An analysis of fraud on the Internet

Abstract

This paper examines the issue of fraud on the Internet and discusses three areas with significant potential for misleading and fraudulent practices, namely: securities sales and trading; electronic commerce; and the rapid growth of Internet companies. The first section of the paper discusses securities fraud on the Internet. Activities that violate US securities laws are being conducted through the Internet, and the US Securities and Exchange Commission has been taking steps to suppress these activities. The second section of the paper discusses fraud in electronic commerce. The rapid growth of electronic commerce, and the corresponding desire on the part of consumers to feel secure when engaging in electronic commerce, has prompted various organizations to develop mechanisms to reduce concerns about fraudulent misuse of information. It is questionable, however, whether these mechanisms can actually reduce fraud in electronic commerce. The third section of the paper discusses the potential for fraud arising from the rapid growth of Internet companies, often with little economic substance and lacking traditional management and internal controls. The paper examines the three areas of potential Internet fraud mentioned above and suggest ways in which these abuses may be combated.