5 common online marketplace scams & how to prevent them

Internet fraud. It’s pretty sophisticated. And for online marketplaces – or any other platform that relies on User Generated Content – it’s often well-hidden or undetectable.

Scammers are an increasingly resourceful bunch, so if there’s a system to be gamed, you can bet they’ll find a way to work it.

However, with the right insight, awareness, and detection processes in place, site owners can keep their users safe – and put a stop to scams before they endanger anyone.

Let’s have a look at some of the most common online scam types to be aware of on your online marketplace, how you stay on top of them, and ultimately how to prevent them.

Online Shopping Scams

One of the most common types of fraudsters plaguing digital marketplaces, online shopping scammers usually advertise high-ticket items for sale at low prices. Typically, these include mobile phones, video game consoles, laptops, jewelry, and cars – with commercial vehicles and heavy equipment on the upraise.

They may be advertised along with a believable, yet fabricated story. This can be something like the fact they’re selling ‘excess stock’ or that goods have ‘minor damages’ – for example.

The reason scammers do this is simply to give some degree of credibility to their request for partial payment upfront. Of course, they have no intention of selling any goods at all. They simply aim to dupe users.

As a marketplace owner, it’s important to advise your users that if something sounds too good to be true, it usually is. It is also vital to warn them against sending any form of payment before obtaining any goods. They should also be wary of paying by direct transfer, using prepaid cards, or any requests to pay for goods using cryptocurrencies.

How Scammers Operate on Online Marketplaces

Here are a few tricks scammers use to cover their tracks.

Purchase old accounts:

Scammers look for accounts that have a good reputation and buy them – to publish fraudulent ads.

Ad modification:

Scammers submit mundane ads with real photos, prices, and reliable data. But once the ads are accepted, they change them – lowering prices and deleting/adding photos.

Trojan ads:

Scammers create accounts and begin publishing conventional ads. Once a reliable precedent is set, they begin posting fraudulent ads instead.

Change IP addresses:

This is when scammers continually change IP addresses to avoid being tracked.

Multiple ad publication:

Scammers submit multiple ads in big quantities; to disguise their fraudulent ones.

Dating & Romance Scams

Dating scams are probably the best-known kinds of online fraud – a topic we’ve covered before in our blog.

While many of us have used flattering photos of ourselves in online dating profiles, there’s a big difference between presenting ourselves in our best light and creating a fake online identity.

While TV shows and high profile cases of this practice – known as ‘catfishing’ – have raised awareness, it still remains a common issue on a lot of dating sites.

Essentially, romance scams Works when a scammer (posing as an attractive man or woman) reaches out to a user, builds a relationship with them exclusively online – sometimes over a period of months – before proceeding to either ask them for money, or even to do favors for them: activities that could well be criminal in their nature.

Why does the scam work so well? Catfishers do whatever it takes to win their targets’ trust. And once that trust is established, the target is too emotionally invested to question the scammer’s motives.

While different official organizations – like the Online Dating Association – are doing more to raise awareness, dating sites themselves need to do more to highlight the dangers and behavior patterns fake users follow.

For example, there are many keywords and phrases catfishers use to make themselves sound more credible (as we outline here). They may claim to be religious or work in a trustworthy job – like the police or military.

A common struggle for many sites is that they’re not quick enough to remove scammers. Dating and romance scammers are quick to move the conversation away from the site to avoid detection – sites need to prevent that from happening already from scratch. Learn how you can create filters to detect and prevent personal details automatically.

Fake Charity Scams

Many of us are wary of so-called ‘chuggers’ (charity + muggers) approaching us on the street asking for donations and we’d be right to – given the recent news that one scam in London was so well-orchestrated that even those collecting cash didn’t know it was a shady operation.

However, online – where donation platforms are becoming increasingly popular owing to their ease of use – how can those donating be sure their money ends up where it’s supposed to?

Transparency is key. The more information a site offers about the charities they’re working with; how much (if anything) they take as commission; and how long donations take to reach each charity, the more trustworthy they’re likely to be.

But what about online marketplaces and classified sites? Charity scams are just as likely here – particularly in the wake of high profile disasters.

As a result, site owners need to advise their users to exercise caution when those requesting funds…

  • say they’re from a charity they’ve never heard of
  • won’t/can’t give all the details about who they’re collecting for
  • seem to be pushing users to donate quickly
  • say they only want cash or wire transfers (credit card is much safer)
  • claim donations are tax-deductible
  • offer sweepstakes prizes for donations

When working with charities, online marketplaces and classified sites should ensure that rigorous security checks are in place. For example, as phishing is a common fake charity scam, it’s crucial that any relevant in-platform messages that provide a link to an external ‘charity site’ are detected early on.

Employment Scams

Online fraud and employment may sound like a fairly unlikely pairing, but in fact, it’s a lot more sophisticated than many might think.

There are numerous ways in which scammers abuse online marketplace and classified sites, and most of the time they’re looking to either extract money or steal your identity (more on that below too).

One of the most frequent employment-related scams is a fake job posting looking for people to handle ‘payment processing’. The scammer may find CV/Resumes online or they may post on credible boards – such as Craigslist.

The trick being played out here is one where the proceeds of crime are handled by the user (for a small commission) and transferred back to the fraudster – who is essentially using the ‘employee’ to launder money.

Another common job-related scam is one where ‘recruiters’ coax candidates into paying for additional job training or career development courses – or when an ‘employer’ asks candidates to cover the costs of a credit record check.

In all cases, employment-focused marketplace owners need to be acutely aware of anyone asking users to impart finance-related information or money.

However, these requests may not materialize until the conversation has been moved to email – away from the site – so it’s critical for those operating job boards to put some form of prevention and moderation effort in place.

Identity Theft

Recent news that a young journalist had a job application withdrawn by someone pretending to be him – via email – is alarming but not uncommon. However, impersonation takes on a whole new meaning when linked to identity theft.

While the most likely scenario in which identity theft occurs is an online data breach, internet shopping also puts users at risk. According to Experian, 43% of online shopping identity theft happens during the peak holiday shopping season (Black Friday onward).

Many scammers use familiar tricks – like phishing – to steal personal details, debit and credit card details, and social security numbers; using them to buy goods (often high priced items in bulk), to claim refunds from ‘faulty’ items, or to open accounts in other peoples’ names to mask other fraudulent activities.

Scammers can buy stolen identities on the dark web very cheaply. And it’s not uncommon for fraudsters to advertise usually high priced items at low prices for quick sale on marketplaces… and then steal shoppers’ credit card details.

While general advice is routinely given to consumers – such as vigilance over website security, visiting preferred stores directly rather than clicking search engine links, and not to store card details online – online marketplaces need to prioritize monitoring and prevention too.

Preventing Scams on Online Marketplaces

With so many ways in which scammers can benefit, it’s clear that they’re not going to stop anytime soon.

This means that in an environment where trust is a limited commodity, the pressure increases on e-commerce sites, online marketplaces, and classified sites, to maintain it.

While official bodies, governments, and consumer rights groups; as well as Facebook (as reported in TechCrunch this week) and other tech champions with considerable clout are informing and empowering users to recognize and take an active stance against suspicious activity, online marketplaces also have a responsibility to detect and eliminate fraud.

As marketplaces scale and begin to achieve a network effect, they need to adopt more stringent cybersecurity protocols to protect their users – multi-factor authentication, for example. Similarly, mapping user behavior can help site owners to identify how genuine customers navigate it – giving them the intelligence they can use to benchmark suspicious activity.

Essentially, the better you know your users and the way they behave, and the more emphasis you put on transparency as a prerequisite for joining your community, the greater the deterrent. But as discussed, there are ways scammers to mask their behavior.

Being a step ahead of scammers is important (as our trust and security expert explains in this article). Therefore, it’s essential to anticipate the different times of the year when certain scams manifest – as outlined in our Scam Spikes Awareness Calendar.

However, by far the most effective way to prevent fraudulent activity on online marketplaces is to have a solid content moderation setup in place. While this could be a team or person manually monitoring the behaviors most likely to be scams, as a marketplace grows, this process needs to function and maintain at scale.

Enter machine learning AI – a moderation solution trained to detect scammers before fraudulent content is posted. Essentially this works by ‘feeding’ the AI with data to recognize suspicious behavioral patterns, and can, therefore, identify a number of possible fraud threats simultaneously.

At Besedo, we fight fraud by giving marketplace owners the tools – not just the advice – they need to stop it before it is published.

All things considered, scammers are merely opportunists looking for an easy way to make money. The harder it becomes to do this on online marketplaces, the less inclined they’ll be to target them.

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