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A shift toward online shopping during COVID-19, global supply chain crisis, and a resurgent economy have all created a recipe for a breakneck holiday
shopping season – one where online shopping fraud poses a tremendous risk to consumers.

Online purchase scams have skyrocketed during the pandemic, and social media ads play a key role in the mushrooming problem, a new Better Business Bureau study finds.

The in-depth investigative study – Theft on a massive scale: Online shopping fraud and the role of social media – finds the pandemic, along with lax social commerce shopping platforms, has opened the door for scammers in China to steal from desperate online shoppers.

Online shopping fraud has been growing for several years, but according to BBB research, it dramatically increased during the pandemic as more people shopped online. A BBB survey found 29 percent of people shopped online before COVID, and this increased to 37 percent by the end of 2020.

In turn, BBB Scam Tracker reports about online shopping scams nearly doubled from 2019 to 2020, and the BBB Institute for Marketplace Trust named online shopping scams as the riskiest scam of 2020, publishing special reports on this growing fraud in 2020 and 2021. Complaints to the Federal Trade Commission (FTC) about online purchases more than doubled in 2020 and continue to increase throughout 2021. Also, online shopping has more BBB “F”-rated companies than any other type of business.

Most online fraud reports examined involve a response to online ads on Facebook and Instagram.

After placing an order, victims report receiving nothing or receiving items that were counterfeit or inferior from what the ads promised. Scammers often take product photos or a landing page from legitimate businesses, post them on Facebook and Instagram and take online orders at websites they create. This leads to complaints against legitimate businesses, as victims often do not realize they have lost their money to a scammer rather than the business the scammer was portraying.

BBB found it was common that people who were not actively looking for a product, but lost money in the transaction, began with Facebook or Instagram 70 percent of the time. Fraudsters understand how Facebook targets shoppers and have developed strategies to reach those likely to be interested in buying their bogus products. Many victims and legitimate businesses believe that Facebook and Instagram should do more to prevent this widespread fraud. A recent federal class action lawsuit against Facebook contends that it is complicit in fraudulent sales and fails to abide by its own policies in addressing them.

While credit cards are still the most frequent payment method in online scams, online scammers increasingly are requesting payment through PayPal. Credit cards and PayPal offer a degree of buyer protection by allowing buyers to dispute charges, although scam victims have reported difficulty getting refunds through PayPal.

In addition, scammers employ a variety of tactics to circumvent the dispute process, including exorbitant shipping costs to return items for a refund, supplying bogus shipping tracking numbers, and delaying the process in order to run out the clock for a dispute claim.

Online purchase scams originate from a variety of actors. Counterfeit goods operations, and those who sell goods online that are not delivered or send items significantly different from what was described, have been tracked to businesses or organized gangs based in China. While China has blocked its people from using Facebook’s social media platform in China, businesses there traffic counterfeit goods and spend billions to advertise on the site.

Pet scams are primarily operated by gangs from Cameroon. Vehicle scams have been traced to gangs from Romania and free trial offer scams have been found to be operated mostly by people in the U.S. and Canada.

Law enforcement actions mostly have been limited to scammers and their accomplices operating in the U.S. and Canada. In 2020, U.S. customs agencies seized $1.3 billion in counterfeit goods, arresting 203 individuals and securing 98 convictions.