Why E-Commerce Law Enforcement Is an Oxymoron

In the few years since the Internet has become an important venue for commerce, communications and entertainment, so-called cybercops have tried to impose a variety of rules, regulations and guidelines to protect the interests of consumers and businesses.

Unfortunately, however, no mechanism yet exists to enforce such initiatives.

As with the NFL’s ban on certain questionable substances, enforcement is nearly impossible for many of the Web’s more illicit activities because comprehensive tracking and monitoring technology does not exist. And any efforts to put the pieces in place usually stir up a storm of privacy issues.

The Internet is simply too vast, stretching across too many borders and encompassing too many cultures, for the current scattershot approach to be effective.

Unenforced Regulations

“Trying to regulate and control the mechanisms by which people gamble or do other illegal, immoral acts with the aid of the Internet is like trying to regulate who uses what freeway at a given time of day,” Louis Columbus, an analyst with AMR Research, told the E-Commerce Times.

Analyst Rob Perry of The Yankee Group agreed, saying that enforcing laws on the Internet is like trying to regulate highway traffic.

“What is the point of having [rules and regulations] if you can’t enforce them?” asked Perry.

Columbus noted that trying to regulate the Internet, especially when it comes to issues like gambling, “is really missing the point” and does not speak to the underlying problem.

According to Columbus, the real question is “why these maladies plague our society and what can be done to free people from paying the costly price of being associated with them?”

Keep Trying

The difficulty inherent in addressing the issues does not stop law and order types from trying.

Jupiter Media Metrix claims that at least 25 cents of every US$100 spent online is lost to online fraud. The Gartner Group says that the losses could amount to as much as ten times that much.

It often seems that efforts to curb cybercrime are more comprehensive and methodical than reality proves. The news is filled with ambitious posturing and the details of fantastical scams that have run up against the long arm of the law.

Training to Fight

In November, the Department of Defense (DOD) awarded an $86 million contract to Computer Sciences to train DOD cybercrime fighters.

That came just days after the U.S. and 29 other countries signed an international treaty to fight online crime.

Also, last December, FBI Director Robert S. Mueller created a new unit specifically focused on fighting cybercrime. Meanwhile, the Bush administration is adding at least 50 new federal cybercrime prosecutors across the U.S.

Creative Exploit

But the cases that make it to court are the exception — not the rule — and generally stem from creative ploys on the part of law enforcement officials to protect consumers and catch the bad guys, rather than from any tried-and-true cybercrook-catching system.

For instance, the U.S. Securities and Exchange Commission (SEC) recently nailed a 17-year-old high school student as the mastermind behind an online securities scheme that bilked at least 1,000 investors out of more than $1 million over a two-month period.

In another case, the SEC, in cooperation with the Federal Trade Commission (FTC) and two securities groups, sought to warn potential victims by using some creative thinking.

The group issued a fake press release announcing the planned initial public offering of “McWhorter Enterprises.”

Those who clicked to the Web site were told that their investments would be multiplied 400 times upon conclusion of the IPO. It asked for credit card and Social Security numbers. The bogus site drew 155,000 hits in three days, SEC spokesperson John Nestor told the E-Commerce Times. Potential “investors” eventually were warned away.

Last Hope

The best chance for a more consistent law enforcement effort might come from the likes of credit card issuers, which could turn their comprehensive schemes for authorizing and completing credit card transactions into a mechanism for enforcing online gambling laws.

Many card issuers are spurning online gambling transactions. Bear Sterns estimates that the card issuers’ efforts might pare the online gambling industry’s potential growth rate down from 43 percent to 20 percent.

And AMR Research’s Columbus contends that online watchdogs need to concentrate their efforts on the problem — not the symptoms — to make a real dent in cybercrime.

“It’s more important to focus on the source of the problem than merely on the approach taken to get to an end result,” said Columbus.