G-Men Take On Net Fraud

May 22 2000

Even as the federal bureau of Investigation helped Filipino authorities chase down the apparent perpetrators of the dreaded "Love Bug" computer virus last week, U.S. Attorney General Janet Reno wormed her way onto another government agency's turf by announcing a new FBI crime center to fight Internet consumer fraud.

The FBI and the National White Collar Crime Center unveiled plans for an Internet Fraud Complaint Center in Morgantown, W. Va., to receive and track online fraud complaints. The Motley Fool , an online investment site, pitched in with technical advice and testing. Reno said the center would work closely with state and local law-enforcement agencies. She gave no indication whether it would work closely with the Federal Trade Commission, whose Washington fortress neighbors Reno's Pennsylvania Avenue monolith.

And that's puzzling. The FTC has aggressively pursued Internet fraud for years and prosecuted dozens of cases. The FTC draws its authority from the Wheeler-Lea Act of 1938, which expanded the 1914 Federal Trade Commission Act, which gives the FTC a civil mandate to police "unfair and deceptive trade practices." The FTC hasn't been shy about scouring the Internet for fraud or violations of Web sites' self-imposed privacy policies. The commission has recently launched inquires into the practices of many leading e-commerce companies, including Amazon.com and Yahoo. The FTC has called on the FBI to help on fraud cases where criminal charges might be warranted.

"I think there's a little bureaucratic jockeying here," says Sen. Ron Wyden , who is active in congressional oversight of the FTC. "Everyone sees that the Internet is where the action is."

On May 4, the FTC issued fresh guidelines for Internet advertisers. The next day, the commission announced an antifraud alliance with the U.S. Postal Inspection Service, 100 local Better Business Bureaus and all state attorneys general. In March, the FTC announced that a Web sweep, dubbed GetRichQuick.Con, in partnership with law-enforcement and other agencies in 28 countries had netted more than 1,600 Web sites worldwide. According to Reno, the FTC gathered nearly 18,000 fraud complaints in 1999. The FBI already accesses the FTC's Consumer Sentinel complaint database.

"It overlaps," says Hugh Stevenson, the FTC's associate director for planning and information, about the FBI effort. "They need to be careful to complement rather than conflict with what we're doing."

The new center's purpose is to create a central clearinghouse to monitor fraudulent activity and coordinate law-enforcement efforts. Ironically, the center will fracture the government's anti-Net fraud efforts by steering some complaints away from the FTC's Consumer Sentinel project. Stevenson says the FBI has agreed to share its data with the FTC. But it's still unclear how the FBI will send information to the FTC.

"Other agencies are doing a limited amount of proactive work in logging complaints," says Ruben Garcia, assistant director of the FBI's criminal investigative division.

Meanwhile, Reno refused to discuss details of the FBI's investigation of the "I Love You" virus.

"We continue to pursue all relevant leads in the case," she said. "We will continue to work with [Filipino authorities] in every way we possibly can." Reno called on other countries to develop "common legislation" with the U.S. to ease international Net policing. Reno said she and her counterparts in the Group of Eight industrial nations have been discussing how to write common legislation to fight international Internet fraud.