It is reported that Internet investment scams are one of the latest forms of online frauds in China. In general,these scams have several forms, such as alleged investments offered in the local branch of a global financial institution and investment products issued by companies claiming to be backed by, sponsored by or in partnership with global financial institutions.Typically, at the centre of these scams there is a fake website that resembles the target global institution’s own website or that has a similar domain name. Scams like this often work on pyramid selling principles and offer commission to victims for introducing other investors. Rumours spread like a virus through online bulletin boards, live chat rooms or by mass emails, and in a short time the net of victims has been cast very wide.

Internet fraudsters aim to make their money as quickly as possible and move on before they can be traced. The scam may have already been in operation for several weeks by the time you hear about it. Pursuing traditional legal remedies such as claims for IP infringement or libel is often too slow and not suited to the task.

In the absence of a strong internal IT forensics team, one of the first things to do is brief and bring in investigators to follow up with the complainants and pursue leads on the ground. Make sure the investigator has specialist internet forensic capabilities and is able to locate ISPs.

How to find out Internet scammer
Identify the registrant (the owner of the domain name). This is done through an online whois search. It is also possible to find out the domain name registrar (the entity that allocated the domain name to the fraudster) and the IP address, which is the first step in locating the ISP that hosts the site. People complaining about the scam should again be able to give you information on the ways in which the scam is being perpetrated. Some may even have had direct contact with the fraudsters.

The fake website is at the heart of the investment scam. It exists to give a veneer of legitimacy to the scam. However, the website also offers the first line of attack in fighting back. Understanding the identity and location of the domain name registrar, web-hosting providers and other ISPs involved is an important first step in identifying the legal and practical options. A single website might be hosted by a long chain of ISPs located around the world. Online searches are available to identify the domain name registrar, the IP address and the first line of hosting. However, it may be necessary to engage investigators with internet forensic capabilities to identify the ISP and other regional hosting providers.

Under Chinese law, ISPs that knowingly host fraudulent websites may be jointly liable. Notifying the ISP of the scam is an important first step to establish its liability. Contacting an ISP directly is faster and cheaper than suing. Ask the ISP to block or disconnect the site. Point out the (likely) non-compliance by the fraudster with the ISP’s terms of use policy. These are usually IP infringement or criminal acts and the ISP’s own secondary liability for the fraudster’s acts.

How to handle the Internet scammer when your company passed off
The public relations team should consider how to get a clear message that there is no connection between your company and the fraudulent entity. They should also let people know what action you have taken, such as reporting the scam to regulators and law enforcement authorities. This can be an effective way to counter reputational risk and show that you are taking steps to protect the public.

Consider placing a notice on your own website to warn people about the fake site and direct enquiries to a central contact point in your office. If victims of the fraud are believed to be primarily Chinese-speaking, you will have the option to publish a disclaimer in Chinese only. This has the added advantage of limiting possible negative perceptions among your non-Chinese speaking customers.

The most cost-effective way to recover domain names is through the Uniform Domain Name Dispute Resolution Policy (UDRP), a relatively effective procedure to recover unlawfully registered domain names. A decision in a UDRP action will typically take three or four months. So this is a second line of response if the website cannot be taken down more quickly another way.

Brief your customer relations departments, sales teams and call-centre staff to ensure you have a consistent approach to managing future complaints and getting information about possible scams.