FTC Law Enforcers Must Be More Creative, Cooperative to Combat Online Fraud
The Federal Trade Commission told the Senate Finance Committee today that the growth of the Internet promises enormous benefits to consumers and the economy, but that "there is a real danger. . .that these benefits may not be fully realized if consumers identify the Internet with fraud operators. . . .Because the Internet transcends national boundaries, law enforcement authorities must be more creative and cooperative if we are to succeed in combating online fraud," FTC testimony says.
Hugh Stevenson, Associate Director in the FTC's Bureau of Consumer Protection, told the committee that ". . .the boom in e-commerce has opened up fertile ground for fraud. The Commission's experience is that fraud operators are always among the first to appreciate the potential of a new technology to exploit and deceive consumers." The testimony notes that long-distance telemarketing and pay-per-call technology attracted con artists when they were introduced. "Internet technology is the latest draw for opportunistic predators who specialize in fraud. In 2000, over 25,000 complaints -- roughly 26 percent of all fraud complaints logged into Consumer Sentinel [the FTC's fraud database] by various organizations that year -- related to online fraud and deception. The need -- and the challenge -- is to act quickly to stem this trend while the online marketplace is still young," the testimony says.
The testimony notes that the FTC has used a variety of tools to combat online fraud. "Since 1994, the Commission has brought 170 Internet related cases against over 573 defendants. It obtained injunctions stopping the illegal schemes and ordering more than $180 million in redress and obtained orders freezing millions more in cases that are still in litigation."
The testimony notes that the FTC is using some new approaches to tackle Internet fraud. "The Commission is developing new methods of collecting and analyzing information about both the offline and online marketplace, drawing upon the power of new technology itself," the testimony says. It says Consumer Sentinel, a web-based consumer fraud database and law enforcement tool is a "central part of this effort". "Consumer Sentinel receives Internet fraud complaints from the FTC's Consumer Response Center which processes both telephone and mail inquires and complaints," and from 64 public and private law enforcement partners. The agency provides secure access to this data, over the Internet, free of charge, to over 300 U.S., Canadian, and Australian law enforcement organizations, "including the Department of Justice, U.S. Attorneys' offices, the Federal Bureau of Investigation, the Securities and Exchange Commission, the Secret Service, the U.S. Postal Inspection Service, the Internal Revenue Service, the offices of all 50 state Attorneys General, local sheriffs and prosecutors, the Royal Canadian Mounted Police, and the Australian Competition and Consumer Commission." The testimony says in 2000, Consumer Sentinel received over approximately 100,000 consumer complaints."
The testimony says that the FTC has provided training seminars and held sessions on new technology, investigative techniques and Internet case law to other law enforcement agencies. "In the past year, the Commission has presented Internet training seminars in seven U.S. cities, and in Toronto, Canada and Paris, France. In addition to FTC staff, these sessions trained approximately 800 individual participants from other law enforcement agencies. These participants represented twenty different countries including the U.S., 26 states, 22 federal agencies, and 14 Canadian law enforcement agencies.
Other innovations used to combat Internet fraud include "Surf Days," where FTC and law enforcement partners "surf" the web for specific types of claims or solicitations that are likely to violate the law; "Sweeps," where the FTC and partners target a particular type of scam for law enforcement action; and an aggressive campaign to educate consumers and businesses. "More than 200 of the consumer and business publications produced by the FTC's Bureau of Consumer Protection are available on the agency's Website," and many are available on a site set up by the FTC to provide consumers with "one-stop" access to consumer information at www.consumer.gov. "Law enforcement alone cannot stop the tide of fraudulent activity on the Internet. Meaningful consumer protection depends on education, as well," the testimony says.
The Commission vote to approve the testimony was 5-0.
Copies of the testimony are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357)
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