Escrow fraud: a new risk for the logistics sector

Mona Schroedel, an expert in commercial disputes at Freeths, highlights how internet trade is making logistic companies more susceptible to fraud, one e-risk in particular being escrow fraud.

How it works Logistics and escrow fraud Case Study Practical Issues PR:

In the first instance, maintaining our client’s reputation was paramount to ensure goodwill was not further damaged. We advised on suitable text to be prominently displayed on the bona fide website to warn customers to be vigilant and to only use that website and making it clear they did not provide escrow services.


Investigations: We urgently carried out investigations to find out who was behind the fraud and obtained details of the perpetrator’s name, e-mail address, London residential address and telephone details. The website host and provider were based in North America.


Action: We then did a number of things in parallel

  • Reported the matter to the police, providing contact details obtained. This gave us a crime reference number to quote in further correspondence with third parties.

  • Called and e-mailed the contact details for the individual who had registered the cloned site; unsurprisingly the details proved to be false.

  • Contacted the internet service provider and host, requesting that it be taken down.

  • Difficulties in pursuing perpetrators Legal Remedies Claim for Passing Off: An ancient and well established law of more than 150 years.

  • As a claimant you must show you have goodwill in relation to goods /services; there has been a misrepresentation to the public; and damage to goodwill/reputation has been suffered as a result of the passing off.

  •  All elements are usually present in escrow fraud via a cloned website. If successful the court is likely to order the defendant to cease the passing off (ie take down the site) and to pay damages to the claimant.

  • Claim for trademark infringement: Whether there is a valid claim under the Trademark Act 1994 depends on whether a trademark has been registered (if not, consider doing so) and whether a breach has occurred. This relates to where the public is confused by identical or similar trademarks being used in relation to similar goods and services. There are potential defences to a trademark infringement action, but is highly unlikely that they will apply in an escrow fraud type situation.

  • If the claim is successful relief will include damages, an injunction and potentially accounts for profits made (though where the profit is derived through fraud this is unlikely).Obtaining an injunction: This is usually not a first step as they are costly to obtain. However, where it is impossible to have the cloned website taken down and damage to reputation continues, it may be necessary. An injunction can be taken out even if the identity of the person behind the fraud is unknown, as long as it is possible to identify a party with the power to take down the cloned site. The court can then order that party to take action.

  • Criminal sanctions: The police may be able to pursue perpetrators but, with limited resources available, it is unlikely that they will actively do so unless part of a wider fraud.

  • Preventing and controlling damage. It will help if IP rights are properly registered so that they can be enforced.

  • Consider buying up similar sounding domain names to limit the risk of them being used to set up cloned websites.Insurance for e-risks may cover escrow fraud; discuss any concerns with your insurers.

  • It makes sense to carry out regular searches to ensure that no cloned websites are targeting your customers and to take immediate steps to have them taken down as soon as they are identified.

  • Facts Escrow fraud is now most commonly committed online.There were 2.5 million cyber crimes in 2015 (interim results from the Crime Survey of England and Wales). 70% of fraud is cyber enabled (according to Action Fraud).

  • Incidents of fraud or cyber crime can be reported to Action Fraud, the UK’s national reporting centre.

The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.