“Social fakes” are invented profiles on social media (often referred to as profile misrepresentation), which can be used to harass or mock victims anonymously. But the more lucrative fake profile is one that imitates a legitimate business, damaging that business’s online reputation.

The impostors’ ultimate goal? Spam leading to scams.

Social-web security provider Impermium published the results of their recent analysis of the cost of social spam. “Online ID signup fraud” is an emerging trend, with fraudulent accounts ranging from a low of 5% to 40% of users. “Scammers are registering accounts by the millions as they perpetrate fake “friend requests,” deceptive tweets, and the like, while the black market for bulk social networking accounts is growing exponentially.”

They also warned about social web abuse, describing current “sleeper cells” as “a ticking time bomb.” Last month, more than 30,000 fraudulent accounts coordinated an attack, in which attackers submitted more than 475,000 malicious wall posts in one hour. According to Impermium, “Even accounts you’ve had for years could be lying in wait for just the right moment.”

Multiple issues stem from fake accounts, such as brand damage for both the website and its users, scams being perpetrated on existing or potential customers, and for social networking websites, an inflated, incorrect summation of active subscribers—to name a few.

Social media sites can use iovation’s device reputation service to help identify fraudsters at account setup. When a device (or related group of devices) signs up for more than your allotted number of accounts, you can receive alerts on this behavior. When multiple countries are logging into the same accounts within a specified timeframe, you can set alerts on this activity. When users are constantly changing their device attributes between multiple online registrations (to look like new, legitimate consumers), you can know this immediately—and automatically deny the new accounts outright or send them to your fraud review queue. If 1,000 accounts were just set up from the same machine, one after another, wouldn’t you want to know that while it’s happening so you can do something before the scams start?

Rather than relying on information provided by the user, which may not be honest or accurate, device reputation technology goes deeper, identifying the computer being used to register an account. This exposes negative behaviors right away, allowing a website operator to deny access to threatening accounts before your business reputation is damaged and your users are abused.

Robert Siciliano, personal security and identity theft expert contributor to iovation, discusses hackers hacking social media on Fox Boston. Disclosures

According to the article, “Online dating scams harm ‘thousands’ in Lee County,” Stacey Payne of the Lee County Sheriff’s Office community relations department says oftentimes those seeking love online either don’t want to believe it, are embarrassed, or simply don’t mind that the person they are in love with is a scammer.

“Oftentimes the victims don’t care they are being scammed – they want that companionship. Or they don’t believe they’re being scammed. They’re in love. If a person is of sound mind they can give their money to whomever they want to give their money.”

Payne estimates that 30% of online relationships, at least in Lee County, are based on lies. Contributing factors such as an aging population and affluent places such as Gasparilla Island can make such areas prime targets for online scammers, Payne says.

Because online perpetrators focus on the emotional heartstrings of their victims, Internet dating websites need to continually educate their members on how to spot potential sweetheart scams before victims get emotionally involved. While keeping members up to speed on fraud schemes and providing tips on how they can avoid being scammed, anti-fraud security tools also play a pivotal role in identifying and stopping online fraud before it happens.

Leading fraud prevention services such as iovation ReputationManager 360 uses device reputation to not only identify and re-recognize when Internet-connected devices with a history of fraud or abuse log onto a dating website, but also reveal hidden associations between fraudulent devices and other online accounts that are already active within a community.

Just since January 1, 2011, iovation has already flagged 15 million fraudulent activities for its dating and social networking clients, further protecting the client’s brand reputation and ensuring its members have a safe experience.  Many of those activities had to do with online scams and solicitations and take place all over the world.

Exposing the connections between fraudsters working together is critical for helping online dating sites reduce fraud rates and remove bad accounts that impacts its customers’ trust and confidence.

I like to expose the flaws in our systems, to find what makes us vulnerable. Much of my “research” (or my “antics,” as some would say) is prompted by my desire to learn more about the scumbags of society, who prey on others. So I sign up for online dating sites, create a profile as a woman, and wait for men to contact me. My research has led me to discover some particularly shady methods scammers use to target emotionally vulnerable victims. The most common is an advanced fee scam involving a wire transfer.

A divorced mother of three in Britain was taken for £80,000 by a scammer posing as a US soldier. It began when a man who called himself Sergeant Ray Smith introduced himself on a dating website. Soon they were chatting and emailing regularly, and then he was calling her on the phone and asking her to wire him money.

Twenty years ago, online dating wasn’t even a thought. Ten years ago, it was weird. Five years ago, it was new and exciting. Today, it’s as normal as milk and bread. If you are looking for a mate online, you will eventually find someone. Most of my friends who’ve tried it were successful. But by the time a new technology becomes normalized, scammers, who are usually ahead of the curve, are lying in wait. As online dating gradually gained popularity and acceptance, scammers were coming up with ways to take advantage and perfecting their craft. And now it’s a full-time job for them. They know all the new scams and come up with better ways of executing the old ones.

It blows me away that these scams are even possible. In many cases, the same scammers maintain multiple profiles on different dating sites, and the dating sites do almost nothing to prevent or police this.

We caught up with anti-fraud provider iovation to see what dating sites around the world were reporting about fraudster activities.

In the last 90 days, 230,000 fraud and abuse attempts were reported to iovation from dating sites alone, including:

• Spamming – 90,000
• Scams and solicitations – 30,000
• Inappropriate content – 20,000
• Chat abuse – 17,000
• Profile misrepresentation – 15,000
• Credit card fraud – 14,000
• Identity mining / phishing attempts – 12,000

iovation has many more categories specific to dating, including bullying, account takeovers, under age members, and so on. What’s unique to their globally shared system is that their clients can choose what to take action on or not. For example, a dating site may choose to not care about cheating in online gaming sites, but set up rules to trigger multiple account creations looking for profile misrepresentation. Dating sites can specify which type of behavior to protect their users from.

If more sites incorporated device reputation checks for suspicious computer history and investigated for characteristics consistent with fraudulent use, they’d be able to deny criminals, often before the first time they tried to sign up.

In the physical world, as the saying goes, “You are only as good as your word.” And when somebody says one thing and does another, we no longer trust them.

Online, people say and do things they never would in the real world. Internet anonymity fuels bad behavior. Websites’ comments sections are filled with vitriol that you’d never hear real people utter. Pedophiles who’d never approach a child on the street contact kids over the Internet. Sex offenders avoid the stigma of their label on dating sites and social media. Scammers create accounts in order to con people and businesses into forking over money. And identity thieves use your personal information to fill out online applications for credit.

All of this is made possible by the anonymity of the Internet.

As fraudsters develop more sophisticated schemes and collaborate in elaborate fraud rings, the threat of cybercrime increases. Online businesses are getting hit hard by fraud and abuse, and it’s critical that fraud protection solutions save them from significant losses and damaged reputations.

A device reputation service checks for suspect history, but also investigates for characteristics consistent with fraudulent users. And the best part is that it denies criminals, often even before their first attempt.

According to Greg Pierson, Founder and CEO of iovation, “Device reputation helps prevent identity thieves from monetizing the credentials that they have stolen. At the same time we are protecting online businesses, we’re also protecting the consumer.”

Device-based fraud management and a shared device reputation infrastructure play a critical role in identifying online fraud and abuse. Neglecting to take advantage of these tools severely limits a business’s ability to prevent fraud.

iovation is attending the Internet Dating & Social Networking Conference in London this week and evidence of this industry’s continued growth is easy to find. Just this weekend, the Detroit News reported on the success of the online dating industry, despite, or perhaps because of the tough economic times. In fact, based on statistics from Forrester Research Inc., the article states:

Online dating is the third largest producer of revenue out of all paid content sites, generating $957 million in 2008, a figure that the firm predicts will grow 10% by 2013.

Unfortunately, the increased popularity of online dating is also good news for scammers who are always happy to take advantage of new, unsuspecting users. This month PRWeb reported that, according to trends revealed by Google, search terms like “online dating” and “free dating” are getting the most hits from fraudsters in African countries, looking for sites where they can con those looking for love online.

Once these online scammers set up accounts at a legitimate site, they begin targeting other users, with consequences that can be anywhere from mildly annoying to completely devastating. For a look at the variety of different scams in play, and the techniques used to lure people into a scam, check out the site Romance Scams. This site not only details the warning signs but also provides links to some of the actual profile photos used by the scammers.

Romance scams aren’t new, of course—taking advantage of an individual’s emotions is a technique that has been used by con artists for centuries. What is new, however, is the level of anonymity and safety that the Internet gives to scammers. The relative ease with which anybody can set up an account using a stolen identity, a fake photo and made-up personal information makes these scams highly attractive to online criminals. Instead of having to focus on a single face-to-face con, the scammer can be running multiple cons at once without a problem.

With this in mind, it is very important for individuals to protect themselves and for online dating companies to take every step to ensure that their sites are safe for their users. One of the important ways we help companies in the dating industry is by raising the bar for re-identifying scammers, by focusing on the computer they use, rather than the personal information (often fake) that they provide. With device reputation, it is much easier to identify scammers trying to return to a site and repeat their scam or con. Because of the impact our fraud prevention service has had, we were mentioned in a ComputerWorld article discussing how iovation helped eHarmony fight online scams and we were also featured in a separate article in the same publication on how we are helping the online dating industry in general.

If you happen to be at iDate London this week, let us know. We would love to meet with you.