Human and Social Perspectives in Information Technology: An Examination of Fraud on the Internet

Abstract

This chapter adds to the discussion of human and social perspectives in information technology by examining the existence and extent of fraudulent activities conducted through the Internet. The principal question addressed by this chapter is whether fraudulent activities perpetuated using the Internet constitute a new type of fraud, or whether they are classic forms of fraud appearing in a new medium. Three areas of fraud are investigated, namely: securities fraud, fraud in electronic commerce, and fraud arising from the rapid growth of Internet companies. The U.S. Securities and Exchange Commission (SEC) has cited more than 100 companies for committing securities fraud using the Internet. Actions prohibited under U.S. securities laws are now being conducted through the Internet, and the SEC has taken steps to suppress these frauds (SEC, 2001). The rapid growth of electronic commerce, and the natural desire on the part of consumers to feel secure while engaging in electronic commerce, has prompted the creation of mechanisms, such as web site seals and logos, to reduce concerns about fraudulent use of information. It is, however, questionable whether these mechanisms are effective in reducing fraud conducted through the Internet. A third potential area for fraud on the Internet involves the rapid growth of Internet companies, often with little economic substance and lacking in traditional managerial controls. This chapter seeks to examine areas with significant potential for fraud on the Internet and to assess implications of such activities for the management of information technology.