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How to Steer Clear of Internet Scams
While most of the businesses you find online are legitimate, you may occasionally encounter a scam. Find out how to identify fraud, and how to protect your business when investing or conducting other financial transactions over the Internet. While most of the millions of businesses that call the Web home are legitimate, trustworthy companies, you may come across a scam in your dealings online. The Internet's inherent nature makes it easy for these errant entrepreneurs to start a business scam -- and difficult to catch them. It is inexpensive to set up a storefront online, and cheap to acquire untargeted bulk mail lists for email marketing. And a professional-looking Web site can fool even experienced business owners.

It can be difficult to catch online scam artists in the act because the digital trail they leave disappears quickly -- in as little as a week, depending on how long an ISP keeps a log. It also takes a lot of technical expertise to track these swindlers, providing a challenge for fraud-related crime units. Scam artists are encouraged by these factors, hoping that setting up shop on the Web will prove easy and profitable.

Small businesses are a target

Some scam artists specifically target small businesses. Here are some of the reasons why:

  • They may have less experience. Scammers prey on the inexperienced -- those new to the Internet or the business that may not know how to avoid scams.

  • They don't have a full-time legal staff. Most small businesses don't employ a full-time legal staff that could investigate possible frauds or prosecute a scam once it has been committed. While small business owners may be able to perform these functions themselves, scam artists count on business owners not having time to pursue them while running the business.

  • They may need financial backing. New and potential small business owners are often in the market for some sort of financial backing to get their feet on the ground. Whether to set up shop, acquire new computers and inventory, or hire employees, small businesses need capital to begin and maintain business. Online deals offering "free money" and upfront cash can be tempting for the small business owner.


Scams to watch out for

  • Funding and "free money" scams: In these scams, advertisers offer "registration" or "information" relating to government programs you might qualify for. They require a fee charged to your credit card, in exchange for a gateway to the secrets of government programs or other sources of free money for small businesses. They may claim the fee is for processing your application, which is required to claim this free money. The credit card transaction takes place over an insecure server, and the company soon disappears, abuses the credit card information, or simply does not deliver the product they claimed they would.

Pyramid schemes: In these illegal schemes, investors recruited early are paid with money from investors recruited later, but eventually it becomes impossible to have enough recruits for the payment structure to work, so the scheme collapses and most of the investors lose the money they've put in. An "investment strategy" that requires you to invest a large sum of money and recruit others to do the same is probably a pyramid scheme. You can get more information from the Federal Trade Commission on this issue.

  • Stock manipulation: The distribution of fraudulent company information can affect stock prices -- to the scam artist's advantage. The false information may warn of bankruptcy or acquisition, affecting the price of stock. If you invest in stocks with your small business revenue, be aware of this scam. Check your sources carefully when you receive stock tips or news.

  • Internet auction fraud: While you may find online auctions a useful way to obtain reduced-price goods for your small business, be cautious when conducting transactions on auction sites. While most auctions featured at reputable sites are genuine and trustworthy, this form of online trade gives scam artists the opportunity to take advantage of buyers. Thoroughly read the auction site's agreement to be sure you will be protected in the case of a scam, such as no-show products or fraudulent use of your credit card. Make sure the site you are using offers secured payment options. Finally, be sure to keep hard copies of all bids and transaction confirmations.


Resources to help you spot a scam
There are many resources available that you can use if you have questions about the legitimacy of a business. If you'd like to learn more about a venture you're considering, the Internet can help you. A few of these resources are listed below:

The government has many resources for small business owners and those concerned about fraud or Internet scams.


The BBBOnLine Reliability seal program is the Better Business Bureau's reliability assurance program for the Web. Qualifying companies post the BBB seal on their website. The seal allows Web shoppers to check BBB information on a company and be assured the company will stand behind its service.



Additional guidelines
You may occasionally come across a deal, offer, or company online that seems too good to be true. Here are some additional guidelines to keep your small business safe from scams:

  • Use common sense. If a deal seems to good to be true, it probably is.

  • Beware bulk email. Bulk email that uses copious capitalization and heavy-handed punctuation is a dead giveaway for offers that are too good to be true. For example: "APPLY NOW!!!!!!! EARN $$$$$ FOR YOUR BUSINESS!!!!" This type of aggressive marketing probably isn't the sign of a reputable company or legitimate offer.

  • Watch out for anonymous addresses. Also beware of anonymous email or addresses that appear to be randomly generated, such as "j2g4tu35@1bestnetdeal4u.com." Senders of unsolicited bulk email -- spammers -- use this tactic to avoid being blocked by Internet service providers and individual users.

  • Bring backup. Print a hard copy of online transactions. If you take advantage of an online offer or purchase, print the confirmation page, including the URL for the offer, time and date, transaction amount, and any other relevant information. You will need this information later if the deal turns sour.

The Internet is an easy place for scam artists to lurk about anonymously, taking advantage of small business owners and others in need of capital or goods and services. The Internet is also a vast resource if you're in search of ways to save money for your small business. If you are wary of deals too good to be true, and investigate the claims of a company before spending your hard-earned cash, you can steer clear of Internet scams.
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