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FTC concentrates on cyberfraud

The Federal Trade Commission releases a report outlining its concerns about and strategies for combating the increased use of the Net for fraud.

Con artists once relegated to soap boxes--then telephones, radio, and television--are increasingly turning to a bigger and more effective tool to ply their wares: the Internet.

In response, the Federal Trade Commission is transforming its chase from telephone wires and airplanes to information packets and high-speed access lines to pursue the increasingly sophisticated criminals, the FTC stated in a report released today.

Entitled "Fighting Consumer Fraud: New Tools of the Trade," the report outlines how criminals are turning to the Net to trick consumers into parting with their hard-earned cash.

"The Internet is now mainstream, and it is allowing fraud promoters to mimic legitimate business more convincingly--and reach potential victims more efficiently--than ever," said Commission director Robert Pitofsky in the report's preface. "The Internet is quickly becoming the marketplace of choice for a host of deceitful pyramid schemers, bogus work-at-home promoters, spurious health and weight loss claims, and a new generation of fraud that uses increasingly sophisticated technology."

Although the majority of the FTC's cases originate offline, it is only a matter of time before the balance is tipped, the report states.

But the FTC has begun in the last year to go after those who use the Net to defraud people. For instance, the FTC went after a company that allegedly "hijacked" users by rerouting Netizens who had gone to "www.sexygirls.com" to calls in Moldova.

It also has stepped up its enforcement of spammers, announcing last month that it filed its first lawsuit against one.

And, the report states, "Officials of the Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA) have identified the Internet as a major breeding ground for 'pump and dump' stock manipulations, penny stock frauds, and other securities schemes."

The FTC also is keeping its eye on online gambling and other sources of potential fraud, such as pyramid scams.

While the Net certainly presents a ripe breeding ground for fraud, the report also notes that Net users generally can avoid schemes by being aware. And perhaps more importantly, that "maturing technologies--cybercash, encryption methods, advanced search engines, and blocking technologies, to name a few--are beginning to allay consumer concerns and converging to open the door to massive Internet commerce."