Check Credit Status Before Engaging in Business
Check the credit status of all potential partners before engaging in any business over the internet. Using all the available ways to clear their backgrounds down to the last detail.

Payment
Letter of Credit and Escrow are recommended in business

Letter of Credit (L/C)

Escrow
Escrow.com is the transaction settlement service used by many of the leading e-Commerce sites, including eBay and eBay Motors. Escrow.com acts as a secure third party to protect the Buyer and Seller. (Refer to www.escrowfraud.com )  

Avoid T/T (Telegraphic Transfer payment)

For Buyers : It is unadvisable to accept an overseas supplier's request for pre-payment. In most cases, a request for T/T payment involves attempted fraud.

For Sellers : it is unadvisable to agree to accept payment from an overseas buyer after they have received products. Once a buyer has received samples or products without payment, it is very difficult to get them back. You won't have the control right within this situation.  

Frequent Contact with Partners
Be wary of the traders who use only an email and cell phone. As the real existence of her/him in the company we could not always make sure. Frequently contact the company phone number and check the person you are touching with actually works for this company.
In most successful cases, genuine trader will keep frequent contact with partner wherever on internet or phone.

Legible and Clear Contract

Make a contract and keep it for a specific period to avoid argument. The contract should include sales conditions, payment method, an arbitration clause, quality inspection, etc.

Samples
For Sellers : Request a nominal payment for samples.
When an unknown buyer requests samples while hinting at a large order, it is always wise to request at least a nominal pre-payment.

For Buyers : Request samples to check the quality of product.
Order a sample before committing to a purchase order to be sure that the product meets your expectations. Don't forget to pay for samples.  

Be Wary of Over-generous Offers
Be wary of potential partners who offer a particularly high or low price in the first instance. It is easy to be tempted by such offers, but they are most often attempts to defraud. This method is most commonly employed in the mobile phone and computer-related business.

Check Contact Information Facticity
Fax No. : Go through the company that uses the same number for telephone and fax. They are likely to be a small one. Be better to avoid companies that list only a fax number in their contact information.

E-mail Address : Contact with partners through only an email address is not a advisable way. Even the company has its own domain name, you could not trace its owner.

Website : Not to cool it by an impressive website for it could not guarantee the business safty.

Related Anti-Fraud Website :
FBI - Internet Fraud & Complaints Center
http://www.ic3.gov/
National Fraud Information Center (NFIC)
http://www.fraud.org/scamsagainstbusinesses/bizscams.htm
Association of Certified Fraud Examiners
http://www.acfe.com/
Financial Crimes Enforcement Network (FinCEN)
http://www.fincen.gov/index.html
Internet Crimes Group Inc.
http://www.icginc.com/
Internet ScamBusters
http://www.scambusters.com/
Better Business Bureau
http://www.bbb.org/

Examples of Fraud
The following are some examples of international trade fraud and advice on how to avoid it.  

Example 1 - Obtaining Samples Fraudulently
When an unknown buyer requests samples while hinting at a large order, it is always wise to request at least a nominal payment for the samples. If the buyer refuses to pay the mailing costs, let alone the sample charge, you are advised to beware.  

Example 2 – Faked Promises Leave The Exporter With Irrecoverable Stock
Swindlers often try to convince a supplier that they are about to place a large order on an L/C basis. They encourage a manufacturer to go into early production on their specifications, claiming that is a test and promising early payment. However, once production is complete the buyer goes back on his word, and the manufacturer is left with unsaleable stock. To avoid this type of situation, when commencing business with unknown buyers, it is safer not to agree to early production, no matter how enticing the offer may be. 

Example 3 - Demanding Discounts By Invoking Spurious Conditions in Documentation
In order to create artificial conditions for refusing to accept goods or for reducing prices, some buyers deliberately include vague terms in the L/C and later claim an intentionally "UNPAID" clause. A variation is to place orders on L/C & D/A, but to withhold payment for the D/A part of the contract.

Example 4 - Sending Illegal job Hunters Disguised As Buyers
Some company may send job seekers disguised as buyers. If you have any doubts, consider the age and position of the person. Very young or low ranking buyers should arouse suspicion. When groups of buyers are encountered, the credibility of the company should be thoroughly went through.  

Example 5 – Refusing Payment For The Second Part Of A Shipment
After gaining the trust of an exporter in the first part of a deal by making immediate payment by T/T, the fraudster then refuses to pay for the second part of the shipment. When working on a T/T basis, once the shipment has been made, if the importer refuses to make the payment, there is no way for exporter to obtain the money. Therefore, if you think you're dealing with an unreliable partner, the T/T method should be used on a pro forma basis only.  

Example 6 - Un-collectable Payment Due To A Financially Unstable Opening Bank
When accepting an L/C from an unknown bank in an underdeveloped country, be sure to check the credibility of the bank. If there are any doubts about its financial condition, it is advisable to request confirmation of the L/C from a reliable bank.