Fighting Fraud: The internet - a safe home for investment funds?

Following two months of monitoring investment websites, slicon.com research has identified large numbers of individuals operating, at best, questionable investment opportunities and, at worst, schemes that are evidently fraudulent.

Some industry forecasts certainly aren't ringing true. For one thing, the internet isn't yet being used by investors to seek the best possible investment opportunities on a global basis. And there are obvious reasons for this.

In one example of wrongdoing - the website www.islandresources.com - we discovered associations between the fake bank and two convicted fraudsters, Teddy Wayne Solomon and a Dan Latham.

According to the FBI, the site was set up by Solomon, while Latham had used the bank on a number of occasions to fleece unwary victims.

One of the key findings of the silicon.com investigation was that people are taken in by impressive looking websites that put them in contact with people they would normally not touch with a barge pole.

"An internet website is a perfect front for a fraudster," said Paul Carratu, head of the security company Carratu International, which has noted the rise in the use of the internet for criminal purposes.

"For the fraudster it offers anonymity and distance while lulling the victim into a false sense of security. The problem is that it is so easy to do and we've noticed that they are getting better and better," said Carratu, who along with many security experts has seen a pattern developing in which web fraudsters are increasingly seeking to mirror websites of well-known institutions.

This was one of the recurring traits of silicon.com's investigation. In four different cases we found examples of faithful copies being made of websites ranging from European financial institutions to the website of telecoms company BT.

In the case of BT, a company spokesman assured us that no fraud had been perpetrated using the site. However, this is more than could be said for conmen copying the internet websites of Bloomberg, Euroclear and JP Morgan.

Although thwarted in most cases, it all goes to prove that executing a sting in cyberspace has given conmen a new lease of life, a point stressed by the veteran journalist Michael Gillard, a specialist in financial investigation.

"None of the frauds you are now seeing on the internet are new, but, as in many things, technology is making it easier," he said.

One of the results of the fraudsters' activities is a wholesale rejection of the web by many as a source for finance because those seeking a deal in cyberspace are now forced to include exhaustive checks to ensure whether or not an institution exists before committing their cash.

In support of this, a recent survey found that around 95 per cent of those using the web expect to be the victims of fraud at some time.

Given such distrust, the process of investing is made many times more difficult if it involves using an unfamiliar language over an unfamiliar medium.

Perhaps it should comes as no surprise that traditional UK banks and investment houses have not been affected by the internet to the extent predicted by many observers.

Faced with the choice between unregulated and lawless cyberspace and the safety of the traditional high street, most people - it appears - prefer bricks and mortar over HTML.