Identity Verification
8 Types of Internet Fraud and What You Can Do About Them
Learn about the dangerous phenomenon of Internet fraud and steps you can take to prevent financial damage and identity theft.
October 30, 2023
min read

What Is Internet Fraud?

Internet fraud encompasses any fraud scheme that uses Internet components such as email, chatrooms, or websites to enable fraudulent activities. There are various types of fraud, and if any aspect of the scam relies on the Internet, it can be considered a form of Internet fraud. 

Offenders often use the Internet to solicit their target for funds or sensitive information, process fraudulent financial transactions, or transfer funds. In addition, many scams use elaborate schemes and excuses to trick unsuspecting individuals into enabling fraudulent activities. 

Organizations must raise awareness of these scams and implement safeguards to protect themselves against Internet fraud. One of these safeguards is implementing identity verification for customers and website users. 

In this article:


Types of Internet Fraud

Account Takeover

Account takeover occurs when a third party gains unauthorized access to a user's account and uses it to perform malicious activities. For example, the third party may impersonate the actual user, change the account's details, use the account to send phishing emails, steal sensitive and financial information, and use stolen data to access other connected accounts.

Click Fraud

Click fraud occurs when third parties manually or automatically click on a pay-per-click advert to inflate the company's advertising bill. The company pays for each click the advert produces, setting a specific limit. Once the limit is reached, the advert is no longer displayed. This malicious action effectively wastes the company's advertising budget. 

Domain Name Scams

Domain name scams occur when a threat actor impersonates a figure of authority, trying to trick a business into paying an excessive fee to renew or buy a domain. Since the fraudster is unrelated to the domain registrar, they take the money without providing any domain. It may occur in several ways.

A fraudster may offer a business first refusal on a domain name. The fraudster typically pressures the business by saying someone else is just about to buy the domain name, and the company has but a few minutes to accept their offer while the third party does not exist. Then, the fraudster continues pressuring the business to pay an excessive fee.

Another domain name scam involves sending bogus domain name renewal notices. For example, the business may receive a letter or email that looks like a renewal notice for their domain name. However, the notice has nothing to do with the domain registrar, and businesses paying the renewal are handing out their money to the fraudster.

Identity Fraud

Identity fraud occurs when a third party steals an existing identity and uses it to perform criminal activities to obtain services or goods through deception. Stealing identity details does not constitute identity fraud—this is identity theft. The fraud element is added when the criminal uses the identity to perform the following criminal activities:

  • Obtain loans, state benefits, and credit cards.
  • Obtain actual documents like driving licenses and passports.
  • Open bank accounts.
  • Order goods using the identity's information.
  • Create mobile phone contracts.
  • Take over real, existing accounts.

Individuals may not realize at first that their identity has been stolen. However, several indicators can imply an identity fraud has occurred. For example, a victim receives invoices or bills for things they did not order or letters from debt collectors for debts they did not incur.

Internet Auction Fraud

Internet auction fraud occurs when a third party creates fraudulent advertisements on auction sites like eBay. The fraudster may scam buyers in several ways. For example, they may offer goods that do not exist or sell one item to all bidders. In addition, the fraudster may try to trick bidders by saying the winning bidder no longer wants the item and victims are the next highest bidder.

Internet Dialer Scam

Internet dialer scams occur when a process changes the victim's computer settings to re-route their Internet connection through an expensive telephone line. For example, it can happen when the victim opens a spam email, visits a pay-per-view website, clicks on a pop-up box, and then downloads the software that changes the computer.

Online Shopping Fraud

Online shopping fraud occurs when fraudsters pretend they are actual sellers through a fake website or by displaying a fake ad on a genuine retailer site, tricking shoppers into spending money on counterfeit goods or no goods. 

The scammer typically uses the latest tech to set up a legitimate-looking retailer website, using sophisticated designs, stolen logos, and a domain name that looks similar to the retailer. These websites often offer luxury items like popular jewelry, electronics, and clothing brands at meager prices, sending a knockoff to shoppers of nothing at all.

West African or 419 Scam

Advanced-fee scams, also known as West African or 419 scams, occur when strangers contact a victim, asking them to pay an admin fee to help move a large amount of money from one country to another. The fraudsters promise the victim will be rewarded with a cash cut after the money has been transferred. 

Once the victim pays the fee, the fraudster takes the 'fee' and cuts all contact or keeps asking for more. For example, the fraudster pretends they need the payment because of a last-minute issue and need it to release the money. The fraudster may also ask the victim for bank account details, saying they need the fee to transfer the reward, while in reality, they use the information to empty the victim's account.

The name '419' refers to a section of the Nigerian Criminal Code that deals with fraud and describes the penalties and charges for such offenders. It is called 'West African' because it may involve countries like Nigeria, Ivory Coast, or Togo, but these scams may also affect South Africa or Iraq.

Fraudsters use various techniques to make the advanced fee offer look legitimate. For example, they may contact the victim using different names and invented characters, providing fake photographs, letters, and documents with official-looking paper. They may also offer to meet the victim in person—usually outside the country.

What Your Organization Can Do to Prevent Fraud

Here are a few key measures you can use to help your organization's employees prevent attempts at Internet fraud.

Credit Monitoring

Credit monitoring tracks activity on credit reports and notifies customers when unusual changes occur. This may include changing contact information, opening a new account, or increasing credit limits. Any credit card business should use credit monitoring to detect and prevent fraud.

Credit monitoring only applies to credit accounts and does not protect a business from fraud bank accounts or social security information. In addition, it cannot prevent fraud; instead, it notifies you after fraud has already happened.

Use Two-Factor Authentication on Banking, Credit Card, and Other Sensitive Accounts

Most financial institutions support two-factor authentication for login. However, it is challenging to enforce strong password policies, and even if you do, passwords can be easily compromised by attackers. 

Two-factor authentication, also known as multi-factor authentication (MFA), means that whenever someone attempts to access a financial account belonging to your organization, a verification code will be sent, usually to their phone.

Employ Anti-Malware Protection

Cybercriminals commonly infect and hijack systems by distributing viruses, botnets, malware, keyloggers, and spyware. Once a system is infected by malware, it is easy for attackers to compromise sensitive information on the device, including credentials for financial services.

It is critical to deploy robust, legitimate anti-malware software on all corporate machines, but that is not enough. Today employees often log into accounts, including financial accounts, from personal devices. Educate employees about the dangers of malware and ensure that employees install malware on personal devices and mobile phones if they use them for work purposes.

Understand and Protect Against Identity Theft

Certain types of personal information can be collected by attackers and used for identity theft. For example, cybercriminals can perform account takeovers and fraudulent transfers and create new lines of credit in your company's or its owners' names. 

Company staff, especially owners and those in financial roles, must follow best practices such as shredding sensitive files and physical mail containing personal information, avoiding suspicious links and attachments in emails, and regularly checking credit and financial reports.

Fraud Prevention with BlueCheck

BlueCheck achieves this balance by combining a sleek, field-tested user interface with a robust verification engine that connects to a network of authoritative databases and credit bureaus. In addition, we partner with companies in various industries and growth stages to provide affordable, reliable online age verification. Learn more about how BlueCheck can help you solve your age verification challenges!