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10 tips for spotting online escrow fraud

Most victims learn about escrow fraud the hard way -- by becoming victims. Don't let this happen to you.

With all the escrow fraud on the Internet, it's paramount that you scrutinize an escrow site carefully before signing up for any service. Otherwise you risk losing your money, merchandise and personal financial information to scammers.

These 10 tips will help you spot a phony escrow site before it's too late.

1. Watch out for copycat sites
Escrow.com is a legitimate escrow site, recommended by eBay. Many scammers copy content from Escrow.com when they build their phony escrow sites. Internet Escrow Service (IES) is a wholly-owned subsidiary of Escrow.com. IES only provides escrow services to Escrow.com. Any site that claims otherwise is fraudulent.

2. Call customer service
Call an escrow site's customer service number. Not being able to get a live person on the phone is a big red flag. If you call and get a fax or a generic voice mail that says leave a message, than it's probably a scam.

Avoid any escrow service that doesn't list an address or phone number.

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"It's a buyer-beware environment on the Internet," says John Hambrick, a supervisory special agent with the FBI at the Internet Crime Complaint Center. "The consumer needs to get on the telephone and converse with folks and verify their credentials."

3. Don't be talked into using a particular escrow service
Be suspicious of using an escrow service recommended by an online buyer or seller. Be sure to scrutinize the site carefully before using the service.

"When the seller directs you to an escrow site of their choosing, that's a warning flag," Hambrick says.

4. Verify and then trust
Verify any and all endorsements and credentials on an online escrow site. Are those really TRUSTe, Better Business Bureau and VeriSign Secure seals on an escrow site? Be sure to check.

"You're not being paranoid. It's a check you can do in two seconds," says Jeff Ostroff, who runs CarBuyingTips.com. Ostroff has helped shut down about 500 phony escrow sites since last summer.

Study all licensing information carefully. Being licensed as an independent escrow company is no mean feat. Contact any licensing authority listed on the site and verify that the site is actually registered. Check this information carefully. Many scam sites have ripped off the legitimate license number of Internet Escrow Services, a subsidiary of Escrow.com.

You'll also want to check when an escrow site's domain name was registered. Many scam escrow sites say they've been in business for years but only have been registered for a few days or weeks. You can use a "Whois" tool at any domain name registrar, such as Register.com, to find out.

5. Steer clear of escrow sites with sloppy content
A sloppy Web site is probably a scam. Spelling errors, grammar problems, inconsistent information or broken links are good indicators that an escrow site is a scam.

Of course, a polished Web site is no guarantee an escrow service is legitimate. A flashy, flawless escrow site could still be a fake.

"Some of them look so unbelievably real," Ostroff says.

No matter how good an escrow site looks, be sure to verify all claims and content.

6. How you pay could be a tip off
Take a close look at how an escrow site asks you to pay. If an escrow site asks you to make a payment to an individual or agent rather than a corporate identity, it's a scam. A legitimate escrow service will never ask you to send your money or your product to the other party.

Beware of escrow sites that use person-to-person money transfers such as Western Union and MoneyGram. Western Union is not affiliated with any escrow service.

An escrow company on the up and up will ask you to wire money from your bank to their bank. They'll provide you with a routing number and account number.

If you wire money to an escrow service, ask your bank to tell you where the wire transfer is being sent.

7. Do a Google search
Search for the escrow site on Google or another search engine. If your search turns up zero results, be wary. If your search turns up consumer complaints about the escrow site, avoid doing business with the site.

8. Be wary of "safe" and "secure" online escrow companies
Scammers love to use those words "safe" or "secure" when naming scam sites. A dash in an escrow company's name, such as secure-escrow.com, is another red flag. The dash seems to show up in many phony company names.

Avoid escrow sites with Web addresses that end in "org." A legitimate escrow service would never try to pass itself off as a nonprofit organization. You'll also want to avoid escrow sites with Web addresses that end in ".biz", ".cc", ".info" and ".US".

EscrowFraud.com and CarBuyingTips.com have long lists of known escrow fraud sites on their Web sites. CarBuyingTips.com lists screen shots of 12 common escrow scams.

9. Don't be blinded by a super deal
Many phony escrow sites place phony ads on Internet auction and classifieds sites. These ads promise potential buyers and sellers unbelievably good deals.

"A lot of times they'll put up a car and try to sell it for under market values, thousands less," Ostroff says. "And of course, there's no car."

Another tip off is when you send an e-mail to a buyer or seller and you get a scripted, "Dear Sir" response, referring you to an escrow site that they've used many times.

And if a seller offers to pay shipping and insurance on a really big item, that's another red flag that the deal may not be on the up and up.

10. Pass on overseas escrow companies
Avoid escrow companies based outside of the United States. Many escrow scammers are based overseas. You'll want to stick to an online escrow site that's based in the United States and one you've checked out carefully. It's also a good idea to use an escrow company recommended by an online auction site. For example, eBay recommends using Escrow.com for transactions valued at $500 and up.

-- Posted: May 17, 2004
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MAIN: Watch out for phony escrow sites
Online auction scams
Recruited to crime: an employment scam
Financial advice glossary
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