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SALT LAKE CITY — Anyone that has ever engaged in any sort of online commerce knows that it can be a great way to find and buy items and sell items no longer used or needed.
It can also sometimes be a hunting ground for online fraudsters and scammers.
Earlier this month, eight Utahns and one Washington resident were indicted by a federal grand jury and accused of obtaining $100 million worth of credit and debit card purchases through a scheme that involved the sale of nutraceutical, CBD and dietary supplements.
To facilitate "tens of thousands" of misleading online sales, the defendants are accused of setting up hundreds of websites and limited liability companies, hundreds of business checking accounts and hundreds of merchant processing accounts in the names of others but which they controlled. They recruited and paid individuals referred to in the indictment as "straw owners" for the use of their personal information, according to the indictment.
Online fraud and scams often occur on a much smaller scale. Here's how it happens, and how you can protect yourself from becoming a victim.
The differing faces of online fraud and scam
"As we live in a society that does more and more online, the prevalence of online scams is increasing," said Zach Whitney, communications director for the Utah Department of Commerce.
Online fraud usually occurs in two ways: one being shady online businesses attempting to deceive customers and the other being scammers reaching out to people through online marketplaces such as Facebook Marketplace and KSL Marketplace, he said.
When dealing with businesses online, Whitney said "a little bit of research goes a long way."
"Even just a Google search, looking at reviews, comparing prices, a little bit of that type of research goes a long way into uncovering whether or not a company you're dealing with is reputable, whether or not you're dealing with the actual company or somebody pretending to be the company or whether or not you're getting the best value for what you're seeking," Whitney said.
Utahns surveyed by the department report they encountered scams largely through phone calls (38.1%), email (34.3%), social media (33.7%) and text messages (25.2%).
Younger respondents mostly reported coming across scams through social media, while older respondents experience fraud through phone calls and email, according to the department.
When dealing with online marketplaces, the department encourages consumers to exercise caution due to the anonymity associated with them.
Focus groups surveyed by the department all mentioned having encountered scams through online marketplaces like Facebook and KSL.com, though KSL.com recently launched a new feature to help combat fraud.
Whitney said that it's often difficult for people to know who they're communicating and dealing with and people shouldn't send money "unless they know who it is they're sending it to."
There are also age disparities when examining who is targeted — and who falls for — scam operations.
According to data from the Federal Trade Commission, consumers aged 18-59 report being contacted by a scammer initially by social media (31%) and through text message (30%), whereas those over 60 were contacted by social media (15%), texts (21%), and phone calls (24%).
Gen X, Millennials and Gen Z (ages 18-59) were 34% more likely to report losing money to fraud than older adults, with most fraud beginning through ads on social media.
Alternatively, the 60 and over crowd were five times more likely to lose money to tech support scams and twice as likely to lose money to prize, lottery and sweepstakes scams than younger adults.
Combating fraud and scam
Fortunately, some online marketplaces are putting technology in place to reduce the prevalence of scams and online fraud.
"Online fraud is a large problem across the internet, especially in online marketplaces," said Brian Hoopes, head of cyber security and fraud prevention for Deseret Digital Media, KSL.com's parent company. "If people can take advantage of somebody, somebody is going to try and do it."
In response, KSL Marketplace in September launched its new Messages feature, allowing KSL Marketplace members with verified email addresses to correspond about listings in a user's KSL account without sharing personal contact information.
"Previously when you used KSL, even the app, if you wanted to communicate with a seller or a buyer, it was all done via email or text which kind of lifted it out of the KSL environment. If you're like most people, you want to avoid sharing your personal information with anybody," said Kirk Koenen, director of marketing at Deseret Digital Media.
Hoopes said that he thinks of fraud prevention as a "cat and mouse game."
"We were noticing that we weren't combatting (fraud) in the most effective way," he said.
The Messages feature makes it possible for users to communicate with a buyer or seller without providing personal information. Users with verified email addresses are able to use Messages to inquire about listings on any section of KSL Marketplace: Classifieds, Cars, Homes and Jobs.
Additionally, the Messages feature is strengthening KSL's security against fraudulent users.
"If someone said something that you think might be fraud ... you can hit report (and) it'll automatically go to our customer support team," Koenen said.
If the customer support team determines an individual using Messages on KSL Marketplace is likely fraudulent, they will alert other users who have been corresponding with this person so they can stop conversations or transactions.
"Message center allows us to monitor for patterns in communication between users and try to mitigate against the fraud that happens there," Hoopes said.
Furthermore, KSL Marketplace can ban an account — and identify new accounts created by the same user — if it is determined that the user is engaging in fraudulent behavior.
So far, Hoopes said that the Messages feature has "certainly" exposed more fraud.
"It's definitely helped us. We've noticed a lot of patterns and our awesome customer service team, our customer experience team, has taken care of handling those patterns and getting those users off the site," he said.
He added that the KSL Marketplace team is constantly working to evolve the Messages feature, often incorporating user feedback, to make the feature as effective and user-friendly as possible.
Beyond marketplace technology aimed at reducing fraud and scams, the Utah Department of Commerce's Division of Consumer Protection created the W.I.S.E acronym to help consumers be more informed and be able to protect themselves from scams.
Here's how people can be a W.I.S.E consumer:
- Watch for red flags. Opportunities that seem too good to be true often are. Check user reviews to see what people are saying about the business.
- Investigate and research. Use trusted consumer protection resources like the Better Business Bureau and/or the Division of Consumer Protection website to see if the business has had a history of problems.
- Set boundaries. Determine how much you're comfortable spending on a product or service and stick to your budget. Doing business with trusted retailers and websites might avoid trouble in the future.
- Examine the fine print. Make sure you understand the terms of contracts. Know exactly what you're paying for, the exact price, the length of terms and how to back out or get a refund if necessary. You don't have to sign anything you're not sure about.
"As we do more and more of our transactions online, we need to be sure and be careful not to let our guard down," Whitney said. "Those dealings online can feel secure, but that level of anonymity just makes it so we need to be extra careful because we don't necessarily know who we're dealing with."
