Occurrences of online fraud complaints: 2002 through 2015

• Published date: 02 October 2017
• Date: 02 October 2017
• DOI: https://doi.org/10.1108/IJAIM-12-2016-0113
• Pages: 484-504
• Author: Kai S. Koong,Lai C. Liu,Hong Qin,Tingting Ying
• Subject Matter: Accounting & Finance,Accounting/accountancy,Accounting methods/systems

Occurrences of online fraud

complaints: 2002 through 2015

Kai S. Koong

School of Economics and Management, Xidian University, Xian, China

Lai C. Liu and Hong Qin

Robert C. Vackar College of Business and Entrepreneurship,

The University of Texas-Rio Grande Valley, Mcallen, Texas, USA, and

Tingting Ying

Ningbo University of Technology, Ningbo, China

Abstract

Purpose –The purpose of this paper is to report on the f‌indings and lessons that were learnedfrom the

many cases of internetfraud complaints that are gathered by the Federal Trade Commission in the USA. The

implications that are contained in the behavior of the complaints and trends identif‌ied are critical for

addressingall types of online criminal activities in the increasingworld of cybercrimes.

Design/methodology/approach –Data for this paper are extracted from the Consumer Sentinel

Network Data Handbookcovering a period of 13 years. Using the raw data, the occurrenceswere plotted and

trends (number of cycles, time between cycles, and leading state and lagging states) were identif‌ied.

Descriptive statisticscovering the 13 years were examined and discussed. Using20002 as the base year, the

rate of growthof each of the states were ranked annually and weretested for stability and predictability using

non-parametricapproaches.

Findings –The key f‌indings are indigenous to the occurrences of online fraud complaints in the USA.

However, as the leading nation with the best database on fraud complaints, the f‌indings are mission

critical to fraud prevention across the globe. Specif‌ically, this study found that since 2002, there have

been four distinct cycles. Each cycle is clearly noticeable because there is a rapid growth in the number

of crime complaints in the beginning half of the period followed by a slowing down period. However, the

speedofchangefromonecycletothenextissteeperandthetimegapisfaster.Whileitistruethatfrom

the perspective of all the 50 states, the ranks appear to change every year and thus are not stable.

However, the majority of the changes are relatively small so their relative positions by rank are still

predictable.

Originality/value –The paper extends existing understanding of online fraud occurrences in the USA.

The f‌indings are timely and based on longitudinal data that span over a decade. The four new cycles

identif‌ied arecritical to the body of knowledge. The observed change in timefrom one cycle to another and its

changes from a mathematicto a geometric one are also new. The f‌indings are invaluable to personsworking

in law enforcementrelated occupations (auditors, lawyers,forensic experts, among others) and who must deal

with the increasingproblem of online fraud and cybercrimes.

Keywords United States, Fraud, Crime, Internet, Complaints, Online

Paper type Research paper

This research paper is written and dedicated to the loving memory of Dr Lee Yao, an Editor of the

International Journal of Accounting, Information and Management. Dr Yao was a Distinguished

Professor at Loyola University of New Orleans and an expert in forensic accounting. His

contributions to the academy are numerous and will be dearly missed.

IJAIM

25,4

484

Received8 December 2016

Revised8 December 2016

Accepted27 December 2016

InternationalJournal of

Accounting& Information

Management

Vol.25 No. 4, 2017

pp. 484-504

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-12-2016-0113

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1834-7649.htm

Introduction

Dinning out at a fast food outlet, shopping at a retail chain, seeing a movie,getting garden

supplies, exercising at a gym, riding a taxi and browsing the internet for holiday deals are

all fairly common and relaxing activities. All of these purchases canconveniently be taken

care of with the swipe of a bank card or a scanfrom a cell phone in China with a “Taobao”

account. Unfortunately, the same convenience and ease of use afforded to law abiding

citizens is also available to criminals. Unlike the old days where the criminals have to be

located next to the targeted victim to steal from his pocket or her purse,modern day crimes

can be committed by someone far away. In the era of cybercrimes, the types of perpetrators

are extremely hard to catch and they operate differently.The perpetrator can be a child who

is an amateur and is curiously hacking into the Pentagon or a computer scientist who is a

technology expert and siphoning money from multiple f‌inancial institutions around the

globe. While it is true that most of them can steal personal information for f‌inancial gain,

they can also terrorize and bully people, as wellas shut down governments from anywhere

in the world (Brenner,2010).

Business and f‌inancial transactions are no longer as risk-free as they used to be either.

E-mails that bears the off‌icial logosof the brokerages, signatures of certif‌ied brokers and the

Verisign logo recommending a “too goodto be true”opportunity can be as fake as snake oil

that is sold by a shrewd street vendor. Countless victims have often been lured and

persuaded into buying sharesof non-existent companies or enterprises because they fell for

social engineering portrayed gimmicks (Clifford, 2011). Even the card that was used for

riding the taxi and used to pay for some groceriescan suddenly not be approved because the

spending limit has been exceeded.Upon calling the bank, it is discovered that the card was

used by an unknown party for a gold chain and a couple of jade bracelets just 30 min ago.

Later, it is learned that the taxi driver has successfully captured the card as well as pin

number with a smart device and sold the information to a third party. Unfortunately, the

victim’s nightmare has only just begun. Besidesf‌iling a long and fairly useless report at the

police station, he/she will have to f‌ight the bank to get the money back as well as monitor

and clear up his/her credit history. If the former task is called “really hard”to attain, the

better word to describe the lattertask is “almost impossible”to clear.

Among the masses living in educated and advanced economies, many of thesenew and

negative developments are fairly hard to believe. Computer technologies have come a long

way, and the internet access is now ingrained in the routine activities of human, be it for

leisure or for business. The sad reality is, withoutthe absence of a guardian, the presence of

a motivated offender and the availability of a target with unique factors, Routine Activity

Theory tells us that it is the ripe place for crimes to happen (Fu et al.,2013). This is how

Nigerian youths become world famous for theirroles in the world of cybercrime. Called the

“yahoo-boys”, many of these youths are students in tertiaryinstitutions who are motivated

by easy money that can be used for paying their school fees, acquiring cars and land, and

sustaining a luxuriouslife style. Targeted victims (customer details) are meticulously leaked

to the yahoo-boys by fraudsters and bank staff who also arrange for bail-outs. These

nefarious and informal networks are able to thrive in Nigeria because law enforcement is

riddled with unbridled corruption itself (Tade and Aliyu, 2011). Even in a developed nation

such as Canada, cyber-fraud is a criticalproblem because there is a clear scarcity of data for

measuring the pervasiveness and costs of cybercrimes. Information is incomplete and

fragmented or is simply not recorded (Roberts et al.,2013). Again, there must be a guardian

(government in this case) that must institute a national databank of known cyber-fraud

offenders and cases to get a better understanding of the occurrences of fraud that is being

committed, whetherit is Canadaor any othernation.

Online fraud

complaints

485