What is Advance Fee Fraud?

In short, Advance Fee Fraud can be described as a confidence scam in which offenders convince a victim to part with small amounts of money in the hope of realizing a much larger gain over a period of time.

Advance Fee Fraud may include any misrepresentation in which a victim is asked to pay small amounts of money before the actual product, service or promise is realized. Thus an advance payment is required.

Offenders of this type of fraud will keep gathering small amounts of money from victims without delivering the product, service or promise.

One famous example of Advance Fee Fraud is the Nigerian 419 scam letter where thousands of people will receive an e-mail requesting the assistance from someone in moving millions of Dollars to a foreign country. The person interested in assisting with this request will be promised a certain percentage amount of the millions of Dollars. Once agreeing to assist fraudsters will start requesting the victim to various small amounts of money before the large sum is moved. While the victim is willing to pay the requested funds, the promised millions of Dollars will never materialize.

The Origin of Advance Fee Fraud

During mid 1980’s the Nigerian 419 scam made its appearance as the oil-based Nigerian economy declined. Initially unemployed university students started making use of this scam by defrauding businessmen in the United States.

The first recorded and reported scam letter in the United States indicated the letter originated from Nigeria.

The number ‘419’ refers to the article in the Nigerian penal code prohibiting advance fee frauds, which is exactly what the Nigerian 419 scam entails.

Due to the above mentioned factors, the Nigerian scam letters were called the Nigerian 419 scam letters.

The Nigerian 419 scam letters, however, was not the first recorded types of Advance fee fraud though. Back in the 18^th century people were subject to a scam known as the ‘Spanish Prisoner’ scam.

Based on the same principals, offenders would inform victims that a rich prisoner promised to share his treasures with the victim in exchange for money to bribe the guards.

How the fraud is committed

As mentioned above, fraudsters will device some story in which they claim to be in possession of millions of Dollars and need the assistance from some person to assist in moving the funds from one country to another.

The victim is often promised 10% of the total of the millions of Dollars if he decides to assist by availing his or her bank account for purposes of transferring the funds.

Once the victim agrees to assist a series of ‘problems’ will occur which will prevent the release of the funds to the victims’ bank account. On each occasion the fraudsters will ask the victim to pay small amounts to get the funds released.

As long as the victim makes the small payments the problems will occur. Once the victim stops making payments the fraudsters will disappear.

Distribution of scam letters

Initially, scam letters were sent by means of normal postal services. Often these scams took years before they were completed. Fraudsters had to wait for long periods of times for mail to be returned.

In the 1990’s with thanks to the Internet and e-Mail, offenders started making use of technology. Today offenders will send one email to thousands of recipients. Replies are received immediately and in short periods of time. Due to this progress in technology, Advance Fee Fraud quickly rose to one of the world’s top 5 economic crimes responsible for the largest monetary losses.

How funds are received

Offenders of Advance fee fraud often require that money be transferred to them via wire-transfer services. These offenders will then make use of false identities to claim the funds sent to them by victims.

In few instances offenders will make use of normal citizens and ask their assistance in using their banking accounts to receive funds. Offenders will then reward these individuals for making use of their banking facilities.

In the minority of cases fraudsters will make use of middle-men to meet the victim in person and collect funds personally.

Variants – Source – http://en.wikipedia.org/wiki/Advance_fee_fraud

There are many variations on the most common stories, and also many variations on the way the scam works. The following are notable deviations from the standard Nigerian Letter scam, but still retain the core elements; the victim is deceived by some disproportionately large gain into sending an advance payment, which once made is irrecoverable.

Purchasing goods and services

A modern activity is advertising automobiles on websites. They list a (non-existent) high value car with a low price as bait to attract buyers eager to buy quickly. The scammer says “I am not in the country, but if you pay me first, a friend will drive the car around to you”. The payment required may be the full price, or a deposit, but it wouldn’t be an insignificant fee. You will never see the car, as it does not exist. They use e-mail only, as they know that the sound of their voice and their attitude will give them away as being high risk.

Another scheme involves advertising fake academic conferences and enticing academics to apply to present papers.. It’s a common practice that the conference subsidizes or pays for the air travel of academics who present papers at the conference, but does not pay for accommodation. One way the scammer baits the hopeful attendee is they offer free air travel to the victim, but only as long as they pre-pay for hotel accommodation. The scammer can give a variety of reasons that the accommodation must be pre-paid – primarily that they don’t trust you will attend the conference unless you pay upfront. At some stage the victim may receive a phone call from a pleasant sounding African man who says he is Doctor or some such.

Just about any goods or services can be used as the scam, but the idea is that they bait you with a good deal, but you must pay upfront and electronically.

Check cashing

Some schemes are based solely on conning the victim into cashing counterfeit check. The scammer contacts the victim to interest them in a “work-at-home” opportunity, or asking them to cash a check or money order that for some reason cannot be redeemed locally. A recently-used cover story is that the perpetrator of the scam wishes the victim to work as a “mystery shopper”, evaluating the service provided by MoneyGram or Western Union locations within major retailers such as Wal-Mart. The scammer sends the victim a check or money order, the victim cashes it, sends the cash to the scammer via wire transfer, and the scammer disappears. Later the forgery is discovered and the bank transaction is reversed, leaving the victim liable for the balance. Schemes based solely on check cashing usually offer only a small part of the check’s total amount, with the assurance that many more checks will follow; if the victim buys in to the scam and cashes all the check, the scammer can win big in a very short period of time. Other scams such as overpayment usually result in smaller revenues for the scammer, but have a higher success rate as the scammer’s request seems more believable.

Some check-cashing scammers use multiple victims at multiple stages of the scam. A victim in the US or other “safe” country such as the UK or Canada (often the country in which the cashing victim resides) is sometimes approached with an offer to fill out cheques sent to them by the scammer and mail them to other victims who cash the check and wire the money to the scammer. The check mailer is usually promised a cut of the money from the scammer; this usually never occurs, and in fact the check mailer is often conned into paying for the production and shipping costs of the checks. The check information has either been stolen or fictionalized and the checks forged. The victim mailing the check is usually far easier to track (and prosecute) than the scammer, so when the checks turn up as fraudulent, the one mailing them usually ends up not only facing federal bank fraud and conspiracy charges, but liability for the full amount of the fraudulent checks. Because the check mailer is taking the fall, the scammer is even less likely to be caught, which makes it a popular variation of the scam for scammers in nations with tougher anti-fraud laws.

A variation of the check-cashing scheme involves owners of vacation rentals. The scammer expresses interest in renting the unit for a much higher than normal rate, usually for an upcoming honeymoon, business trip, etc. The scammer also offers to pay all fees “up front,” as soon as the unsuspecting unit owner agrees to the windfall rental. Eventually a very official looking money order/cashier’s check arrives. About this time the scammer requests that a portion of the rental fee be returned for some compelling reason…wedding called off, death in the family, business failure, etc. Due to the supposed crises, it is requested that most of the rental fee be returned via wire transfer. The unit owner in encouraged to retain “a fair amount” to compensate him for his time. The wire transfer is sent, only to find out later that the official looking check was indeed fake and the entire amount is charged back to the unit owner by his bank.

Romance angle

A recent variant is the Romance Scam, which is a money-for-romance angle. The con artist approaches the victim on an online dating service, an Instant messenger (like Yahoo IM), or a social networking site. The scammer claims an interest in the victim, and posts pictures posted of an attractive person (not themselves). The scammer uses this communication to gain confidence, then asks for money. The con artist may claim to be interested in meeting the victim, but needs cash to book a plane, hotel room, or other expenses. In other cases, they claim they’re trapped in a foreign country and need assistance to return, to escape imprisonment by corrupt local officials, to pay for medical expenses due to an illness contracted abroad, and so on. The scammer may also use the confidence gained by the romance angle to introduce some variant of the original Nigerian Letter scheme, such as saying they need to get money or valuables out of the country and offer to share the wealth, making the request for help in leaving the country even more attractive to the victim. In a newer version of the scam, the con artist claims to have ‘information’ about the fidelity of a person’s significant other, which they will share for a fee. This information is garnered through social networking sites by using search parameters such as ‘In a relationship’ or ‘Married’. Anonymous e-mails are first sent to attempt to verify receipt, then a new web based e-mail account is sent along with directions on how to retrieve the information.

Lottery scam

The lottery scam involves fake notices of lottery wins. The winner is usually asked to send sensitive information to a free e-mail account. The scammer then notifies the victim that releasing the funds requires some small fee (insurance, registration, or shipping). Once the victim sends the fee, the scammer invents another fee.

Much like the various forms of overpayment fraud detailed above, a new variant of the lottery scam involves fake or stolen cheques being sent to the ‘winner’ of the lottery (these cheques representing a part payment of the winnings). The winner is more likely to assume the win is legitimate, and thus more likely to send the fee (which he does not realize is an advance fee). The cheque and associated funds are flagged by the bank when the fraud is discovered, and debited from the victim’s account.

In 2004 a variant of the lottery scam appeared in the United States. Fraud artists using the scheme call victims on telephones; a scammer tells a victim that a government has given them a grant and that they must pay an advance fee, usually around $250, to receive the grant.

Hitman

An e-mail is sent to the victim’s inbox, supposedly from a hitman who has been hired by a “close friend” of the recipient to kill him or her but will call off the hit in exchange for a large sum of money. This is usually backed up with a warning not to contact the local police or FBI, or the “hitman” will be forced to go through with the plan. This is less an advance-fee fraud and more outright extortion, but a reward can sometimes be offered in the form of the “hitman” offering to kill the man who ordered the original hit on the victim.

Bomb scams

Related to the hitman scam, the scammer contacts a business, mall, office building, or other commercial location with a bomb threat. The scammer says they will detonate the bomb unless the management of the business does as the scammer tells them. Often, the scammer says they have the store under surveillance; however, analysis of the calls by police have established that the vast majority of threat calls are made from other states or even from outside the country. Some evidence exists that points to the scammers hacking into the store’s surveillance network, but this has not been confirmed in any case and has been refuted in others. The scammer usually demands that the store management or people in the headquarters office of the store (if the store is a chain) send money via wire transfer to the scammer to spare the store and the people in it. Other demands of these scammers have been more personal and humiliating, such as demanding that everyone in the store take off their clothes.

Because the underlying threat in the scam is a bomb threat, local law enforcement very quickly responds to the site under threat; however, because the scammer is usually nowhere near this location, the scammer is in little if any danger of being apprehended while the scam is playing out. Law enforcement, in the meantime, cannot assume the threat is anything but genuine, and therefore can do little to intervene without risking the detonation of the bomb. The fact that the threat was in reality a scam has usually not been discovered until long after the situation is over—and the extortionist has collected the money demanded.

Charity scams

The scammer poses as a charitable organization soliciting donations to help the victims of a natural disaster, terrorist attack (such as the Sept. 11 World Trade Center attack), regional conflict, or epidemic. Hurricane Katrina and the 2004 tsunami were popular targets of scammers perpetrating charity scams; other more timeless scam charities purport to be raising money for cancer, AIDS or Ebola virus research, children’s orphanages (the scammer pretends to work for the orphanage or a non-profit associated with it), or impersonates charities such as the Red Cross or United Way. The scammer asks for donations, often linking to online news articles to strengthen their story of a funds drive. The scammer’s victims are charitable people who believe they are helping a worthy cause and expect nothing in return. Once sent, the money is gone and the scammer often disappears, though many attempt to keep the scam going by asking for a series of payments. The victim may sometimes find themselves in legal trouble after deducting their supposed donations from their income taxes. United States tax law states that charitable donations are only deductible if made to a qualified non-profit organization. The scammer may tell the victim their donation is deductible and provide all necessary proof of donation, but the information provided by the scammer is fictional, and if audited, the victim faces stiff penalties as a result of the fraud. Though these scams have some of the highest success rates especially following a major disaster, and are employed by scammers all over the world, the average loss per victim is less than other fraud schemes. This is because, unlike scams involving a large expected payoff, the victim is far less likely to borrow money to donate or donate more than they can spare.

In a related variant, the scammer poses as a terminally ill mother, poor university student, or other down-on-their-luck person and simply begs the victim for money for college tuition, to sponsor their children, or a similar ruse. The money, they say, will be repaid plus interest by some third party at a later date (often these third parties are some fictitious agency of the Nigerian government, or the scammer themselves once a payment from someone else is made available to them). Once the victim starts paying money to the scammer, the scammer tells the victim that additional money is needed for unforeseen expenses, similar to most other variants; in the case of the ill mother, the children will fall ill as well and require money for a doctor’s care and medicine (many scammers go as far as to say that as the sponsor of the children, the victim is legally liable for such costs), where the student might claim that a dormitory fire destroyed everything they own.

Fraud recovery scams

This variant targets former victims of scams. The scammer contacts the victim saying that their organization can track and apprehend the scammer and recover the money lost by the victim, for a price. Alternatively, the scammer may say that a fund has been set up by the Nigerian government to compensate victims of 419 fraud, and all that is required is proof of loss (which usually includes personal information) and a processing and handling fee to release the amount of the claim. The scammer is counting on the victim’s dire need to recover their lost money, as well as the fact that they have fallen victim before and are therefore susceptible to such scams. Often, these scams are perpetrated by the same scammer who conned the victim in the first place, as an attempt to ensure the scammer gets every penny possible from the victim. Alternately, the original scammer “sells” a list of the people he has scammed but who have ceased contact to another scammer who runs the recovery scam. Sometimes the scammer impersonates the foremost “fraud related crime-fighters” in Nigeria, the EFCC (Economic and Financial Crimes Commission), which not only adds credibility to the scam, but tarnishes the reputation of the EFCC once this second scam is discovered.

Pet scams

Another such scam is based on the adoption of a puppy (usually English Bulldogs or Yorkshire Terriers; a cute, expensive breed coveted by families who cannot afford them) or an exotic pet such a parrots or reptiles. A scammer first posts an advertisement or sets up a web page offering puppies for adoption or for sale at a ridiculously low price, most often using stolen pictures from other websites and respectable breeders. When a victim responds to the ad and questions the lowered price or the reason for giving up such an adorable and expensive pet, the scammer first explains that they have recently moved to Nigeria or Cameroon from the US for work (usually volunteer work as missionaries) or for studies, and claims either to have no time to properly care for the pet, that the weather has had such a terrible toll on the pet, or that they have too many pets to care for.

The scammer and victim exchange a few e-mails to build trust. Once it is established that the victim offers the right home for the pet, the scammer offers to ship the pet, and requests the victim only pay for shipping, or comes off the original price substantially to seem legitimate. The victim, who now has an emotional attachment to the pet, feels obligated and even happy to do so, as shipping is a small price to pay compared to the pet’s full price at a shop or breeder. The scammer requests Western Union or MoneyGram to keep the deal going in a timely fashion as the pet is ready to go to a new home and the victim is now excited. However, after wiring money, the victim doesn’t receive the pet (as the pets don’t exist), and if the victim does hear from the scammer again it is only for more money (to get puppy out of airport holding, or to pay unexpected vet bills that have come up) until the victim stops responding.

Craigslist

The popular online classifieds website, Craigslist, has been plagued with scammers using advance-fee fraud and similar techniques, usually involving fake checks, to con people out of their money. Sometimes many scammers contact a person who is either attempting to buy or sell items on Craigslist, and attempt to perpetrate the exact same scam. Many of the same elements as the Nigerian 419 scams are used often on Craigslist, including persons conducting transactions from outside the country, sending realistic looking bank checks, sending more money than is owed, and requesting that money be wired back to the scammer.

The Consequences of Advance Fee Fraud

Not only do victims suffer serious financial losses in these scams, but they expose themselves to acts that may include robbery, assault, kidnapping and murder.

Osamai Hitomi, a Japanese businessman was lured to Johannesburg, South Africa in a Nigerian 419 scam and kidnapped on 26 September, 2008. The kidnappers took him to Alberton, south of Johannesburg and demanded a $5 million ransom from his family. Seven people were arrested after Police intervened.

On 23 September 2008, a Kenth Sadaaki Suzuki, a Swedish businessman, was lured to South Africa and kidnapped. He was taken to a house in Rosettenville in Johannesburg and robbed of all his belongings. Thereafter a ransom of €20,000 was demanded from his family. Two people were arrested. They are also linked to the kidnappings of three American Citizens and possibly other similar cases.

On June 2, 1996 in Lomé, Togo, 419ing kidnappers held a Swedish businessman for $500,000. Swedish police and the kidnappers negotiated before the kidnappers released the man on June 12, 1996.

Joseph Raca, a former mayor of Northampton, England, was kidnapped by scammers in Johannesburg, South Africa in July 2001. The captors released Raca after they became nervous due to increased police investigations.

D?nu? Tetrescu, a Romanian who flew from Bucharest to Johannesburg to meet with con men in the Soweto area of Johannesburg, was kidnapped in 1999 and held for $500,000.

29-year old George Makronalli, a Greek man, was murdered in Durban, South Africa during December 2004 after responding to a 419 scam.

Kjetil Moe, a Norwegian businessman, was reported missing and ultimately killed after a trade with Nigerian scammers in Johannesburg, South Africa during September 1999.