Financial Frauds on Web - Coursework Example

Internet Fraud History of financial frauds on web As Gough says, some of the earliest financial frauds on the web started as email scans where people were scammed into sending her money to fraudsters. This was before the internet was very entrenched in people’s lives and many people did not really understand the way it works. The Nigerian email scams are some of the oldest forms of online scams and they came to be known as the 419 scans, which refers to the code by which they are referred to in the Nigerian online fraud laws. However, as many people have become more aware of how the internet works and are able to avoid such mundane methods of scamming, fraudsters have improved the way they carry out their fraud and have gone to more high tech techniques to achieve their goals. Today, most online fraudsters use credit cards to rob people of their money. They can use various methods to be able to do this. For instance, they can target their victim and then entice them to give their banking information and then this can be used to rob them of their money. This can happen in two ways. The first one is by contacting the victim and then slowly asking them bits of information about them until the fraudster has all the information he or she needs to carry out the last and final act of the fraud, that is steal the victims money. This method is usually used by “catfishes” who pretend to be someone they are not and then preying on people looking for romantic relationships online. Secondly, they fraudster can also contact the victim, either through a phone call or any other means such as email, and pretend to be a bank representatives and ask the victim to provide some information about their banking information (Feldkamp & Whalen, 2014). The victim, not suspecting that the person on the other end is a fraudster and not an actual bank representative gives the informational and before they know, they have already been conned of their money. The fraudsters can also hack the users’ (customers’) accounts and be able to not only withdraw funds but to also use their bank account to carry out other fraudulent activities such as transferring money. However, this kind of a fraudster is a very advanced one and is a seasoned programmer. It is not only individual people who are affected by such fraud. Organizations, and especially banking institutions are also targeted. This is especially by the kind of fraudster that is discussed above, the hacker. Hackers are able to hack into banks and withdraw money from the banks directly without having to steal from the customers themselves (Goldmann, 2010). Financial frauds on web do not only involve fraudsters stealing money from other people or institutions, it can also involve people carrying out illegal financial transactions such as depositing and withdrawing illegally earned money. This is convenient for most people who are involved in illegal techniques of making money because they see it as a way to do their illegal banking without having to avail their identity. Dangers of financial fraud on web There are any dangers posed on both individual and businesses by online fraud. For individuals, they stand to lose all their money if there are no well laid mechanisms to protect the fraudster from fleecing all the funds in an account. For banks, it can be even more serious with regard to the fact that they may not only lose millions of dollars, but may also lose critical customer information and this can lead to a situation where even their business reputation is lost. In cases where banks, or businesses in general are the target of an online fraud, the risk and the stakes are usually higher than when the targeted victim is an individual customer (Abu-Taieh et al, 2009). This is because it is necessary to note that the targeted business can lose a lot of money and can also lose customers’ banking information which can also be used to not only steal funds from the customers but to also sue their information to execute other fraudulent activities. This can be witnessed in the situation where Sony was hacked by hackers who stole users information. Methods of detecting financial fraud There are various ways in which online fraud can be detected and thwarted. However, this in most cases depends on the cooperation between users and service providers. For instance, banks should be able to work with their account holders in a way to detect and thwart fraud. The same applies for online merchants who must work closely with customers to help identify fraud. In such a situation, the best way is to educate the customers about the potential sources of fraudulent activities and the ways in which they can be detected and avoided. Customers play a big role in fraud issues and their education is important because no matter how well protected the firm is, the final nail on the coffin of fraud is dependent on the customers. If the customers do not observe simple security measures with their accounts and their online transactions, there always a chance that fraud will happen. Banks can have better communication platform with the customers. For instance, they can have the customer’s email and phone number so that they can contact the customer whether there is a unique transaction. This can then help in making sure that there are ways to not only detect the fraud but to also prevent it before it is too late. From business point of view Businesses have a number of tools that they can use to detect fraud in their businesses. For instance, credit cards have some sort of security measures that are applied and hat can be used to detect most fraudulent activities. For instance, online merchants can use the card security code to detect if a transaction initiated by a customer is a fraudulent one or not. The card security code is a three digit security feature that is printed nest the bank account number in the credit card and it used as a verification feature during a “card not present” transaction. The idea is that if the person initiating the transaction has stolen the card electronically, he or she will not have the card security code because this security code is only available on the actual card. Banks can also use this to verify that transactions are valid and not fraudulent. The other method that can be used to detect fraud online is by comparing the shipping address and the billing address. Usually, if a fraudster has stolen card information, his or her shipping address will be different from the billing address and this can be a clear red flag that the transaction is fraudulent. For merchants, this can be a very good way to detect fraud and thwart it before it is successful. They can also use the email and see if the person is responding to the email. However, while this may not be feasible, it can be used for these situations where the other tools have flagged a transaction as a potential fraud transaction. There are also a number of tools that can be used to protect both the individual and the firm from fraud. These tools are tools that are developed by independent firms and can be installed to be able to analyze every transaction and detect any fraudulent transaction and alert the relevant parties (Mena, 2003). If the tools are used by a firm or an online vendor, it alerts the vendor and they can then follow up on the suspected transaction to determine if it is a fraud. Individuals also have a number of tools which they can use for a small fee to help them to detect any suspicious activities on their bank account and especially credit card accounts. Once they receive the alerts, they can then follow up if they believe that there is need and if they find that the transaction was one of theirs, they can either ignore it or they can flag it as a genuine transaction. Conclusion It is clear that online or web fraud is one of the most serious issues that both individual and organizations face today. With internet becoming a daily requirement for people and becoming the favorite way of carrying out transactions, this issue continues to be a serious issue. The other problem with internet fraud is the fact that it is a borderless crime. For instance, a person in one country can carry out fraudulent activities in another country and this makes it hard not only for detection but also for prosecution. The other problem with this modern crime is the anonymity of the crime. It is usually hard to put a face to a criminal and so many of them can go unpunished. However, it is necessary for banks and other related organizations to not work with their customers in order to make sure that they are able to detect and thwart these crimes before anyone is affected in a negative way. Reference list: Abu-Taieh, et al (2009). Utilizing information technology systems across disciplines: Advancements in the application of computer science. Hershey, PA: Information Science Reference. Feldkamp, F. L., & Whalen, R. C. (2014). Financial stability: Fraud, confidence and the wealth of nations. Hoboken, NJ: John Wiley & Sons. Gough, L. (2013). The con men: A history of financial fraud. New York, NY: Harlow : FT Publishing. Goldmann, P. (2010). Financial services anti-fraud risk and control workbook. Hoboken, N.J: Wiley. Mena, J. (2003). Investigative data mining for security and criminal detection. Amtserdam [u.a.: Butterworth-Heinemann. Read More