This is one of the rising scams online these days. Whichever sites provide any kind of financial services are vulnerable to such types of scams. A lot of sites providing social services have also been targeted by such fake escrow services.

How does a genuine escrow system work?

This kind of service is usually set up for auction sites, which deal with high-valued transactions online. Usually, an escrow system functions in the following manner. The buyer makes a payment through the escrow service and once the financial transaction is approved, the seller is contacted stating that payment is made. The buyer can withhold actual payment of transferring of money until he or she receives the item from the seller. Only when the buyer is satisfied with the item and its quality can he or she release payment online. Thus, once the buyer sends confirmation the escrow payment is released and the seller receives payment into the account.

How does a phony escrow system work?

The fake escrow services are meant to victimize unsuspecting buyers into believing they are making a genuine payment. It is very easily setup by trained hackers and other malicious individuals on popular auction sites.

Firstly a new website is created, which looks just like any regular escrow payment site. In fact, all the features of the new phony site are so identical to a genuine site that detection of a scam is nearly impossible. Once the fake site is established, the scammers will visit auction sites and pose as sellers as well as buyers. They will bid on popular products and even sell items on such auction sites. This way, they manage to start getting customers to conduct financial transactions on the fake escrow site. As a buyer, the scammer bids the highest amount on the product and thus wins the item. Then he or she sends an email asking the seller to conduct business only on a preferred escrow site, which would be the fake site URL.

Once the seller accepts that usage of this escrow site is fine, he or she receives a subsequent email that states that payment has been made and will be kept in a bearing trust of non-interest accruing account, till item is received and approved. The seller then sends the item thinking the buyer has made the payment. The seller never receives the payment although the buyer has received the product. Any communication with the buyer fails and this is how fake escrow services have minted millions of dollars from unsuspecting buyers and sellers.

When the scammer poses as a seller on an auction site, he or she lists out only very costly items. Once an unsuspecting buyer bids on the item, he or she wins it and the seller insists on using his or her preferred escrow service, which is the fake one. The buyer makes the payment, thinking that it is a safe financial transaction. Later they realize that they will never receive the item they bought.

Aldo Check out How to Avoid being Scammed by Forum Scammers