The Better Business Bureau of Hawai'i issued an alert yesterday warning online shoppers of scammers posing as escrow services to defraud consumers.

Internet-based thieves are using escrow service fronts with some new twists to steal money and personal identities, the BBB said in a news release.

The scope and cost of Internet fraud is growing. In 2007, the Internet Crime Complaint Center processed 219,553 complaints and the Federal Trade Commission reported that nearly $526 million was lost to online fraud. The FTC also reports that 28 percent of online fraud victims sent funds to scammers via hard-to-track wire transfer services — a favorite tactic of fake escrow services.

"Legitimate escrow companies in Hawai'i and on the Mainland create a safe environment where both the buyer and seller feel comfortable exchanging money and goods knowing they can't be taken advantage of," said Dwight Kealoha, chief executive of Hawai'i's BBB. "Unfortunately, scammers have realized they can cash in on this type of transaction by creating a facade of trustworthiness as an escrow company."

Escrow fraud is typically perpetrated through online auctions or Web sites with classified ads. Both eBay and Craigslist have posted warnings to users about escrow fraud on their sites, but the BBB notes that shoppers continue to become victims as scams get more sophisticated.

Victims of escrow fraud are often shopping online for big-ticket items such as a used car when they come across a deal that is often too good to be true, according to the release. When the buyer and supposed seller make contact, the seller recommends using a specific third-party escrow company to protect both of their interests, according to the BBB. The escrow company contacts the consumer and requires that they wire the payment for the item through Western Union or MoneyGram to have the car delivered. After wiring the money, buyers don't receive the car and usually never hear from the seller or the phony escrow service again.

"Perpetrators of escrow fraud have learned that every detail they provide (such as a fake transaction number and supposed contact information) and every step they require the buyer to take creates a greater sense of trust in the company," Kealoha said. "These scammers know that the more intricate and complicated the process, the more legitimate it will seem."