Escrow and Fake Escrow Scams
What is Escrow?
Escrow is a term applied to any 'honest broker' service that offers to hold money or goods until all parties in a transaction are satisfied that terms and conditions have been met, whereupon the goods/services/monies are released.
Escrow services have existed for many years but have recently come to prominence in the online world because of buyers and sellers both worried about getting scammed in an Internet auction or sale. A seller does not want the goods to vanish with no payment. A buyer does not want to send money with no goods (or faulty goods) in return.
A genuine Escrow Service allows sellers to send goods safe in the knowledge that funds exist and are being held safely until the goods have been delivered. In turn, the buyer can feel secure in that the goods can be received, checked for suitability/condition and the money will only be paid over when this is confirmed to the Escrow Service.
In many auctions "just use an escrow service, " is the customary advice for both buyers or sellers. Escrow companies act as a third-party referee, taking payment from buyers but not releasing the money to sellers until the goods are delivered. Escrow companies are supposed to be the safest way to avoid fraud on the Internet, particularly when dealing with Internet auction sales of expensive items such as jewellery or cars.
What is the problem?
The problem is simply that, although genuine Escrow Services such as Escrow.com
are serving the market well, many dishonest and false escrow sites are being set up. These sites operate for a short period until sufficient money has been collected from unsuspecting victims then vanish with the money. The sites look extremely convincing to a casual inspection and have real-sounding names such as Simple-Escrow.net or WhyEscrow.com. Because of the effort involved in setting up this scam, the value of the fraud is normally high, running into thousands of pounds.
How do the frauds work?
To initiate the scam, the criminals firstly build elaborate fake escrow Web sites, with convincing names like Simple-Escrow.net and WhyEscrow.com. The Web sites are often set up to imitate legitimate escrow services. To an untrained eye or on casual inspection it can be very difficult or nearly impossible to tell the difference.
The criminals then set up a trap auction (or auctions) on a popular auction site like eBay. The price quoted is 'keen' if not downright cheap. Not unnaturally the item is snapped up. When a winner asks how to make payment, the 'seller' suggests the use of an escrow service because of the 'value' of the item. It is also suggested that this is safer for the buyer as well because they will be able to inspect the goods before the money is released.
The winner of the auction is then requested to use one particular (fake) service. Sometimes there is a choice of two equally false sites. Once the money is transferred to the fake escrow site it is immediately transferred out to another location and 'vanishes'.
The fraudsters will wish to make as much money as possible from the site so there is often a period when the 'seller' and the 'escrow site' stay in contact trying to explain the delays in delivery. This is so that they can complete any further scams they may be running using this fake site. When they have done as much as they can or have completed collecting money from their ongoing scams, all accounts will be closed and the website will no longer respond.
The fraud can work both ways. A fraudulent seller can suggest that a buyer use an escrow site he or she controls, then simply grab the buyer's cash without ever sending the merchandise (which usually never existed.) Alternatively a fraudulent buyer can trick a seller into shipping items that haven't been paid for by simply sending an official-looking e-mail from a fake escrow service stating that funds have been received and to go ahead and with shipment of the items.
Over time the fraud artists are getting better at what they do. In the early days of auction fraud many fake auction adverts were riddled with typographical errors and poor graphics. Today, they take very much greater care to make the offer seem valid and often include legitimate information intermingled with fake addresses and phone numbers.
Fraudulent BMW 'sale'
Bruce Lachot, an Arizona dentist sent $55,000 through cyberspace thinking he was getting a great deal on a new BMW. Instead, he ended up with nothing other than a lot of unwanted media attention.
He thought he'd done all the right things. He even sent the money using an escrow service, supposedly the safest way to fund big transactions online.
And that's where he went wrong. On the Internet, it's nearly impossible to tell the difference between a real Web site and a scam. Mr. Lachot was persuaded to use a fake escrow site, one operated by the BMW seller. The seller, who perhaps never had a car in the first place, simply disappeared with the money.
Lachot went public with his story on MSNBC.com in an effort to prevent others from falling for the con. His tale generated a lot of attention; eventually, he appeared on the Oprah Winfrey show, telling his cautionary tale. But all that exposure hasn't deterred the criminals, and apparently hasn't done enough to warn online car buyers, either, who continue to fall for the trick.
Money traced but unrecoverable
Once the money has been wired out of the country, often by a middle man it may be impossible to recover even if traced
In a recent case a victim sent $8,000 to an escrow firm named Triple-trader.com as a down payment on a new Volvo SUV priced at $29,000. The victim had taken out a personal loan from their credit union to make the down payment. Now, they have nothing but loan payments.
The sale price was well below normal sticker price, but the seller offered a believable explanation.
The seller said that the Volvo was stuck in customs, as he tried to ship it to Germany (where his company had transferred him) and that since it didn't comply with European regulations, it would be cheaper for him to try to sell it. The fraudster claimed that customs was charging him $20 per day to store it there.
This is a good example of the tales that fraudsters tell to explain the very attractive price. The price is key to the scam since the item needs to sell and not hang around. The scam just can't work if the item is not selling in a competitive marketplace!
Almost immediately after the money was transferred, Triple-trader.com disappeared. A phone call placed to the telephone number listed in the domain registration for the site went unanswered, as did an email sent to the listed site administrator.
The victim's efforts to retrieve their money were fruitless.
"After over $150 in phone calls and a dozen e-mails to the bank in Sweden that we transferred the money to, they finally told me that the $8,000 was withdrawn, and due to privacy, they could not tell me any additional information, " she said.
Fraudsters often use other tactics to speed up the deal so that any suspicions are ignored in the rush. One victim lost money in this way because he ignored his intuition. The buyer was initially naturally cautious when he started dealing with a seller named "Phyllis, " who was selling a 2000 Audi A6 on eBay. The buyer had a few questions about the car and sent a private note to "Phyllis " using eBay's "ask the seller " feature. "Phyllis " immediately wrote back answering the questions.
They then offered to close the deal immediately for the (low) price the buyer had already bid, even though that was against eBay rules. The seller said that they needed to do this because speed was of the essence. The "seller " said they were desperate to sell the car and in addition to agreeing to the lower price, would pay for half the shipping if the victim agreed to a fast purchase.
The seller offered to make the sale safer by using escrow services.
Because they were not following eBay rules or procedures, the seller suggested they use a different escrow service than the usual eBay escrow. The buyer was directed to use an escrow service named "Safesale.net" The site was convincing. It all looked legitimate and contained plenty of legalese that seemed to cover everything. The buyer signed up for the escrow service, received a password and got a very professional looking document that listed car VIN (Vehicle Identification Number), buyer's and seller's names, shipping costs, shipping info, etc. They also gave the bank wire account numbers and names and information to transfer the funds.
The money was sent to the bank. (A large, well-known International bank.) For a week, both seller and escrow strung the buyer along, promising that the car was on the way. Suddenly the communications with both stopped. E-mails sent to Safesale.net's domain name registration contacts went unanswered and the buyer found that on the same day he had wired the money the Bank, it was transferred to a bank in Latvia. Both accounts were closed almost immediately.
Is it getting any better?
Jeff Ostorff runs a Web site named CarBuyingTips.com
, and has tracked many escrow scams. He has worked to shut down over 300 fake escrow sites. As fast as he can have the Internet host take down the site, others pop up.
"It's more lucrative than ever, " Ostorff said. "In the first week of this month we came across 30 new fake escrow sites. "
Alvin Black, general manager of Escrow.com
, the largest legitimate online escrow service, said the fake escrow scam "is probably worse than it was a year ago. " The company gets 10 inquires a day from consumers asking about the legitimacy of other escrow sites, and last month, Escrow.com
helped shut down 40 fraudulent escrow sites, Black said.
The fake sites hurt his business, he said, because they have made consumers wary of online escrow services.
"It's our No. 1 problem, surpassing anything else, " he said. "I spend a lot of time reading bulletin boards. There are a lot of people who post and say, 'I don't trust any escrow company now.' "
Even legal action taken by the Federal Trade Commission in May against one alleged fake escrow site, Premier-Escrow.com, hasn't slowed the scam.
Ostorff concedes there are so many fake escrow sites that they can't shut them all down. Escrow.com's Black says his company is actively working with law enforcement agencies, but so far, nothing has really slowed down the con artists. Consumer education is the only effective form of prevention, he said.
Paul Moreau started tracking the fake escrow phenomenon as an avid eBay user. He now maintains a Web site called SOS4auctions.com that is devoted to tracking the phenomenon. While authorities scramble to shut down fake escrow sites as soon as they pop up, many operate for a month or two. At any given time, 20 or so are operating, Moreau says, and there's a more disturbing trend. At one time, fewer than 10 fake escrow sites popped up each month. More recently, 25 new sites appeared in one month. In other words, the scam has become more intense, and it's so successful that imitators are catching on.
SOS4auctions.com contains a detailed list of suspected fraudulent sites. But the fake escrow scam is so elaborate that someone even created a fake version of Moreau's site, just to confuse would-be readers who might otherwise be warned off the scam.
"It's so bad that it's very difficult to know what's a real escrow service and what's a fake, " said Moreau, who is known by the pseudonym Fenton Smith on his Web site.
Moreau wouldn't guess how much money has been lost to the scam, but said he regularly hears from victims who've lost $20,000 or more — one even sent $40,000 after believing he had purchased a car. Moreau said he thought the $1 million in losses described by MSNBC.com's anonymous source was "probably typical. "
Since the money was sent via wire transfer
, there is often no recourse for victims.
"I just tell them to contact the Internet Fraud Complaint Center and pray, " Moreau said.
How to spot fake sites
Many other tricks are used by the fraudsters to make the con hard to spot. Once a customer has been lured into a transaction, the con artists use a variety of names and bank accounts, making it difficult to spot the scam in progress. In one typical exchange a fake escrow purveyor identifying himself as Michael Comer asked that $1,700 be wired to American National Bank in Rockwall, Texas. The real Michael Comer operates an electronic money firm and is a victim of Identity Impersonation. The scam artists were using his legitimate American National Bank account to move money out of the country.
Another payment was directed to "Aspen Consulting Inc., " attached to an account at HansasBanka, in Riga, Latvia.
How to avoid being defrauded
If you decide to use escrow services then you can be assured that genuine escrow services ARE the most secure form of transaction but there are some obvious signs of potential problems that both buyer and seller should look out for to spot the fakes.
Consumers should never buy or sell items to a consumer who insists on using a specific escrow service. Propose an alternative. With very little research you will be able to locate some genuine escrow services (or ask your bank to suggest one.) If that disturbs the other party, then be very cau[span]tious.[span] eBay carries a list of recognised escrow services.
If the escrow service and the seller appear to be working closely together, that's also a bad sign. One victim got instructions on how to send money to the escrow company from the seller's own e-mail address. If they seem to know details of the payment progress immediately the escrow service 'takes action' be careful. They may be the same person!
Sending money to a bank outside the country is always a bad idea unless you are using a certified and traceable method such as Telegraphic Transfer using trustworthy high-street banks and they have assured you of the validity and ownership of the destination. Remember that ransfers like this are also covered by modern Money Laundering laws and you can be in breach of these regulations if you don't know where the money is going to! Always beware of suggestions to use Western Union or MoneyGram transfers.
These are NOT verifiable or traceable payment methods. E-Gold,E-Bullion, Evocash and E-Dinar are cash transfer services that have also been used in the past.
Examine the sites website carefully especially the 'terms and conditions' section. This section is one of the most difficult to fake from scratch and is frequently 'cloned' from legitimate sites. In some cases there may be references to the wrong escrow site.
Fraudulent site frequently carry an equally fraudulent VeriSign symbol. If you see one, check it out.
Genuine escrow sites will operate in a secure environment especially if taking personal data. Is the site address secure? (https//)
Do a 'whois?' query on the escrow website. This will tell you the country of registration and sometimes registrant contact details. If you are worried you can try to contact them (although sometimes they may have set up measures to send responses like a genuine escrow site.) The main thing to look out for is the date of registration. Remember that these sites are set up purely for fraud purposes and therefore very likely to be as recent as just a few days or weeks prior to the advertisement or auction date. (it is important though, to not take this as a positive test. Sometimes the fraudster may have set these up as 'sleepers' registered a few years previously intended for fraudulent use in the future.[span] DO NOT be fooled by a copyright date on the page . It is the easiest thing in the world to make this 1998 to make the site look old and trustworthy. Sometimes the 'about us' information may also allude to an older date ( "In business since 1066 " etc.)
It had also been reported in the past that some registrars (the people who maintain the lists containing this 'whois' information) are less assiduous in checking the truth of the information supplied. Just because there is a contact telephone number, don't assume it is OK until you have spoken to the registered contact.If it is fake, in many cases the number will just ring out. If what you are buying is expensive the price of the call it is a small price to pay as (part) proof that the domain is genuine.
There are websites that have been set up to specifically combat these fake escrow sites. Many maintain lists of currently operating fake sites that you can check. Look at these if the escrow site name is unfamiliar. Beware again though that some false 'warning sites' have been found publishing lists allegedly in the 'public interest' which just happen to omit their own currently active fake sites!
Checkout the discussion groups
dedicated to finding these sites. There is one dedicated to eBay
Don't be fooled into doing 'deals on the side'. Auction rules are there to try to give the best protection possible. Any attempt to use extra enticement should be viewed as an attempt to get you to commit yourself without natural reticence getting in the way! If you make a query on the item and the seller comes back with a 'buy now' price BE CAREFUL. It's not in the rules for good reason!