Wherever money changes hands, hustlers and con artists are sure to be found. A string of recent Internet bank scams shows that hustlers have found the cyberworld to be just as profitable as the physical world.

This week, the government of the tiny island nation of Antigua warned consumers about a scam involving an online bank called European Union Bank. EUB, based on the island, touted itself to American consumers as a profitable offshore thrift, offering interest rates on deposits of an astonishing 21 percent.

There was just one problem: The bank, which solicited deposits on the Internet from customers in the United States and worldwide, may have been linked to Russian organized crime, according to statements from Antiguan government officials. Its two Russian directors have disappeared, apparently taking with them their customers' deposits, Antiguan officials said. While it's unclear how much money was lost, EUB executives claimed the bank had some $10 million in capital as of last year, the Montreal Gazette newspaper reported this week.

Such online scams aren't confined by geography. Early last month, the Federal Bureau of Investigation closed down another online bank, this one based in North Carolina, in the wake of allegations that the bank offered "guaranteed" investment services despite having no state or federal charter and lacking Federal Deposit Insurance Corp. coverage for deposits.

According to U.S. banking regulators and other observers, one thing is certain: We haven't seen the last of this kind of scam.

"It's very easy to pull this off," said Cynthia Bonnette, an examination specialist with the Division of Supervision at the FDIC, the government agency that monitors the nation's banking system.

Bonnette, whose job it is to probe financial institutions for fraud, said online banking scams can often operate for several months without triggering suspicion, just as online pyramid schemes sometimes do. (Would-be investors can check out the FDIC Web site or the Netbanker.com site for lists of chartered and insured banks, she added.)

Of some 1,200 banks now operating Web sites, about 50 use the Internet as a delivery channel for banking and investment services, Bonnette said. And of those 50, within the past year, only five have been determined to be fraudulent, including the North Carolina operation, Netware International Bank, she said. FBI officials (who intervened when they found the bank had no charter and was simply a fraudulent business) seized telephones and computers from Netware's Mooresville, N.C., offices in the July raid, and froze assets of some $600,000.

Often, it takes a tip from a concerned investor to put regulatory agencies or law enforcement on the case. In the EUB situation, Idaho residents informed the state Department of Finance when they received E-mail solicitations to do business with the bank, according to Gavin Gee, director of the department.

EUB also showed up on an FDIC list of "questionable" banks, Gee said. The state issued EUB a cease and desist order when officials determined the solicitations to state residents violated an Idaho law barring banks from soliciting deposits from residents, he said. However, state officials never determined whether any Idaho residents lost money to EUB, Gee said.

While none of this can be viewed as great public relations for the nascent Internet banking industry, the president of the first bank to open its doors in cyberspace, Security First Network Bank, maintained that investors simply need to use common sense when choosing a financial institution.

"It's 'buyer beware,' just like in any other type of transaction," said Chuck Ogilvie, president of SFNB, in Atlanta. "When you see a 21 percent interest rate advertised, you have to ask yourself whether that makes any sense. If the institution isn't chartered and insured, chances are that rate is too good to be true."

SFNB, which made history in October 1995 when it launched as the first bank to operate solely on the Internet, boasts a federal charter and FDIC insurance, Ogilvie said.

"We haven't seen a lot of concern from our customers" about the fraud question, he said. "We're a federally regulated thrift. Everybody knows our corporate offices are in Atlanta -- there's a place to call or come and see us" in case there is a concern, Ogilvie said.

"The Internet is just like any other new channel -- people are unsure of the risks until they get used to the idea," he said, adding that similar concerns were voiced when telephone banking first became common.

As of Dec. 31, 1996 -- the latest date for which figures were available -- SFNB had 7,800 customers from all 50 states and total deposits of $28.3 million.

Mar. 15, 1999 -The banking industry has long banked on public trust, but a new technology scam threatens to erase customers' deposits as well as their trust.

Beware of the fraudulent banking site on the Internet, one where you can send a deposit check out anytime you like, but never again see your green. The Federal Deposit Insurance Corp. has identified at least 16 suspicious banking sites in the last few years, but acknowledges there could be many others lurking. So concerned is the agency that last year it launched a "suspicious Internet banking" section on its Web page (www.fdic.gov), where consumers are asked to report questionable sites. The FDIC page also includes a "special alert" list of suspicious banks and allows consumers to compare the name with a database of legitimate chartered, FDIC-insured banks.

It's a fertile time for fraudulent bank Web sites. Computer owners are acquiring a taste for the convenience of moving money from home with the mere click of a mouse. Banks are finding online banking sites quite the conduit to pitch loans and other products.

Some clever cyber-crooks have found their fraudulent sites to be a passive, relatively easy way to collect money. Internet users, after all, have come to expect from their starched banker's site little more than a few logos, lots of text, and maybe a few financial-feel-good photos. That means a low threshold of entry for the scam artist with good Web design software.

"They're really varied in terms of the sophistication and how convincing they are. If you have some amount of expertise, you could make it look very legitimate," said Jeff Kopchik, a senior policy analyst at FDIC.

The consumer need only be mesmerized long enough to swallow the bait: an offer of extraordinary interest rates on savings accounts, certificates of deposit, or other fictitious products. Intrigued consumers sign up and mail in a check or money order as an opening deposit. It's that simple. But it's also possible that site operators could mine from customer applicants data such as Social Security or credit card numbers. The FDIC has referred three suspicious sites to federal law enforcement agencies.

Last September, a federal grand jury indicted three North Carolina residents for fraud and money laundering charges. Their Netware International Bank allegedly operated without a banking charter and made such promises as a 20 percent return on savings. An estimated 3,000 customers nationwide mailed about $650,000 to the fictitious Internet bank, according to press reports. That money allegedly bought for the operators a twin-engine aircraft, a fishing boat and sport utility vehicle.

Of course, for every case like this there are many more Internet banking sites operated by legitimate institutions that are chartered, regulated and insured. The FDIC estimates that 3,000 banks have Web sites, with about 460 of those being so-called "transactional" sites that allow customers to transfer money between accounts or to pay bills.

A new breed of bank operates without brick and mortar branches, with customers conducting all of their business on the Internet. The latest of these is First Internet Bank of Indiana, launched last month. It is state-chartered and regulated by the Indiana Department of Financial Institutions, and FDIC insured. Its senior managers have years of experience in the banking industry.

Any online bank can make those claims, but how do you know for sure? One way is to check with the FDIC site (though it isn't 100 percent foolproof because some legitimate institutions operate under a slightly different name than on their charters).

Last fall, the banking industry introduced a high-tech system. Some online banking sites now display the "SiteCertain" seal, which is sort of an electronic watermark. Sites obtain the digital certification through the American Bankers Association. When customers click onto the seal logo, a connection is made to a secured, online database that verifies the legitimacy of the site. "With the trust people give their banks, we feel we have to have that extra level of protection. We urge them to be very cautious," said John Hall of the ABA.

FDIC's Kopchik said an online banking site may be fraudulent if it:

These "should probably cause a consumer to stop and look a little more carefully," said Kopchik.

- By Chris O'Malley, The Indianapolis Star and News.

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