Non-Delivery / Non-Payment Scams Are Big Business!
HERE’S HOW YOU CAN AVOID BECOMING A VICTIM
What is Non-Delivery Fraud?
In non-delivery fraud, criminals promise highly sought-after goods, collect a payment, then never deliver. While the principle is simple, the fraud scheme is often sophisticated and can yield huge profits.
But it can also be the case that you are selling something, such as on eBay, and have to ship something to a buyer! Non-delivery and Non-Payment fraud go hand in hand.
Criminals are able to adapt a well-established set of methods to suit any kind of product, from masks during a pandemic to electronics or even everyday items such as paper.
The bigger the sale, the bigger the profit. Products are sold by the container load, meaning that payments can easily run into the millions.
What is Non-Payment Fraud
You are financially responsible for fraudulent purchases by your customers and/or customers’ non-payment of purchased services.
Scammers buy things from you with stolen credit cards or bogus checks. You ship the item, but you may not find out it was a fake payment for a couple of weeks, and by then you lost the physical goods.
To avoid and/or address fraudulent activity or misuse, it’s important to understand potential risks and to develop policies and practices that can reduce your exposure.
It’s Organized Crime
Contrary to popular belief, these types of scams aren’t just carried out by lone “wheeler-dealers”. Organized crime groups have gone to great lengths to set up a sophisticated modus operandi involving websites, salespeople, intermediaries, and of course, bank accounts. Scams often involve more than one country in order to make victims feel helpless and complicate investigations.
Advertising Draws Victims In
Glossy advertisements imitate those of trustworthy businesses, attracting victims with high-quality images, brand names, and genuine reference numbers. Criminals approach potential buyers online or in person by infiltrating professional purchasing circles.
Fake websites and social media accounts almost identical to those of known businesses offer several ways to make contact with the alleged seller. Online contact forms, phone numbers, and email addresses all give the impression of a legitimate customer service center.
Everything Looks Very Official
Once contact is made, the sales exercise can begin. Prices for large orders are negotiated and validated by “superiors”. Scammers provide contracts, proforma invoices, and paperwork on official letterhead.
Careful planning goes into making the sale look as normal as possible to avoid detection.
Fraudsters then ask for an advance payment to secure the merchandise. The payments, which can go from 40% to 100% of the full order depending on the total amount, are made directly into accounts that have been opened under registered (fake) companies.
Finally, victims are given links or tracking numbers so that they can follow the shipment from the supplier to the destination.
Salespeople Manipulate Victims And Create Relationships
Alleged sellers work hard to create trust with the buyer. Whether it is flattery (“you’re my best client”), social engineering Social engineering is the psychological manipulation of people into performing actions or divulging confidential information. It is used as a type of confidence trick for the purpose of information gathering, fraud, or system access, it differs from a traditional "con" in that it is often one of many steps in a more complex fraud scheme.
It has also been defined as "any act that influences a person to take any action that may or may not be in their best interests." (“you’re so lucky, this product is impossible to find right now”), or lies (“we got special permission for this shipment”), the scammer will maintain contact throughout the delivery process.
The scammer will also invent as many reasons as possible to obtain extra payments along the way, such as customs fees, express delivery, insurance, etc. Contact is maintained until the victim starts to hesitate, becomes irate, or accuses the salesperson of fraud.
Then They Disappear
Once scammers feel they have been uncovered, they end all contact. Phones are cut off, emails go unanswered and websites are shut down. Victims are left in shock and ashamed, often reluctant to report the fraud to superiors and police.
Criminals, on the other hand, move on quickly and start a new fraud with a new product. If one domain is suspended or taken down, other domains are still available to attract new victims. The cycle starts again.
How To Protect Yourself From Non-Delivery Fraud
Follow these steps to protect yourself from experienced fraudsters:
- Be aware of bogus websites – criminals will often use a web address that looks almost identical to the legitimate one, e.g. ‘abc.org’ instead of ‘abc.com’;
- Verify the company/individual offering the items before making any purchases;
- Check online reviews and consumer protection groups – for example, have other customers complained about not receiving the promised items?;
- Be wary if asked to make a payment to a bank account located in a different country, as it is more difficult to liaise with entities abroad once fraud is detected;
- Keep your radar on high alert, especially if you are asked to pay unplanned fees;
Most importantly, if you believe you have been the victim of fraud, alert your bank and police immediately so the payment can be stopped and/or recalled.
According To The FBI FBI - Federal Bureau of Investigation
The Federal Bureau of Investigation (FBI) is the domestic intelligence and security service of the United States and its principal federal law enforcement agency. Operating under the jurisdiction of the United States Department of Justice, the FBI is also a member of the U.S. Intelligence Community and reports to both the Attorney General and the Director of National Intelligence. A leading U.S. counter-terrorism, counterintelligence, and criminal investigative organization, the FBI has jurisdiction over violations of more than 200 categories of federal crimes, including financial fraud.
Non-Delivery of Merchandise
Non-delivery of merchandise is a scheme most often linked to Internet auction fraud, in which a seller on an Internet auction website accepts payment for an item yet intentionally fails to ship it. Sellers like these sometimes will relist the item and attempt to sell it again through a different username.
Non-delivery of merchandise can also be considered a form of business fraud in a number of cases. For example, some web-based international companies advertise in the U.S. for affiliate opportunities, offering individuals the chance to sell high-end electronic items, such as plasma television sets and home theater systems, at significantly reduced prices. When these items sell and the funds are forwarded to the companies from their affiliates, the items fail to ship to the individuals who sold them and thus never make it to their respective buyers.
Tips for Avoiding Non-Delivery of Merchandise:
- Make sure you are purchasing merchandise from a reputable source.
- Do your homework on the individual or company to ensure that they are legitimate.
- Obtain a physical address rather than simply a post office box and a telephone number, and call the seller to see if the telephone number is correct and working.
- Send an e-mail to the seller to make sure the e-mail address is active, and be wary of those that utilize free e-mail services where a credit card wasn’t required to open the account.
- Consider not purchasing from sellers who won’t provide you with this type of information.
- Check with the Better Business Bureau from the seller’s area.
- Check out other websites regarding this person/company.
- Don’t judge a person or company by their website; flashy websites can be set up quickly.
- Be cautious when responding to special investment offers, especially through unsolicited e-mail.
- Be cautious when dealing with individuals/companies from outside your own country.
- Inquire about returns and warranties.
- If possible, purchase items online using your credit card, because you can often dispute the charges if something goes wrong.
- Make sure the transaction is secure when you electronically send your credit card numbers.
- Consider using an alternate payment service.
PayPal Also Recommends To Reduce Non-Payment Fraud
How can you prevent fraud when shipping an order?
Here’s how you can help prevent fraud when shipping an order:
VERIFY SHIPPING ADDRESS
Go online and verify the shipping address. Look for red flags such as shipment to a freight forwarder, shipping company, P.O. Box, hotel, or a vacant property. Fraudsters often ship orders to addresses that can’t be traced back to them.
- Freight forwarder: Third-party shipping service that reships merchandise to another location (typically abroad) for a fee. To see where your package is being sent to, simply enter the shipping address into a search engine. If the search results show the name of the shipping company, be more cautious.
- Shipping companies or P.O. boxes: Fraudsters like the anonymity that shipping companies and P.O. boxes provide. However, there are also a lot of legitimate reasons for using a shipping company or a P.O. box. You just need to be more cautious, since shipping to P.O. boxes and shipping companies are typically riskier than shipping to residential addresses.
- Money / Parcel mule A money mule sometimes called a "smurfer," is a person who transfers money acquired illegally (e.g., stolen) in person, through a courier service, or electronically, on behalf of others (usually criminals that they are knowingly or unknowingly affiliated). Typically, the mule is paid for services with a small part of the money transferred - but not always. Mules may or may not be aware that they are performing these actions. Money mules are often dupes recruited online for what they think is legitimate employment, not aware that the money they are transferring is the product of crime. The money is transferred from the mule's account to the scam operator, typically in another country. Similar techniques are used to transfer illegal merchandise. Mules can be prosecuted for numerous crimes.: Fraudsters pay people (known as money mules Money mules are a type of money laundering where a person transfers illicit funds through a medium (such as a bank account) to obfuscate where the money came from. There are different types of money mules including witting, unwitting, and complicit.) to have orders shipped to their address. The money mule A money mule sometimes called a "smurfer," is a person who transfers money acquired illegally (e.g., stolen) in person, through a courier service, or electronically, on behalf of others (usually criminals that they are knowingly or unknowingly affiliated). Typically, the mule is paid for services with a small part of the money transferred - but not always. Mules may or may not be aware that they are performing these actions. Money mules are often dupes recruited online for what they think is legitimate employment, not aware that the money they are transferring is the product of crime. The money is transferred from the mule's account to the scam operator, typically in another country. Similar techniques are used to transfer illegal merchandise. Mules can be prosecuted for numerous crimes. receives the package, then reships it to the fraudster A Scammer or Fraudster is someone that engages in deception to obtain money or achieve another objective. They are criminals that attempt to deceive a victim into sending more or performing some other activity that benefits the scammer.’s address. Be careful if you have a lot of orders from different customers that are shipped to the same address.
- Vacant property: To identify vacant properties, enter the shipping address into a search engine. If the property is currently listed as for rent or for sale, it could be vacant.
SHIP WITH ONLINE TRACKING
Use a shipping service that provides online tracking to help confirm the item was delivered. Standard shipping receipts only show that an item was shipped.
- Online tracking services prove the item was delivered.
- If the total sale is for $750 or more, obtain signature confirmation to confirm your customer received their order – the nominal expense is well worth it.
- Use your discretion when shipping internationally using First Class Mail International since this shipping service is not accepted under PayPal’s Seller Protection Policy.
ORDER SHIPPING INSURANCE
Too many things can go wrong in transit. That’s why it’s important to purchase shipping insurance for items that are fragile or expensive. Shipping insurance serves two purposes:
- Insures the item in the event it is lost or damaged.
- Includes tracking and delivery information so the customer can see that the order is en route, and you will know when the package was delivered.
In case of a shipping problem, file an insurance claim with the shipping company.
You, your customer or the shipping company can report claims. Contact your shipping company for detailed instructions on how you should proceed with a claim.
- Be aware of insurance exceptions.
- Liability for loss or damage may be limited depending on the type of package, the declared value, and/or the shipping company. Talk to the shipping company to ensure proper coverage.
DELAY SHIPPING HIGH-RISK ORDERS
- Delay shipment for new orders that are expensive and in demand for 24 to 48 hours, especially when shipping internationally.
- Use caution when shipping overnight. Fraudsters will often ask for overnight shipping so that they can resell expensive merchandise as quickly as possible.
USE YOUR OWN SHIPPING SERVICE
Do not use your customer’s shipping company when mailing orders. Packages can be rerouted by the customer to other addresses after shipment, and won’t be covered by Seller Protection.
USE CARE WHEN CHOOSING OR ACTING AS A DROP SHIPPER
Since you’re responsible for delivering what the customer orders, it’s critical to choose a reputable drop shipper to help avoid losses.
- Be wary of drop-shipping companies located in high-risk countries.
- If you’re a drop shipper, have a vetting process in place for all suppliers. This should include inventory management and product guarantees (to ensure that items are in stock and you’re delivering high-quality merchandise).
Issue returns quickly and let customers know when you are out of stock/inventory
If an item is out of stock, remove the listing or update it to reflect the out-of-stock status. Provide an estimated in-stock date or clearly indicate that customers who choose an out-of-stock product are placing an advance order.
Example: A new customer orders a $10,000 chandelier. Here is what you can do:
Search an online map to see who and where the order is being shipped. Is the order being shipped to an expensive home, motel, or to a freight forwarder?
Use a search engine or social networking site to verify the name and shipping address. Does the name, shipping address, and billing address match?