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Escrow scams on the rise

  • 09 May 2013
  • Written by 
  • Published in Security

Be careful who you trust to hold your money while an Internet transaction occurs.

For those unfamiliar, an escrow service is a trusted third party who will temporarily hold the money to be paid for some object being purchased.

The intention is to reduce the level of both buyer and seller scamming. Once the buyer passes the money to the escrow service, they will tell the seller the funds are securely held. Once the buyer receives the goods, he will tell the escrow to release the funds to the seller.

All well-and-good. But what if the escrow service becomes the dishonest party? This will badly break the trust model as they will obviously receive the funds but never release them to the seller and may even insist that they were never received from the buyer. Even worse if the escrow is in cahoots with the seller.

According to BitDefender, there are over 2000 fake escrow web sites on the Internet, noting that “Scammers generally pose as sellers on authentic auction websites, then direct buyers to the fake escrow service they control. The scammer takes the money and never delivers the goods.“

According to BitDefender, fraudsters put more energy into creating fake escrow websites at the beginning of our winter. More than 16.8 per cent of the escrow scams registered in almost one year were created in June.

A similar spike was registered in February this year, with over 17 per cent of the total number of analysed escrow scams. After a steady decrease from July to October, the number of fake escrow companies starts to grow before the holidays, especially in December.

The top five items 'shipped' to the aether are cars, motorcycles, electronics, items of special value and bikes.

“The scammers can be quite convincing - that's precisely how they can make money,“ said Bitdefender Chief Security Strategist Catalin Cosoi. “They put a great deal of effort into coming across as legitimate, even to the point of warning their targets to protect themselves from credit card and payment fraud. A typical statement seeking to reassure their victims is that they never request banking details - it actually makes no difference with escrow fraud.“

BitDefender (and indeed iTWire) recommends that potential users of an escrow site recommended by the seller perform suitable due diligence such as a WHOIS lookup to determine ownership and other useful facts. More to the point, it would be better to counter with an escrow service of the buyer's choosing.

Caveat emptor!

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