Sale of Illegal Goods via The Internet

The sale of contraband items and the popularity of internet use, are very positively correlated. Moreover, this correlation is having a negative impact on a variety of things at different levels. The internet had become more than just a traffic route for information, but also for items such as prescription drugs, marijuana, wildlife products, scalped tickets, counterfeit identification, other counterfeit and a variety of other items that are either illegal, or not accepted by social norms. This is causing many problems in respective industries, as well as on the streets. Although much is being done in the way of preventing this malpractice, only a very small number of websites have been shut down.

WEBSITES USED

Some examples of common ways these websites are used to sell illegal goods

EBAY: anyone can sell or buy from Ebay. For example if someone wants to sell a counterfeit DVD, they can advertise it as an original or in its original case. Upon purchase of the item, the seller would erase their account and the sale cannot be traced back to them. Unfortunately, because it is not the website that is responsible for sale of illegal goods, the only way these actions can be prosecuted is through apprehension of the instigator. If the seller deletes their account then there is no way to trace them, and the trail is lost.

GUNBROKER: anything related to guns and/or gun parafenailia can be sold on this website. It is basically an Ebay for guns. Security measures are enforced through shipping of the purchase. Whatever is purchased must be shipped through and picked up by a licensed gun dealer, and the buyer can pick it up from them. Some problems associated with this method are that someone could pose as, or have a fake license and obtain guns at relatively less than market price.

MARIJUANAGRAMS: A website such as this, which is used for the purchase of marijuana can exist under a religious or medicinal guise. Because the discussion and observation of pictures of the drug is not illegal, the website cannot be prosecuted. It is only illegal if the person is caught in possession, therefore these types of websites are allowed to exist to, causing much frustration to law enforcement.

Types of Goods Sold

The internet is a convenient place to buy and sell a variety of goods. As the popularity of the internet has grown, so too has the amount of goods sold via the internet. In fact, in 2006 alone, online spending in the United States reached an all time high of just over $100 Billion. Each year that number continues to climb, with many "online only" stores springing up, as well as many retail stores expanding their online accessibility. Although online shopping can be beneficial and save consumers money, that convenience bring with it a new issue, with such a gravity most people don’t feel; the sale of counterfeit and illegal goods via the internet. It is become trivial for criminals and scalpers to make money online, selling various contraband and illegal goods.

Tickets

In Alberta, and other provinces and states, it is illegal to sell or "scalp" tickets for any price above the face value. That being said, there are still many ticket scalpers who sell tickets online for profit. Anything from concerts to sporting events to vacation tickets can be found online simply by using a familiar website: Ebay. A search for tickets on Ebay yielded these results (and more). Note that they are all above the original sale price.

Two tickets to Montreal/Toronto (NHL) (nosebleeds)---> $429
Two tickets to Boston Celtics home game (NBA)---> $1099
Four tickets to boxing match (de la Hoya vs. Pacquiao) --> $28,000
Two ACDC tickets (floor seats) --> $6110

Illegal Substances

Drugs

Much to the discontent of law enforcement organizations, drugs (illicit, and prescription) are available online and are often advertised bluntly as their street name. One site, (www.marijuanagrams.com) which specializes in the sale of marijuana, is set up in a similar fashion to many other online shopping sites. It contains a shopping cart, currency converter (contributing to international sales) and various other features which to ease the process of purchasing the substance. A second web page (www.marijuana-215.org) sells a variety of illegal substances and other related contraband. There are many other websites of a similar nature, all of which accelerate the use, sale, and abuse of the products available via the former.

Aside from traditional "street drugs," some that are not typically found on the street can easily be found on the internet. Prescription drugs are widely available online (without a prescription). Many of these drugs are not FDA approved, and have been deemed unsafe for use (by medical authorities). Not only is the unauthorized sale of prescription drugs illegal, but it jeopardizes the health of the consumer.

Another issue related to prescription drugs being available online (with no prescription), is untrained and uncertified individuals running a "back door pharmacy." From a business perspective, this hampers the profits of large medical corporations (Merck, Rexall, GSK etc..), who are leading the world on various biomedical research projects. From a health care perspective, a more direct effect is of concern. During rough economic times, many people may not be able to afford their prescription from a legitimate pharmacy, so they turn to the "back door pharmacies," receiving medication. The medication they receive may or may not be safe.

Alcohol & Tobacco

Alcohol and tobacco products can also be found online. And because all you need is a credit card/paypal account, or in some cases just cash order, it is very accessible for people under the legal age to purchase alcohol and tobacco. Websites are required to ask for your age to verify that your legal, however that is very easy just to lye and say that your legal.

Counterfeit goods

Copyrighted Media

Available online is many different types of copyrighted media. These are usually very easy to make or copy and therefor can be sold very inexpensively. Some of these goods include:

CDs
DVDs
Computer software/games
Video games

Because of the widespread use of copying devices, and how exact people are able to produce copies of different media, it is often very difficult for the owners of the copyrighted material to track and prosecute criminals who sell these goods.

Counterfeit Identification

Counterfeit identification is another huge problem. Fake IDs are extremely easy to get and it's also very hard to try and stop it. There is an abundance of different websites online that offer fake drivers licenses, passports, etc...

Some of the websites claiming to get you "perfect" fake IDs for upwards of $200 include:

www.newid.com
www.fakecard.co.uk
www.21overnight.com

Fake Clothing

One of the biggest and most common issues with online selling is that of fake items. Most commonly these are luxury items and are mainly clothing and accessories. Sites like EBAY and KIJIJI have major issues with counterfeit goods, however, in most cases the responsibility lies on the buyers and sellers to verify that the good is indeed authentic. A lot of these fake items come from Asia, primarily China, and look very similar but often have design flaws and are made with poor quality fabrics. Common examples of popular counterfeit clothing brands include Gucci, Louie Vuitton, Prada, Lacoste, and many others.

Miscellaneous

Guns & Ammunition

A whole website dedicated to buying and selling guns (gunbroker.com)

Ivory

Prostitution

The internet can also be a supplier of services, on top of just goods. One such "service" is that of prostitution. There are many websites which allow people to post ads for prostitution. Commonly these ads say things like "PERSONAL ESCORTS" or "FULL SERVICE".

Major websites, such as Craigslist claim that they are trying their best to cut down on the amount of prostitution ads being placed, however, there are still many advertisements online selling these special services.

Methods

Who Are the Instigators?

Anyone can sell anything through the internet, which is what makes tracking illegal activity so difficult. All they need is access to a computer, internet and the drive to do so. Whether or not the good being sold is illegal or not, the ability to sell personal and general items is becoming unlimited. The fact that there are so many ways to manipulate and control the market place makes it even more attractive. With new ways of circumventing the system being created everyday, it is becoming more and more difficult to crack down on this type of activity. One of the most effective ways to solve this problem is to make people informed and aware. To get the information out so that people will be able to recognize questionable situations and products.

The Outright Sale of Contraband Items

In most cases, when people are selling contraband goods, they do not make any effort to "disguise" what they are selling. This is generally due to the fact that tracing people over the internet can be hard to do, and is rarely done. Therefore, the chance that either buyers or sellers will be caught and punished is very slim. One way that contraband items are sold outright is on general auction websites (such as Ebay.com or Amazon.com), where any type of good can be sold. However, one problem with using these websites for the sale of contraband items is that they may be monitored. For example, Ebay employs over two thousand people worldwide to tackle counterfeiting alone. Therefore, sellers run the risk that the items they are selling may be taken down, or that their accounts may be cancelled. As a result, a second way that people sell contraband items online is over specific websites that are dedicated to the sale of a certain good. Three main types of contraband goods that are sold on specific websites are drugs, guns and ammunition, and conterfeit identification. One example of a website dedicated to the sale of drugs is marijuanagrams.com, which focuses on the sale of marijuana and other drug paraphernalia. An example of a website which sells guns is gunbroker.com, which not only sells guns, but ammunition as well. An example of a website dedicated to the sale of counterfeit identification is www.fakecard.co.uk. All of these websites claim that their site is not responsible for any of the illegal activity that occurs on or because of the website, and that ultimately, it is the users responsibility to obey all applicable laws. However, since most individuals feel that there is very little threat of punishment, the sale of contraband goods continuously occurs.

Making Sales "Legal"

In an effort to avoid punishment by the law, many of those who sell contraband goods via the internet try to come up with ways to make the sale of these goods legal. While this is not possible for all types of illegal goods, a prime example can be found when looking at the resale of event tickets. In many countries, ticket scalping, the sale of tickets at a price higher than their original value, is illegal. Punishment for ticket scalping can range from warnings, to hefty fines, to time in prison. As a result, many sellers will often include an additional item for sale with the tickets. While ticket scalping is illegal, the sale of almost any other good at a price higher than its original value is within the confines of the law. Therefore, by adding the additional sale item, the seller may price the items as high as they wish, as any extra costs may be attributed to the non-ticket item. For instance, when reselling tickets to a sold out sports game, many sellers will include a team jersey or other team paraphernalia in addition to the tickets. A second example can be found when looking at the resale of concert tickets, where sellers will often include a CD as part of the package. These sellers will then price the "ticket package" at a much higher cost than what it was originally worth. It is clear that buyers are paying significantly more to get ahold of the tickets rather than the additional item, as there are little or no tickets available yet the added item is usually widely available. However, since nothing can be done to prove this, there is no way that the sellers can be punished.

A second method used by individuals who resell event tickets is to sell the tickets out of a state/province where ticket scalping is legal. Since the laws regarding ticket scalping are not federal laws in Canada or in the United States, each individual province/state is responsible for creating their own laws on the matter. For example, the state of New York has strict laws probibiting the resale of tickets above face value. However, in the state of Hawaii, ticket scalping is legal. Therefore, individuals wishing to sell tickets to an event in New York may do so legally if they sell the ticket in Hawaii, or any other state which permits the sale of tickets above face value.

False or Misleading Advertisement

While it is true that many individuals who wish to sell contraband items over the internet do not try to disguise what they are selling, there are those who use false advertising to mislead the consumer. This technique is most commonly used when selling counterfeit goods, such as clothing, accessories, or prescription drugs. In the case of counterfeit clothing and accessories (such as footwear, jewellery, perfumes, and purses/bags), many sellers claim the the goods up for sale are made by high end labels, when in fact, they are only replicas. Some of the labels that are commonly duplicated are Louis Vuitton, Channel, Tiffany and Company, Christian Dior, Nike, Lacoste, and countless others. In many cases, the consumer is unaware that the items that they purchased were not authentic until they have already paid for and received the product. While it is very hard to track down the individuals who make profit selling counterfeit clothing, there have been an increased number of cases where the seller has been caught and punished. In the case of counterfeit prescription drugs, the vendors may sell fake medication under the guise that is real. This can have extremely negative consequences on the consumer, as these drugs may be entirely ineffective, or may have unwanted side effects. Therefore, it is highly recommended that when buying prescription drugs, one buys directly from a pharmacy, rather than from a website online.

Manipulation By Auctioneers

Shilling: to drive up the selling price, auctioneers spuriously place bids on their own auction.
Bid siphoning: auctioneers avoid paying commissions to auction sites by contacting and transacting with interested bidders directly.
Second chance offers: losing bidders of a closed auction are offered a second chance to purchase the same item off-site.
Shell auction: with no intention of selling, auctions are established for the purpose of obtaining names and credit cards, which are then used to facilitate crimes such as identity theft.
Misrepresentation: specifications for the merchandise for sale are intentionally described incorrectly or the actual quality of the merchandise is overstated.
Failure to ship: auctioneers fail to send the merchandise upon receiving the money. In February 2005, a Queensland man was convicted in such a case.
Counterfeits/pirated software: counterfeits, usually luxury items, and pirated software are offered for sale.
Triangulation/fencing: stolen goods are offered for sale.
Fee stacking: hidden costs are added to the transaction after the auction has ended.
Sale of non-existent merchandise: in August 2003, two men were charged in Illinois with using stolen identities to sell nonexistent goods in online auction sites.
Using compromised accounts: in March 2007, a man was arrested on charges relating to hacking into two eBay users' accounts and using these accounts to sell nonexistent Apple iPods
The seller posts the auction as if he resides in the United States, then responds to victims with a congratulatory email stating he is outside the United States for business reasons, family emergency, etc.
Sellers post the auction under one name, and ask for the funds to be transferred to another individual.
The subject requests funds to be wired directly to him/her via Western Union, MoneyGram, or bank-to-bank wire transfer. By using these services, the money is virtually unrecoverable with no alternative for the victim.
Sellers act as authorized dealers or factory representatives in countries where there would be no such dealers.
Buyers who ask for the purchase to be shipped using a certain method to avoid customs or taxes inside another country.
The address of the credit card holder does not match the shipping address.

Manipulation By Bidders

Bid shielding: a dishonest bidder places a low bid while a colluding bidder places an inflated bid. The colluding bidder withdraws immediately upon winning the auction, resulting in a lower bid being accepted.
Failure to pay: bidders fail to pay for the merchandise received.
Buy and switch: buyers switch received merchandise with inferior merchandise and then request a refund.
False-name bid: bids are made under fictitious names or using stolen credit cards.

Manipulation Through False Advertising

Hidden Fees and Surcharges: advertising at a certain set price without dislosing any extras that may be charged. Face to face this can be solved simply by asking questions however over the internet this is more difficult because the instigator may be unable to be contacted an therefore the unknowns cannot be discovered until after the fact. For example, a pop-up advertising a "free" trip to Mexico will only advertise how it is free not that you have to pay for the hotel or other expenses once you are there.
Inflated Price Comparison: falsely increasing the regular price so that the comparison price appears to be a better deal.
Bait and Switch method: advertise an illusion of an excellent service at little or no cost, when in reality once interest is shown then the service is revoked on standards that were not previously known. This method correlates with Hidden Fees and Surcharges.
Deceptive Units of Sale/Pricing: Advertising a price or amount as a singular unit, when you have to buy more than one inevitably. For example, airline tickets; a one way flight may be advertised, but seeing as how you have to buy a return ticket the deal becomes not as attractive as originally expected.

Crime Prevention Measures

Anyone with a valid internet connection and a computer can participate in an online auction. With such a broad user base, what are auction websites and the government doing to stop illegal behavior through online auctioning.

Protection and Prevention Measures

Authentication Mechanisms

Authenticating the identity of online auction site bidders and sellers is the primary fraud minimization strategy. There are three ways in which individuals can be identified: by producing something that they have (id cards), something that they know (passwords), or something related to who they are (fingerprints). There are others, such as the use of a person's name or location and a variety of behavioural characteristics that can be used to identify people.

On most online auction sites users are identified by their email address and corresponding password. This can be used by fraudsters to facilitate illegal transactions since the email address is a perfect fictional name that does not reveal any links to the original user. Password based authentication has a share of disadvantages despite being cheap to use, easily erasable, and having a wide user base. In terms of user accountability, it might be hard to hold a user legally accountable for any actions done in a password-only authentication system. Also, most online auction sites only authenticate that the user has a valid email address, and clearly this is a weak form of security.

An additional security feature used by most online auctions is secure channel sign-in where the browser and the auction sites employ an SSL/TLS connection. This encrypts the user's password to ensure secure communication between the browser and the site, which helps to prevent password leakage from eavesdropping and illicit password seizure. However, a keylogger could still retrieve passwords, if such a program were installed on the user's computer.

Reputation mechanisms

The Feedback Forum on eBay, a reputation mechanism, is one important means to produce trust and motivate good behavior among members. The centralized forum provides registered eBay users with opportunities to rate each other as positive, negative, or neutral and leave comments after a transaction has taken place. Ratings can also be provided on the description of goods, communication, delivery time and packing charges. The running total reputation score of each participant is the sum of positive ratings minus the sum of negative ratings. In order to provide information about a participant's recent behaviour, the total of positive, negative and neutral ratings for three different time windows (past month, past six months and past year) are displayed.

Reputation systems can, however, be exploited. For example, in ballot stuffing, sellers conspire with bidders to give positive feedback on fictitious transactions, hence inflating the auctioneer's reputation

Third Party Prevention Measures

In some cases, third party organizations will have illegal sites shut down. For example, in the US, a website known as "LegitScript" had over 500 websites shut down. In the Unites States, websites have to be authorized via a registrar. Considering the immense quantity of registered websites, it has become an impossibility to police all of them, allowing many illegal websites to remain active. LegitScript has taken the onus to aide in the policing of such websites as well as to help the common consumer to locate and use safe, registered online pharmacies. It was started by John Horton, a former White House aide.

User Prevention Measures

Payment security

Individuals can take action to reduce the risks of fraud by choosing safer payment options, including credit cards and online payment services such as PayPal, that offer some form of consumer protection. Buyers should avoid using instant wire transfers or any independent third party payment services. There have been cases reported where payment services are controlled by dishonest buyers/sellers to commit frauds. Individuals can also take steps to protect their passwords and other personal information to prevent identity theft.

Education

User education at the point of transaction and through media releases by reliable institutions, such as the Internet Crime Complaint Center(IC3), enables users to keep up to date of the latest auction scams and the best fraud prevention measures available. There is a need for coordinated action by government agencies to ensure that the most effective advice is provided to the community. The following are some of these prevention measures recommended by such government agencies.

Before bidding, contacting the seller with any questions.
Reviewing the seller's feedback.
Cautiousness when dealing with individuals outside of your own country.
Understanding refund, return, and warranty policies.
Determining the shipping charges before you buy.
Not taking part if the seller only accepts wire transfers or cash.
Cautiousness of unsolicited offers.

Insurance Services

eBay and other auction sites do not offer online auction insurance themselves but some other third parties do. If PayPal is used to purchase an item individuals are covered by the PayPal Buyer Protection program as long as the transaction meets the eligibility requirements. Eligible transactions receive coverage up to the full purchase price and original shipping charges. This PayPal insurance covers items not received (INR) and significantly not as described (SNAD) transactions as long as the dispute is made wthin 45 days of the transaction. Most auctions on eBay state whether they are eligible for this PayPal insurance.

Government Prevention Measures

Auction sites, like garage sales, flea markets, classified advertisements and other independent sales venues, sometimes draw criminals wishing to sell stolen products, but for law enforcement organizations, finding stolen goods offered online is sometimes easier than more traditional detection methods.

Online auction sites attract FBI and other law enforcement agencies in part because stolen goods can be moved so readily but also because auction fraud complaints made up about 45% of the 207,492 complaints received by the FBI’s Internet Crime Complaint Center (IC3) last year, but that number is down significantly from 2005, when auction fraud was cited 63% of the time. Overall, the number of complaints received by IC3 was down 10% from the previous year, when the IC3 logged 231,493 complaints. But the total dollar losses reported were up in 2006, totaling $198 million for the year. In 2005 that number was $183 million.

Police arrested 9 individuals, in an operation codenamed "Peace-maker", mounted with a view to stopping the increase in the number of sales of concert tickets at an excessive price on some online auction websites. Following a two-week investigation, officers attached to the Technology Crime Division of the Commercial Crime Bureau identified a number of online auctioneers suspected to have pushed up the price of the ticket of a concert tickets by posing as other account holders making false bids against genuine bidders. Studies revealed that the original prices of the concert ticket ranging from $100 to $380 were pushed up to a level of $600 to $2,000. The officers raided nine locations, resulting in the arrest of three men and six women aged between 19 and 43 for offenses including fraud, criminal damage and access to computer with criminal intent.

Conclusion

The sale of contraband goods over the internet is difficult if not impossible to prevent, However steps are being taken to crack down on perpetrators and reduce the effects of the trade. One of the most effective methods to enforce this is through abstinence on the part of the sellers and buyers. If you are a buyer, take measures to clarify that the good you are purchasing is legitimate/legal, and if you are a seller take measures to present your product in a legitimate manner, with clarification for the buyer of where, when and how you obtained the good. And on both sides, refrain from sale or purchase of goods that are clearly illegal or have been obtained illegally.