Finlay & Associates - Fraud, Accounting & Taxation Blog

Former Burlington Citizen of Year discharged in fraud case

fraudalerts — Thu, 02 Dec 2010 16:53:17 +0000

Stu Chapman will repay $15,000 after pleading guilty to making a false statement in his handling of finances of the city’s Royal Canadian Army Cadet Corps.

Chapman, 76, was given the most lenient sentence available, an absolute discharge, by Justice Fred Forsyth during an appearance in Burlington court Monday.

Chapman’s lawyer Paul Stunt says his client will repay $15,000 to the corps.

Chapman had five other charges all related to the same Halton police investigation, including three counts of fraud over $5,000 and two counts of breach of trust, withdrawn by the Halton Crown attorney’s office.

Although Chapman is deemed by law not to not have been convicted with his absolute discharge, he still technically has a police record with his admission of guilt in the case.

Burlington’s 1998 Citizen of the Year, Chapman was charged in October 2009 following investigation of his volunteer work with the Royal Canadian Army Cadet Corps in Burlington, specifically during the years 2007 and 2008.

An agreed statement of facts involving Chapman’s lawyer, Paul Stunt, and the Halton Crown attorney’s representative from the Hamilton Crown’s office, Craig Fraser, as well as a joint sentencing submission from the same two lawyers recommending Chapman receive an absolute discharge was accepted by the court.

Chapman, married for 53 years and the father of four, offered no comment outside court afterwards and left with several family members.

Prior to sentencing, Chapman told the court “The past 15 months have been extremely stressful for my wife and myself,”

He said it was eased somewhat by the support of family and friends.

Chapman pled guilty to inappropriately paying himself between $17,000-$19,000 between 2007 and 2008 while serving as the unpaid volunteer chairof the support committee with the Royal Canadian Army Cadets Corps Local 2379 on Fairview Street. He was responsible for preparing and submitting the corps’ yearly financial records.

Chapman also used cadet corps funds to pay three other cadet volunteers who should not have been paid.

“They were small amounts,” Hamilton assistant Crown Fraser told the Burlington Post, noting the three people did not realize they weren’t supposed to receive any money.

It was another administrator within the cadets corps that began to question a section of the corps’ year-end financial statements after noticing a sharp rise in expenses over two years for Chapman.

Stunt said Chapman had to pay between $7,000-$8,000 in back taxes and interest to the Canada Revenue Agency for the cadet corps money he gave himself and that his client intends to pay $15,000 back to the local army cadet corps.

Justice Forsyth acknowledged in court it is unusual for someone to plead guilty to a fraud-related charge involving money to then be given an absolute discharge.

Citing Chapman’s guilty plea prior to the start of a trial, his lack of a criminal record to that point, the shame he has brought upon himself in the last 15 months and the 20 letters of support for Chapman submitted to the court from many high-profile Burlington residents, Forsyth said an absolute discharge was appropriate in this case.

“There is no reason to think Mr. Chapman would ever get in front of a judge again in the role of an accused person … I believe it was an error in judgment by Mr. Chapman…. The letter writers are from a cross-section of business, religious and political sectors, and ordinary friends.”

Forsyth said the letters describe the exemplary deeds of Chapman over the years, “but for this one fall from grace.”

Chapman has performed many volunteer duties since the 1950s.

Since moving to Burlington in 1963 he has served on city council committees, is a past president of the Burlington Lions-Optimist Minor Hockey Association (BLOMHA), helped found Crime Stoppers in Halton, is a past president of the local Federal Progressive Conservative Riding Association, and has assisted Friends of the Royal Hamilton Light Infantry and the Lions Club Cruise Night classic car shows.

Outside court, Chapman’s lawyer, Paul Stunt, said that in his long career, first as a Crown prosecutor and now as defence counsel, he couldn’t recall another case where he was involved where a defendant pled guilty in a fraud-related case and received an absolute discharge from a judge.

“It’s an exceptional result,” said Stunt.

THE BURLINGTON POST

Online E – ticket Scam

fraudalerts — Thu, 26 Aug 2010 15:59:10 +0000

Police have charged a Hamilton Ontario man after upwards of 30 people were duped into buying fake tickets online.

The charges come after a search of an east Hamilton home yesterday.

Police say between April and July, the accused set up email accounts and sold tickets on a buy and sell website using the following aliases: Jacob Wilson, Jacob Wilcox and Josh Kovecks.

Investigators say the man received online payments and then emailed out fraudulent e-tickets to victims.

An 18-year-old is charged with 2 counts of fraud under 5 thousand dollars and 3 counts of uttering forged documents.

When will people learn that you will always get caught.

Volunteer charged with defrauding army cadets of $36k

fraudalerts — Fri, 02 Oct 2009 16:20:41 +0000

A popular volunteer and well-known former Burlington citizen of the year – and a founder of Crime Stoppers of Halton – has been charged with fraud for allegedly taking $36,000 from local army cadets.

Stuart Chapman, 75, is charged with three counts of fraud over $5,000, breach of trust and making a false statement.

Halton police arrested Chapman Wednesday. He is to appear in court in Milton Nov. 4.

Chapman, who attained the rank of major as a cadet volunteer, has not been associated with the organization since September last year.

Detective Duncan Taylor, of the Halton police fraud unit, said the investigation began in April last year when the Army Cadet League of Canada, which oversees 450 cadet programs in Canada, noticed “inconsistencies” in the finances of 2379 Royal Canadian Army Cadet in Burlington.

The investigation included an audit of the corps’ finances and its funding from the City of Burlington as a non-profit organization, which receives support from the city.

Taylor said the charges cover the two-year period between September, 2006 and September, 2008, when Chapman was a volunteer chairperson of support in charge of finances with the cadet corps.

The corps is affiliated with the Royal Hamilton Light Infantry of Hamilton.

Police allege Chapman “fraudulently remunerated himself” with more than $36,000, belonging to the corps.

Taylor said audits revealed the suspect had issued himself a salary of more $19,000 each year.

“There were ‘discrepancies’ regarding receipts,” Taylor said

Chapman was named Burlington’s citizen of the year in 1998 for his civic involvement, which has included everything from co-founding Crime Stoppers of Halton in 1978, to years of service with the St. Johns Ambulance, minor hockey associations and service on various city hall committees.

Chapman retired in 1997 after selling Chapman Morris Advertising Ltd., a firm he began with the late Lillian Morris in Burlington in 1969.

But he might be best known in Burlington for his car, a fixture at cruise nights and parades for many years.

Chapman was the Studebaker director of advertising and public relations at the plant where they built the cars Hamilton, the one given the job in 1966 of telling the world the car company was shutting down.

Along the way, Chapman became known as the face and spokesman of the 200-member Studebaker Drivers Club Hamilton chapter and served as international president of the larger 14,000-member Studebaker car club.

From The Hamilton Spectator (TheSpec.com)

Canadian faces U.S. fraud charges in online gambling probe

fraudalerts — Wed, 09 Sep 2009 23:08:00 +0000

A Canadian man was indicted this week in the United States on fraud and money laundering charges after he allegedly processed more than US$350-million in online gambling payments, highlighting the cat-and-mouse battle that pits law enforcement agencies against the intangible world of Internet gambling.

Douglas Rennick, 34, who lives in Canada, faces a maximum of 55 years in jail and must turn over US$565,908,288 in monies reaped through the alleged financial conspiracy that saw millions of dollars funneled from a Cyprus bank to two accounts in California.

He is alleged to have tried to disguise the transactions to distribute gambling winnings to U.S. residents and, if proven guilty, the forfeiture amount will be among the largest ever collected in that district, according to the U.S. Attorney’s Office in New York.

From sometime in 2007 through June 2009, Mr. Rennick allegedly opened bank accounts at Washington Mutual and Union Bank of California under at least five corporate names and “falsely represented that the accounts would be used for such purposes as issuing rebate cheques, refund cheques, sponsorship cheques, affiliate cheques and minor payroll processing,” according to the grand jury indictment filed in a Manhattan court.

The U.S. Attorney’s Office confirmed that Mr. Rennick is not in U.S. custody, but would not comment as to his whereabouts.

The indictment, filed in the Southern District Court of New York because Mr. Rennick is accused of cashing out winnings to gamblers living in that city, is part of a larger and ongoing investigation into online gaming, according to New York authorities.

“We know that Internet gambling is a multibillion industry in the United States, and our estimates may even be low-balled,” said Jim Margolis, spokesman for New York’s FBI office, adding that the office had its first Internet gambling case about 10 years ago.

Mr. Rennick is among a handful of Canadians who have been charged with online-gambling offences in the United States in recent years, most notably joining the two founders of payment company NETeller who were arrested in Los Angeles and New York in January 2007 on conspiracy charges.

How Mr. Rennick’s citizenship will factor into the case is yet to be seen. “We have no comment about extradition at this point,” said Rebekah Carmichael, spokesperson for the U.S. Attorney’s Office.

To be sure, Canada is more tolerant of online banking than its neighbour to the south: Unlike in America, it is not illegal to gamble online. However, as in the United States, it is illegal for anyone other than provincial governments and charities to run online gambling operations — save for horse racing.

“This is clearly another stab at this particular industry to show that the U.S. government is not happy to have Internet gambling take place within its borders,” said Michael Lipton, Q.C., partner at Toronto’s Dickinson Wright LLP and gaming expert.

The U.S. Justice Department has long held that Internet gambling is illegal but, because cyberspace hardly respects borders and because online gambling is legal in nearly 100 jurisdictions worldwide, authorities struggle to clamp down on an industry worth an estimated US$17-billion globally.

“The genie is out of the bottle, the Internet is here,” Mr. Lipton said. “It’s impossible for the government to get into the bedrooms, offices, and living rooms and make sure that people are engaging in online gambling. This is a phenomenon that is here whether we like it or not.”

Mr. Rennick’s charges come amid a summer of legal turmoil and uncertainty for gamers in America, after the U.S. government froze $33-million in assets of two high-profile payment-services companies — money that was on its way to roughly 27,000 online gamblers looking to cash out winnings earned at four offshore sites, including Poker Stars and Full Tilt.

The asset-freeze and Mr. Rennick’s indictment are part of a crackdown targeted at the financial middlemen who stepped in after a 2006 federal law was passed that prohibited credit-card companies from processing transactions related to online gaming sites. That law, which caused some U.S. trading partners to complain that the ban violated World Trade Organization rules, is set to go into effect on Dec. 1 of this year.

Yesterday, meanwhile, poker web sites were abuzz with news of the charges against the Canadian, as onlookers scrambled to assess the broader implications of the case.

“Stern, but fair,” said a commentor at USA Players.com.

Gambling911.com posted updates throughout the day, and writer Tom Jenkins at PokerNewsDaily.com was quick to post an article on the case, specifically noting that the indictment made “no mention of sports betting was given.”

The indictment does, however, state that Mr. Rennick and unnamed co-conspirators used the accounts “to receive funds from offshore Internet gambling companies that offered, variously, poker, blackjack, slots and other casino games.”

Mr. Rennick is accused of then disbursing the roughly US$350-million, via cheques, to U.S. residents seeking to cash out their gambling winnings.

Said Mr. Lipton: “If the allegations are proven to be true, this particular individual effectively processed nearly half a billion dollars. It’s a huge chunk. It’s fairly significant.”

National Post

Bookkeeping & Taxation Services

fraudalerts — Sat, 25 Jul 2009 22:04:06 +0000

Bookkeeping & Taxation Services

Payroll, accounts receivable & accounts payable, and preparation of financial statements are just some of the day to day bookkeeping services that can be provided by Finlay & Associates.

Accounts Receivable Management

We will process invoices, handle cash receipts, prepare and mail monthly statements and provide you with monthly aging reports. We will also reconcile your accounts receivable each month.

Accounts Payable Management

In addition to processing and prioritizing your payables, we will provide you with monthly aging reports and reconciliation of your payables.

Bank and Credit Card Reconciliation

All your bank and credit card statements will be reconciled each month. If you have internet features with any of your accounts, we can save you time by downloading them directly into your accounting system before reconciliation.

Month End Closing

In addition to reconciling your accounts payable and accounts receivable each month, we will also reconcile your other balance sheet accounts and review the income and expense accounts for accuracy. We will do any adjusting and recurring journal entries that need to be done.

Financial Statements and Management Reports

We will provide custom designed financial statements and management reports. Do you want previous year comparison statements, or current period and year to date comparisons? Tell us what bookkeeping reports you need and we will design them to your specifications.

Other day to day services include;

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Payroll preparation

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Monthly/quarterly payroll + GST/PST/WSIB filings

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Miscellaneous bookkeeping and administrative work

Year End Accounting

We can simplify things at the end of the year for you by conducting a year end review of your books and gathering the information for the annual audit and/or tax returns. This consists of, but is not limited to, analyzing the balance sheet and income and expense accounts, making any necessary adjustments and preparing schedules, with the appropriate backup, for all the balance sheet accounts. Having completed this work, you should see savings on your audit bill.

Fixed Asset Management

Managing fixed assets can be a time-intensive process that you probably would like to forget about but can’t afford to ignore. We can set up a fixed asset management system that is easy for you to use, or we can manage it for you. Fixed Asset Detail would include: purchase date, serial number, and manufacturer, as well as life of asset and depreciation method. Depreciation would be calculated monthly or annually. We can also project the depreciation expense for future periods. Accumulated depreciation and book value will also be calculated.

Cash Flow Projections

Cash management is crucial. When will your receivables come in? Are you paying your bills too quickly? Will you be able to meet next month’s payroll? How much cash will you have in 3 months? Will you need a bank line of credit this year? Cash flow projections work in conjunction with your financial statements to provide the answers to these questions. Working closely with you, we will prepare cash flow projections that will alert you to any cash shortages that may lie ahead, providing you with enough time to develop appropriate strategies.

Other Accounting Services Include:

 Budgeting

 Inventory control

 Inventory analysis

 Interacting with outside auditors

 Overhaul existing accounting systems

 Accounting system setup on new and existing companies

 Implement record keeping and accounting procedures

 Taxation – Personal and Corporate – Registered with the CRA to EFILE

 Business Planning

 Remote Services 24/7

 Training – Quickbooks, Simply Accounting, ACCPAC

 Risk Analysis – both financial & non-financial (this will reduce insurance premiums)

 Hourly or monthly plans available – very good rates

 1st consultation no charge

What makes us better? A SERVICE 24/7 BY EMAIL, PHONE OR REMOTE TO ENSURE YOUR BUSINESS NEEDS ARE MET. We don’t just do the books, we will explain all the reports in detail so that you can make the right business decisions. These days costs are more important than ever before, therefore your costs will be tailored to your affordability and you will only pay for what you need. Don’t be fooled by outrageously low prices, do your homework, you will only get what you pay for.

We specialize in small to medium size business, we can come to your location to do the work or we will pick up the documents and return them in a timely manner.

We are an Accredited Member of the Better Business Bureau South Central Ontario.

Service to Our Clients is #1 – Our Promise to You

Accounting & Bookkeeping

produce your accounts in a timely manner

respond to your issues within 2 hrs of your contact with us, by phone, email or remote

explain to you, all the reports to allow you to make good business decisions

work with you on your business strategy

work with you at your convenience – days, nights or weekends

ensure that our rates are fair and competitive

Taxation

prepare your taxes in a timely manner

minimize your taxes payable by researching everything that you are entitled to

look at your taxes from the family perspective maximizing your family wealth

tax plan with you throughout the year

ensure that our rates are fair and competitive

Contact James Finlay – 905 870-1832 or mailto:info@finlay-associates.com

http://www.finlay-associates.com

Bookkeeping Services

Fraud Risk Review

fraudalerts — Fri, 24 Jul 2009 13:01:41 +0000

Fraud Prevention - ”Fraud is disease that needs to be eradicated from all levels of the organization, if not we all suffer.”

Fraud risk review All the evidence suggests that your organization is more at risk to an incidence of fraud than ever before. According to the Association of Certified Fraud Examiners 2008 Report to the Nation, 6 percent of revenues will be lost this year to fraudulent activity. The time to act is now before you become the next victim. Let us examine your systems and procedures from the fraudsters’ viewpoint, and provide you with an assessment of your vulnerability to fraud.
Review of high-risk functions While the risk of fraud in your organization is high, some activities have a higher risk associated with them than others. Let Finlay & Associates fraud risk management advisors offer you the essential advice you need to prevent and detect fraud in all your high-risk activities.

Prevention controls Having identified the risks, and weaknesses in your organization we will use our experience to design and implement, systems and procedures to minimize the risk of fraud. This could include; Fraud Policy, Conflict of Interest Disclosures, Whistle blowing Policy and the setting up of a Hot Line to allow your employees a means of disclosing information which may be relevant to any investigation.
Fraud training All employees are the eyes and ears of the organization. Without them you cannot possibly hope to minimize the risk of fraud but unless they know what they are looking for they cannot help you. Remember fraud can be committed by employees from the highest position to the lowest, longest serving to the shortest. Let us provide your orgainzation with the knowledge they need to help you defeat the fraudster. We can provide on-line training or in small group instruction designed to fit your own needs.

Fraud Detection & Examination

If your company, non-profit or charity has, or you think you may have, been a victim of fraud, our staff can examine your records and prepare and build a case for litigation should you wish to proceed to secure a conviction or deal with the situation under you company policies. Most orginazations do not want the bad publicity and prefer to deal with it themselves but are now comfortable knowing that they now have the correct controls in place after we have advised them. Studies have shown that during the recession fraud has increased and is expected to increase further. Don’t let your company be the next victim.

Red Flag As a board member, senior or junior member of the organization, you suggest a fraud risk review and the reaction is hostile or comments such as ” it cost too much”, “it’s to time comsuming”, “we can do that ourselves” or “our policies are good enough” you may be at risk and have been for a long time. Studies show most frauds are not discovered until 2 years after they started.

For further information visit www.finlay-associates.com or email info@finlay-associates.com or call 905 870-1832. Follow us on Twitter for up to date information – www.twitter.com/fraudandabuse

TAX-FREE SAVINGS ACCOUNT – NAMING A SUCCESSOR HOLDER

fraudalerts — Wed, 22 Jul 2009 12:27:13 +0000

By now, most of us have heard of the Tax-Free Savings Account (TFSA) which was introduced in the February 26, 2008 Federal Budget. It is a registered account in which investment earnings, including capital gains, accumulate tax free. Beginning in January 2009, taxpayers over the age of 17 may contribute up to $5,000 each year to such an account. If a taxpayer’s contribution room is not used in one year it may be carried forward to the next year allowing for a larger contribution in that year. In some ways the TSFA is similar to an RRSP and in a lot of ways it is not. Contribution room in TFSA does not depend on “earned income” but is a flat $5,000 per year. Unlike the RRSP, contributions to a TSFA do not result in an income tax deduction and withdrawals from a TFSA are not reported as income nor included in income for any income-tested benefits, such as the Canada Child Tax Benefit or Goods and Services Tax Credit. The CRA will establish contribution room for all taxpayers on the basis of income tax returns filed. Taxpayers who do not file for a number of years may establish their contribution room by filing those returns. Upon death of the TFSA holder, the funds within the account may be rolled over into their spouse’s TFSA (before the end of the calendar year following the year of death) or they may be withdrawn tax-free. If the TFSA is not rolled over, any amounts earned within a TSFA after the death of the taxpayer are taxable to the estate or the recipient if paid out before the end of the first calendar year following the year of death. If the contents of a TFSA are donated to a registered charity in the taxpayer’s will, the donation is deemed to have been made immediately before the taxpayer’s death. One question that many people ask is who can receive the proceeds when the TFSA account holder dies? Although TFSAs are federally regulated accounts, provincial legislation determines if a beneficiary can be named in a TFSA contract. Under the Income Tax Act, the tax exempt status of the account only applies to the spouse or common law partner, so if the named beneficiary of the account upon death is someone other than a spouse or partner, the account is no longer considered to be a TFSA. Most provinces and territories have now enacted legislation allowing TFSA beneficiaries to be named that aren’t spouses or partners, and therefore, upon the death of a TFSA holder, the beneficiary can have the TFSA assets passed on to them without going through the estate and subject to expensive probate fees. We have provided a summary below of the successor holder and beneficiary recognition by province:

Province Designation of Successor Holder and Beneficiary Allowed? And the effective date.

Alberta – Yes, January 1, 2009

British Columbia – Yes, November 27, 2008

Manitoba – Yes, June 11, 2009

New Brunswick – Yes, January 1, 2009

Newfoundland – Yes, May 28, 2009

Northwest Territories – Yes, February 2009

Nova Scotia – Yes, November 25, 2008

Nunavut – Yes, February 2009

Ontario – Yes,, June 16, 2009

Prince Edward Island – Yes December 3, 2008

Quebec – No, N/A

Saskatchewan – Yes, May 14, 2009

Yukon – Yes, May 14, 2009

IT’S A GOOD TIME TO REVIEW CORPORATE OWNER MANAGER COMPENSATION

fraudalerts — Wed, 22 Jul 2009 00:41:26 +0000

It’s half time, and that’s a good time to review the income requirements of the owner-manager you may be working for. How should you begin this process? Here are some tips to consider:

First, in determining the optimum income plan, each individual family member’s total income and type will be critical. It is important to ensure that the family member has enough total income to utilize fully his or her personal credits, excluding those that can be transferred to other family members. These are discussed below. So, the total amount of income is important.

The type of income is equally important.

The payment of a reasonable salary, for example, will increase both net and taxable income. It will also normally attract CPP and (often) EI contributions, both of which give rise to additional personal credits and may increase the family member’s Canada Employment Credit. A decision to pay additional salary must take these into account.

Another key issue is the fact that a salary is earned income for purposes of creating RRSP contribution room. If it is desirable to allow family members to accumulate retirement income there may be a preference for paying a salary.

Dividend income, on the other hand, increases both net income and taxable income as well, but also provides the dividend tax credit. Issues that need to be taken into account in evaluating the payment of a dividend as compensation include:

the taxable amount of the dividend is greater than the cash amount, so dividends have a greater effect on clawbacks than do salary, dollar for dollar;
dividend income is not earned income and does not create RRSP contribution room;
dividend income is investment income for purposes of computing the Cumulative Net Investment Loss account, and the receipt of a dividend may increase access to the capital gains deduction;
dividends paid from a private corporation to a minor will normally attract the kiddie tax, meaning that they are taxed at the highest possible rate;

because of the dividend tax credit, the tax treatment of the dividend must be modeled closely where the taxpayer has relatively low income and may be in danger of not utilizing all of his or her personal credits.

HRTC – A FAMILY-BASED CREDIT

fraudalerts — Wed, 22 Jul 2009 00:39:47 +0000

On July 13, 2009 The Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food) announced the official launch of a new national advertising campaign for the popular new Home Renovation Tax Credit (HRTC) introduced in the 2009 Federal budget. This credit is a one-time, time limited one, however, which means that if you’ve been planning on renovating your home and plan to use the credit on your 2009 tax return, eligible home renovation expenditures must be made between January 27, 2009 and before February 1, 2010. Families will be able to claim a 15% non-refundable tax credit for certain amounts paid to renovate their residence or cottages, up to a maximum credit of $1350, if they spend at least $1,000. However, the credit has already caused some significant controversy. That’s because the eligibility for the credit is “family based”. For the purposes of the credit, a family will be considered to be an individual, the individual’s spouse or common-law partner, and their children who were under the age of 18 throughout 2009. Yet, if two or more families have an eligible family dwelling in which they share ownership, each family can qualify for the tax credit on their tax returns. So it is possible that with three families sharing a home or cottage, up to $30,000 in renovations could be claimed, equalling a total of $4,050 tax credit, much higher than the benefits accruing to a single family! Some people are questioning the fairness of this tax credit, while others are saying that with the economy in the dumps, who can afford to spend any money on renovations, so the fact that families sharing a home are getting a better tax break is meaningless. Other detractors of the program insist that contractors are unavailable to complete the work, and other contractors are actually invoicing for work yet to be completed. We would like to hear from you regarding the home renovation tax credit program and the rules regarding this “family based” tax credit program.

Tips to Avoid Online Auction Fraud

fraudalerts — Sun, 19 Jul 2009 23:38:16 +0000

While most buyers and sellers on internet auction sites are honest, there is always the threat of underlying fraud.

Auction sites have had instances of sellers posting pictures of items for sale, only to include in extremely small print that buyers are only bidding for the photo rather than the item itself. When the photo arrives in the post and not the product, buyers are obviously outraged.

Steps to avoid online auction fraud 1)Check seller’s feedback

One of the best ways to judge a seller’s honesty is to check his or her feedback. Most buyers will give feedback on a sale, rating the seller in the seller’s Feedback Profile. If the feedback is negative, it will be very difficult for that seller to buy or sell anything on that auction site in future. Check the seller’s feedback and if it is not overwhelmingly positive, do not buy.

2)Find out seller’s contact details

Before you enter into a deal, try to establish contact with the seller. On eBay you can search information on a member by visiting the Find Members page. If you can get a phone number or an email address, you have a better chance of solving any future problems. You could establish contact with the buyer by requesting further information about the nature of the product in which you are interested.

3)Payment Methods

Credit cards are the safest way to buy anything online for the simple reason that, in the case of fraud, most credit card companies will cover the cost. Online payment services such as PayPal and FastPay are also popular with auction site users because of their safety. These are account-based systems that send money via credit card or bank account.

4) Use an Escrow Service

For higher priced items you should consider an escrow service. An escrow service acts as a middleman between the buyer and the seller to ensure a fair transaction.

The escrow service holds the item and the money until the buyer has inspected and approved the goods. Only then does it release the money to the seller.

The only downside is that it will cost the buyer extra to use this service. However, it is something to bear in mind when buying more expensive items.

5) Complaints/ Fraud Protection

Most online auction sites have a complaints’ procedure. For example,if you’re unhappy with the goods or you have not received them, Ebay operates a fraud protection program. For more information go to : http://pages.ebay.com/help/community/fpp-guide.html

FlipShark has a useful site on internet auction scams. www.flipshark.com/scams/ebayindex.html

The US Federal Trade Commission has a useful guide for buyers and sellers on internet auctions which has relevance to other countries. www.ftc.gov/bcp/conline/pubs/online/auctions.htm

To sum up, most buyers and sellers on internet auction sites are honest. However, if you use the above tips, you should not fall victim to auction fraud.