Fraudsters Strike with Online Gambling E-Mail Scam

A woman in Attleboro, Massachusetts last month tipped off employees of Citizens Bank to an Internet gambling scam, and she had no idea that anything unusual had happened to her.

The unsuspecting woman walked into her bank branch, the Attleboro S&S, in late November to withdraw $3,100, which, she told the teller, was to cover a fee to an agent in charge of winnings she earned at an Internet gambling site. The fee, she said, had to be paid to collect the prize money.

She presented to the teller a letter she received from what turned out to be a fraudulent financial company, Standard Trust Inc., claiming to be a payment service for the online casino portal, Onlinegambling.com. She also received with the letter a check for $3,950 that the fake finance company sent to help cover the $3,100 processing fee.

In this case, the banker recognized that it was a scam and advised the woman not to send the money.

The scam is one of countless schemes that have been carried out for years by Internet fraudsters. According to the National Consumers League (NCL), the not-for-profit organization that runs the National Fraud Information Center, the top five Internet scams in the first half of 2005 were:

1. auction scams in which merchandise was either misrepresented or not delivered;
2. general merchandise sales scams, in which good not sold through auctions were misrepresented or not delivered;
3. Nigerian money offers, defined as false promises of riches to consumers if they transfer money to their bank accounts;
4. fake checks delivered to consumers for work or items sold (consumers are instructed to wire money back, as was the case with the woman in Mass.); and
5. phishing scams, in which consumers receive emails supposedly from reputable source asking for confirmation of personal information.

Rick Mercuri, chief security officer for Citizens Financial Group, concurs with the NCL's placement of auction scams at the top of the list.

"We have seen schemes where fraudsters use eBay or similar online services," Mercuri said. "The fraudster will offer to buy a big ticket item such a car or motorcycle and pay for it using a counterfeit check. In these cases, the victim is out his car and is being contacted by the police for his “involvement” in defrauding the bank.

Mercuri, who is in charge of managing all physical security and the investigation of financial crime for Citizens, explained how the scams work.

"Fraudsters typically use both legitimate and fraudulent online services in which cash is exchanged to facilitate these schemes," he said. "The victim is either called by phone (telemarketer) or more often contacted online (sometimes through spam) and are told that they won a cash prize sweepstakes. The victim is then sent a check larger than the amount that they 'won' and asked to deposit it and return the difference. The victim is usually given a technical explanation for this unusual method of payment (usually tax related). In most cases, the victim quickly follows the instructions only to find out that the check that they deposited was counterfeit. This causes a great deal of problems for the victim since they are often considered a willing party to the scheme."

The Attleboro incident is very similar to scams identified by the NCL, although this is the first time Mercuri has seen one involving a supposed online gambling operation.

Citizens is not conducting an investigation into this particular case because the bank did not lose any money. Nevertheless, the group provides information warning customers of such schemes.

Tips for avoiding the different types of e-mail scams are furnished by the National Fraud Information Center online at: www.fraud.org.