If you spot any of these warning signs, cease all contact with the potential fraudster immediately. To prevent others from falling victim to the same scams, be sure to report the fraud to the FTC.
The Future Face of Online Fraud
The Internet's impact on fraud didn't stop once scammers found ways to exploit it. The transformation of the face of fraud is an ongoing process, with every new digital leap forward a potential weapon in scammers' arsenals.
In July 2024, VICE magazine spoke to online scammers to discover the new ways they're conning internet users. Many of these utilize generative A.I. platforms that have skyrocketed in popularity since 2020. By creating fake images of products or convincing victims to talk to chatbots instead of people, fraudsters have taken online shopping, romance, and tech support scams up a notch. One scammer even admitted to charging people for fake, AI-generated therapy sessions.
The Internet and its innovations have opened the door to types of fraud not thought possible, making it easier to carry out scams, and much harder to track down perpetrators. This is why staying one step ahead of scammers is vital. So…
Read Up - With such a sinister variety of frauds out there, your best defense is holistic awareness. Read everything from news about major organizations that've fallen victim to hacks to blog posts from individuals who've avoided scams. Staying informed means recognizing new fraud tactics before they appear in your inbox or feed.
Be On Guard - When browsing the Internet or using social media, it's always best to maintain a healthy skepticism. Run any phone numbers, social media accounts, or online stores you don't recognize or trust through search engines. Be especially cautious when making purchases or sharing personal information online.
Protect Your Digital Footprint - Create separate email addresses and social media accounts for business and personal purposes, keeping the latter private. Try not to use your real name when creating usernames for sites, and use an avatar instead of a photo for your profile picture. Scammers are constantly searching for weak points, and tightening up your online presence can keep them at bay.
In Conclusion…
In the digital age, there is a constant risk of online fraud. The Internet affords scammers anonymity and access to hundreds of thousands, potentially millions, of unknowing targets. It's easier than ever for these cybercriminals to steal your time and money. If they're not carrying out frauds like identity theft and investment scams that have been adapted to the Internet, then they're using 'new' fraud techniques like phishing.
But, with some preventative measures and knowledge of the warning signs, it's possible to use the Internet without falling victim to fraud. Keep updated with how fraud tactics are evolving and how to keep yourself secure. Be sure to inform your family and friends of these techniques so they can stay safe, too. Stay cautious, and you can outsmart the scammers before they even get a chance.
Sources and Resources
https://www.formica.ai/blog/evolution-of-digital-fraud
https://besedo.com/blog/the-evolution-of-online-scams-moderation-methods/
https://www.tookitaki.com/compliance-hub/cyber-fraud-real-life-examples-and-prevention-strategies
https://www.cifas.org.uk/insight/fraud-risk-focus-blog/evolution-identity-fraud
https://www.weforum.org/agenda/2024/04/interpol-financial-fraud-scams-cybercrime/
https://www.digitalguardian.com/blog/50-examples-ransomware-attacks-and-their-impacts
https://eucpn.org/sites/default/files/document/files/2302_ENG_PAPER_Online fraud_LR.pdf
Leave a reply