With more and more consumer transactions taking place through online marketplaces, the frequency of escrow fraud has skyrocketed. The primary problem is that many people don’t know what this financial crime is; let alone how they can protect themselves. Here are some answers to the most common questions on how to avoid becoming a victim.
What is escrow fraud?
This type of plot occurs commonly in business or consumer transactions where the parties aren’t completely confident in each other’s ability to perform. They’ll agree to use some person or service as an escrow agent who will hold the funds and release them only when the parties are satisfied with the arrangement. Presumably, both buyer and seller don’t trust each other, but they do trust the escrow agent to fulfill the stated responsibilities.
Escrow fraud occurs when a bogus or unlawful agent is set up by a fraudster, who then removes the funds once they’re deposited by the victim. The money that was only supposed to be released upon certain performance is gone and the fraudster doesn’t uphold his or her end of the bargain.
Where is escrow fraud most likely to occur?
Today, millions of consumers are making purchases over the internet through online marketplaces, company web pages and auction sites. Escrow fraud typically takes place in this environment, as the thief earns the trust of victims and convinces them to go to a third-party escrow service instead of making a purchase through the listing company. The scammer alleges that this arrangement facilitates the exchange of funds for purchasing goods or services.
Are there certain red flags that I need to know?
In a typical case, you’ll first see an ad that you recognize from such sites as Yahoo!, eBay or Craigslist. The low price will attract your attention and you click through for more information, eventually conversing by email – outside the original site where you viewed the ad. Many times, the person you’re communicating with exhibits poor grammar and spelling. This is a certain red flag that you’re being set up for escrow fraud.
In addition, when an online seller requests that you go outside an auction or listing site in order to complete a transaction, it’s likely the person is attempting to engage in fraudulent activity. This is especially true when the individual mentions that he or she has “used this escrow agent often.” You also might be offered free shipping, discounts or other incentives for going through the fraudster’s bogus escrow service.
How can I avoid becoming a victim?
Recognizing the signs listed above is the first step to avoiding escrow fraud. If something appears too good to be true, it probably is. When faced with these types of circumstances, cease all communications with the thief and go through the proper purchasing channels at the seller’s website.
As escrow fraud increases for online purchases and similar transactions, more businesses and consumers need to know how to protect themselves.
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Veriti Consulting LLC provides various fraud and forensic accounting services for individuals and businesses across the United States. To learn more about escrow fraud services we offer call 855.232.4410.
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- Five Steps To Minimize Insurance Fraud Risks In Business
- What You Need To Know About Fraud Investigation Process And Procedures
