LONDON — The Web site for the European Union Bank, the world's first offshore bank on the Internet, offered potential depositors a tantalizing feast: "total privacy" and "strict confidentiality" along with an "internationally attractive interest rate offered in the milieu of a tax-free jurisdiction."
Attractive, indeed: The 3-year-old institution, incorporated on the Caribbean island of Antigua, offered rates up to 10 times higher than those at other banks. Millions of dollars poured in from hundreds of depositors around the world, undeterred by a warning from the Bank of England that the whole thing might be too good to be true.
Alas, London's stodgy central bank turned out to be right. But depositors, blinded by dollar signs, continued investing right up until the two Russian-born owners disappeared last August and the European Union Bank went into receivership. Depositors who had pumped more than $10 million into the bank were left high and dry.
British authorities cite the European Union Bank as a prime example of the dangers that lie in wait for the unwary--and the greedy--who use the Internet for financial transactions. Bank scams are only one manifestation of crime on the World Wide Web.
Computer hackers regularly attack the information systems of large corporations and government agencies to commit commercial espionage, a crime that costs an estimated $100 billion a year in the U.S. alone. Drug cartels use international banking systems to launder millions of dollars in illegal profits, wiring the money in and out of legitimate businesses faster than law enforcement agencies can track it. Unscrupulous investment services reap millions of dollars in profits from the promotion of worthless stocks.
Crafty cyber-thieves have found that they can steal a lot of money with very little risk. FBI and bank security sources say that the average electronic bank theft in the United States nets about $250,000 and that only about 2% of the thieves are being caught.
Daniel Geer, an engineer for Open Market, a Cambridge, Mass., company that provides secure business access to the Internet, told a subcommittee of the U.S. House of Representatives earlier this year that stealing money by computer is far safer than holding up a bank with a gun.
About 80% of the robbers with guns wind up in prison, he said, and their average take is only about $7,500. By contrast, he cited the case of Russian computer thieves who stole $10 million from Citibank.
