Analysis of Internet Auction Fraud - Essay Example

Name: Course: Course Instructor: Date Submitted: Table of Contents Name: 1 Table of Contents 1 1.0 Introduction 2 2.0 Scope 2 3.0 Analysis of internet auction fraud 3 4.0 Call for action 5 5.0 Solution and their short comings 5 6.0 Proposed solution 7 7.0 Conclusion 7 8.0 Work cited 8 1.0 Introduction Internet fraud is the act of deceiving through solicitations to acquire fraudulent transactions through the internet. This crime includes those that occur in chart room, websites and chart rooms. Online auction has become a lucrative business as many people make a living through the online purchasing through auction houses. In the USA the Federal Bureau of Investigation put the internet auction as the highest fraud on the internet at 35% to 40% of the complainants in the year 2007 (Darcy, p.24). Internet auction fraud occurs when persons or entities put auction advertisements of merchandise on the net but either fail to deliver or deliver the merchandise in less value or proportions from those that were advertised upon purchasing. According to the department of justice, the internet crime is an extension of preexisting traditional crimes that are exploiting new mediums (National White Collar Crime Center, p.30). To the FBI it represents the use of premeditated identity and or information to perform fraudulent activities. Reasons given for increased fraud on the internet include the ease at which identity is to forge than the known traditional contexts. The proceeds in the internet crime are easier to divert and provides the frauds with a vast target market to reach (Swire, p.44). 2.0 Scope The essay will limit itself to the internet Auction fraud in the United States. Firstly, the essay will demonstrate the causes of internet auction fraud and find out who the victims are and its effects the American society. Secondly, the essay will discuss the previous solutions that have been utilized to end the bane and propose other solutions that could be implemented to aid in the elimination of the vice. 3.0 Analysis of internet auction fraud In this era, any person with an online modem and a computer is vulnerable to being deceived. Most of the reported crime on the internet contains auction sites. The fraud always takes progress in the shill as they do not receive any feedback in the process since the shill seldom wins any bids. The shill always bids the price that is considered the lowest for the product value in the auction house. The placement of the bid is normally strategic as he bids at almost the last stage. There are five main ways through which the internet auction fraud occurs (Carrier, p.20). This includes the bid shilling where an individual works for a different individual in creating a false identity to bid for prices for merchandise in place of the true seller. A friend for instance can be engaged to bid for the item while having no intension to purchase it. This enables other user to make higher bids for the merchandise which is not their thus enabling the seller of the item to obtain a higher value for the item (Donga F et al, p.50). Secondly, the internet auction occurs where the buyer and a partner identified who is not the seller inflates the price artificially thus discouraging other possible bidders from biding. In this case the friend who bids opts out of the biding process and allows his friend to win the purchase at a lower bid. Thirdly, an internet auction fraud can occur in the case where the bidder who wins the bid ends up not getting the merchandise even after paying for them. This is the most common of the auction frauds. In other cases, the person with the winning bid could have his merchandises but fails to honor the payments. To add to this, the internet fraud could also be propagated by bid rings which consist of groups of several bidders who form a ring and have an agreement of not top bid against each another. This is normally done by avoiding bidding in the process thus the winner ends up getting the lowest bid for the auctioned item. The auctioneers may also place various items for bidding and use them in the process to place multiple bids. The prices will be inflated or driven up thus discouraging other pot6ential bidders (Wang et al, p.54). Lastly, the internet auction fraud can occur in the product authenticity. The fraudster would claim that the merchandise on the bidding list is other than the one provided. Bidders would bid on the product on the thought that it is genuine and ends up not receiving what was advertised. This is most often in the cases of sports memorabilia. Of all the biding online auction fraud techniques, the shill biding is the most prevalent. This form of biding has been covered by the most mass media groups in the USA. The auction fraud always violates the trend of fairness in the auction market. According to Wang, et al (p.74) the shill bidding could give the seller a lot of profit than expected on a single item. This could also result in the insufficiency of the market as well as a ferocious spiral of auctions. Most buyers on realizing that there is the existence of shill bidding could refrain from participating in the bidding process and end up letting go of the merchandise. The seller of the product will therefore result to selling the product on a later date. 4.0 Call for action Since the internet Auction fraud is recorded as the highest it is best to take precautionary measures especially for persons who engage in bidding proc4esses and make a living from it. Before bidding it is appropriate to be knowledgeable of how the bidding process works. Internet auction sites are differently set depending on the type of auction being undertaken. Secondly, the public ought to be aware of the actions the auction site takes in case there is a problem in the auction process. It is advisable to read the disclaimers provided by the auction sites. In addition, the public must be in possession of the relevant information about the person selling and buying and not only the email address. Consult the business bureau to gain insight of the business entity you are dealing with (Internet Auction Fraud, p.54). 5.0 Solution and their short comings Various solutions have been presented to curb online in-auction. Various approaches have been established solution in relation to online fraud including trust management and prevention approaches. Based on trust management, it is evident that the current prevailing electronic commerce applications systems do not offer any form of trustworthiness. To install trust to these systems it is essential to come up with another application consisting of a security agent, monitoring both bidding and auction agents. Just like human bidders widely communicate with fellow auction agents, the secured computer will do the same hence emphasis on trust. It is obvious that this framework ensures that online auction is protected from malicious bidders. By sending messages which is only checked by an auctioneer, ensures that malicious bidders don’t get any chance from scanning and modify any bid from a different bidder. Further, the security application installed in this program ensures that in any case of malicious action there is an automatic detection on the auctioneer side (Nikitkov p.88). The other approach is that of using prevention versus prediction measures which are more effective on various online auctions as opposed to reactive measures. Here, actions procedures rules are usually embedded in various software programs are very tight such that online fraud activities are highly detectable. The seller are only allowed a single starting bid without being given any form of having a low starting bid and a higher secret bid to attract buyers. This solution encourages having a bid which is honest. Researchers have indicated preventing approach is the best solution as compared to others in preventing online auction fraud. It is clear that if online auction fraud cannot be prevented, then prediction or preventive measures can minimize risk to those perceiving to participant in the auctioneering process. Further, preventive measures design certain bidding strategies whereby honest bidders and users are able to counteract scam (Scott 2006). 6.0 Proposed solution Other than approaches other solution entails understanding widely what online auctioneer works. This can be done through looking for information from internet sources so as to understand what obligation is designed for a buyer and that of a buyer during auction process. It is essential for one to find out what actions have been taken such as insuring in case of an online fraud. Another general solution at a personal level is one is needed to be cautious of second chances offered through unsolicited emails where one is contacted even after the auction list has been closed. Most of second chances that have been offered are fraudulent. This calls to perform a thorough research about a seller by also using a business bureau where most businesses across the globe are located. Details on the kind of methods of payments should be investigated and interrogated and if suspicious do not send any amount of money (Kauffman, p.65). For the above mentioned solution to be implemented both bidders, auctioneers agents, buyers and sellers should get involved and being at the forefront in the implementation of these solutions. Government from various countries should come up with policies whereby those engaged in online auction fraud should be punished in a court of law. Evidently you as the buyer should be always alert before issuing out any money to any one claiming to be a genuine auctioneer. 7.0 Conclusion Internet fraud has proved to be a tough vice to alleviate. There is need for the public to join hands with the government to enable expose the vice and the perpetrators but before this, the participants of the auction need to be aware of the terms of payments from the buyer. The governments need to intensify the war on the bane in collaboration with the other states especially if the crime involves participants from different countries. The buyers need to have information on the deliveries, returns and warranties that accompany the product after its purchase. 8.0 Work cited National White Collar Crime Center. NW3C (2002) accessed on the 15th of April 2011 from http://www.nw3c.org/index.html Darcy, L. (2007) What Is the Definition of Internet Fraud? Access3ed on the 16th April 2011 from: http://www.ehow.com/facts_4856098_what-definition-internet-fraud.html Swire, P. (2009) No Cop on the Beat: Under enforcement in E-Commerce and Cybercrime. J. on Telecomm. & High Tech. L.7:107. Wang, Y, et al: (2004) Parallel and Autonomous Agents Based Internet Marketplace,” Electronic Commerce Research and Applications, 3 (3)294-310. Donga, F et al. Combating Online In-Auction Fraud: Clues, Techniques and Challenges: accessed on the 16th of April 2011. Carrier, M. (2005) An introduction to art fraud :Online auctions: art fraud for the masses… Marc Carrier, Carrier Art Appraisals. Internet Auction Fraud (2001) accessed on the 16th of April 2011 from: http://www.cbintel.com/AuctionFraudReport.pdf Nikitkov, B. 2008. “Online Auction Fraud: Ethical Perspective,” Journal of Business Ethics, 79 (3) 235-244. Scott, E. 2006. “The Role of Reputation Systems in Reducing On-Line Auction Fraud,” International Journal of Electronic Commerce, 10 (3) 95-120. Kauffman C. 2005. “The Effects of Shilling on Final Bid Prices in Online Auctions,” Electronic Commerce Research and Applications, 4 (1) 21-34. Read More