FTC Reports That 53% Of Fraud is Internet Related

by Ira Wilsker
Golden Triangle PC Club
From the March, 2005 issue of the I/O Port Newsletter

The Federal Trade Commission (www.ftc.gov) recently reported that 53% of the 635,173 fraud complaints filed with the agency in 2004 were internet related. Readers of this column will recognize the list, as each of these has been discussed in previous columns, but still some of us continue to fall prey to these frauds, and need to be reminded about the risks that we all face on the internet. Losses from internet related fraud reported to the FTC in 2004 totaled $265 million, with an average loss of $1440 per case. Three percent of victims reported losses in excess of $5000; fifteen consumers reported internet related losses of $1 million or more, with one victim in Texas reporting a loss of $5 million! Of all fraud complaints, the initial contact with the victim was via the internet in 57% of the cases. Email, typically the spam mail that this column has warned about for years, accounted for 35% of the victims, and web based solicitations accounted for 22% of the internet victims. The number of internet related fraud complaints reported to the FTC increased from 176,720 in 2003 to 205,568 in 2004, an increase of about 16% in a year. It should be noted that these figures only include reports filed with the FTC, and do not include all victimizations.

Internet fraud included auction complaints, which were the single largest category of complaints at 16%, Internet service complaints at 6%, foreign money scams (including some of the "phishing" and infamous Nigerian 419 type scams) composed another 6% of complaints, foreign lottery and sweepstakes victimized 5%, loan and credit protection scams comprised 3% of complaints, and work at home and other business opportunities represented 2% of FTC internet related complaints. The three metropolitan regions reporting the highest rate of victims of these frauds was the Washington D.C. area, San Jose-Santa-Clara, CA, and the metropolitan Las Vegas areas. The states with the highest rate of fraud (all types) reported to the FTC were Arizona (180.5 per 100,000 population), Alaska (174.4), Nevada (151.3), Washington (151.2), Hawaii (143.1), and Colorado (142.5). The old oft repeated adage that if it appears too good to be true, it probably is not holds as much validity today as when first stared countless years ago. The more contemporary warning about never responding to spam mail, popup ads, and similar internet enticements is also still as valid as ever.

Identity theft remains another major problem, with many of the victims being victimized through their personal computers. Of all identity theft victims reported to the FTC (computer and non-computer related combined), 28% were the victims of credit card fraud, phone and utility fraud (such as cell phones contracted in the name of the victim) constituted 19%, bank fraud 18%, and employment fraud 13%. Other major methods of victimizations reported were government benefits and loan frauds. Areas with the highest rates of identity theft in 2004 were Phoenix - Mesa - Scottsdale, AZ; Riverside - Ontario, CA, and again the Las Vegas metropolitan area. States with the highest rates of identity theft were Arizona (with 142.5 identity theft victims reported per 100,000 population), Nevada (125.7), California (122.1), Texas (117.6), Colorado (95.8), and Florida (92.3).

The report then breaks down victimization details by state. Texans, for example, reported 21,435 cases of fraud to the FTC, mostly internet related. Internet auction fraud topped the Texas chart with 5350 complaints, followed by Internet shopping fraud (2584 complaints), internet services (2208), foreign money offers (1938), and loan and credit repair scams (1531). Texans reported losses of $23,590,903, averaging $1393 per loss. This number is slightly skewed higher, because of the one Texan who lost $5 million. Cities with the highest number of fraud complaints were Houston (2501), Dallas (1410), Austin (1325), San Antonio (1228), and Fort Worth (694).

Many Texans were also victims of identity theft. Employment related fraud (using false names and social security numbers) was reported by 6976 Texans, constituting 26% of the complaints in Texas. Bank fraud was second (5640 victims, 21% of the complaints), followed by credit card fraud (5607, 21%), phone and utilities fraud (3982, 15%), government documents or benefits fraud (2353, 9%), and loan fraud (1300, 5%). The leading cities in Texas for identity theft were Houston (3850 identity theft complaints to the FTC), Dallas (1848), San Antonio (1826), Fort Worth (970), and Austin (927).

More information on these topics can be found on a variety of federal websites such as www.consumer.gov (for identity theft and other consumer related topics), and www.econsumer.gov (internet and ecommerce related crimes).

The full FTC report is available online at http://www.consumer.gov/sentinel/pubs/Top10Fraud2004.pdf



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Tulsa Computer Society 3/01/2005
Don Singleton, President