Swindlers of all sorts have detected the Internet. The new media has turned the web into a battleground for everyone, also for dishonest entrepreneurs.  It’s not enough, anymore, for the swindler to be a Finn as in the good old days when the consumer was, at least once, able to see the swindler.

There used to be lots of small scale swindlers of all sorts, horse swindlers, hawkers selling antiques, apples, etc. Now we read about most peculiar scams in newspapers almost every day. Modest attention is usually paid to these cases. It is only considerable financial losses that make the scams public. The victim won’t try to contact the seller until it becomes clear that there will be no delivery at all.

With e-commerce, the situation is getting more and more uncomfortable for the customer. Trade in general, and international trade in particular, includes a mutual risk. Trade without a risk is non-existent because the risk may be related to the goods itself, the delivery and the payments. Trade always has its own ways for minimizing the risks. In international trade, various payment instruments (letters of credit) have been created for the security of the parties. In international trade, it is vital for making a bargain that the parties (seller or buyer)start to trust each other. This is impossible in international trade. Thus, the problem will be solved by using a letter of credit.

Naturally, an average consumer has never heard about the exclusive payment arrangements which are customary for the protection of both the seller and buyer in international trade.  It is quite enough for a consumer to be able to just pay online. However, online payments were made easy with the emergence of the EU. Money transfers can easily be made to any country within the EU by using the so called IBAN code (Single Euro Payments Area).  In the EU, both paying and swindling have been unified. Goods, labour, money, drugs and prostitutes can freely move from one country to another. This harmonization already covers all human activities including those of medical doctors.

All kinds of goods can be bought from abroad at low prices. Too low a price should ring a bell but consumers aren’t always alert. Swindlers should know about the correct pricing because a low price could mean a reduction of 20 to 30%, which wouldn’t, still, make anyone suspicious. For example second hand earthmovers and excavators are considerably cheaper abroad than in Finland. In addition, the price can still be lowered through VAT gimmickry. So, engineer XX got excited about a second hand excavator which could be useful in his own yard and at the summer cottage. It could also be used for the drainage of wet woodlands. He found a seller, a British journalist, who offered to sell the machine at a price which was 30% lower than the price of a corresponding machine in Finland. The excavators were also quite new. The engineer had already contacted the seller by email for more information. Next, the advance payments and insurance payments should have been arranged. The first thing the buyer should always do is check if the enterprise officially exists. Here the EU is a big help: If the enterprise cannot be found in the EU database, it doesn’t officially exist. Every Finnish enterprise can also be found on the website of the European Commission Taxation and Customs Union (http://ec.europa.eu/taxation_customs/vies/?locale=fi). As for VAT, the buyer is obliged to check whether the enterprise exists or not. Appealing to ignorance is useless because the tax authorities will show no mercy in this case.

Google Maps can be used for checking the location of the enterprise or for having a look in a satellite picture. The engineer did this and noticed that the office of the enterprise was located in a suburb with blocks of flats with no excavators in the yard. The seller said that the storeroom was elsewhere. No coordinates for the storeroom were sent, which was not significant any longer because suitable ‘storerooms’ are available if needed.

Next, the seller’s enterprise was to be identified in the EU Enterprise Registry. The seller gave the registration number. However, its composition didn’t comply with the regulations of the enterprise registration number system of the UK. In addition, there was no enterprise to be found by that registration number in the corresponding EU database.

Now the engineer got really worried. A further search on the Internet revealed that the enterprise had gone bankrupt more than 30 years ago.

Everything looked fine on the website, which is still available. No matter how attractive the site seemed, a preliminary check immediately revealed what it was all about.

The author works as lecturer of international trade and has also been employed as a negotiator of contracts by an import enterprise.

Jorma Kananen

JAMK University of Applied Sciences