Advance Fee Fraud Targets U.S. Businesses
By Charles N. Richardson
Citizens of certain African and Asian
countries who feel it is fair to play upon the greed of companies and individuals in
industrialized nations practice a scheme known in the U.S. as "Advance Fee
Fraud," but to them it is commonly referred to as "Citizen's Personal
Reparations."
Although most people attribute these
to the country of Nigeria, and to Nigerians, because of the publicity of "419"
scams (from the fraud statue number in the Nigerian code) have received, not all originate
in the country or are originated by citizens. Just as citizens of other African nations
have been labeled as Nigerians when arrested for drug smuggling and other crimes, based on
the fact that they were traveling on a (fraudulently obtained or fake) Nigerian passport,
so it is with these scams as well. Further, enterprising Nigerians and others, living in
other third world countries, are trying their hand as well.
The perpetrator, sometimes using
letterhead of a legitimate company or even government, sends letters to companies and
individuals in industrialized nations. The initial letter appears to innocently request
assistance regarding transferring funds to a bank account in the country where the letter
is received. Various reasons for the letter are given, but many times it will allude
vaguely to the sender's highly placed government contacts or friends who wish to transfer
large sums of money in order to access the funds when they are out of the country.
Alternatively, the letter may claim
that the money to be transferred is owed to the individual or company receiving the
letter, and that the sender is acting in some official capacity to facilitate the payment.
The amounts supposedly owed, or needing to be transferred, are usually quoted to be in the
millions of dollars. The sender also indicates that any assistance will be rewarded with
20%-30% of the transferred money to be paid as a commission for assisting with setting up
the transfer and honesty in looking after the money until someone arrives to take control
of it. There is a plea for the recipient to maintain the utmost secrecy in this delicate
matter, as it wouldn't be wise for too many people to know about it.
If the sender is successful in
enticing a reply, a second letter is sent. Depending upon the amount of greed demonstrated
by the context of the reply, the perpetrator proceeds, possibly asking for a fax number.
After some correspondence some information is requested, such as bank account numbers and
blank letterheads, depending upon whether the person solicited is now acting alone or on
behalf of an organization.
Depending on the sophistication of the
perpetrator, the second and al letters thereafter will come by a courier service or
registered mail. The letter(s) following the release of banking information normally
profusely thank the individual for the cooperation and state things are moving along fine
and everyone should expect to reap their rewards very soon.
Once the perpetrator is fairly
confident that he has hooked his prey, he may decide to make direct contact. Or he may
just continue the ruse by correspondence.
A third letter follows, after the
perpetrator has received whatever items he requested, as he is now confident he has hooked
his prey. The letter will probably mention the oversight of having not signed the bottom
of the letterhead, and will ask that signed letterhead be forwarded immediately. This
letter, or the next one, will then mention a slight glitch in the plan. The glitch
typically is that either government officials or bankers have refused to release the
money, although it is sitting there waiting to be wire transferred, but cannot be without
a facilitation fee (bribe). It is explained that money should be transferred to the
perpetrator so that he can iron out the difficulties. If the fee quoted is not responded
to, the perpetrator assumes it was too high, send another pleas, with a reduced figure,
and goes on about how he should be trusted with this small amount, since, after all, you
are going to be entrusted with millions.
Although a number of red flags should
be apparent at this point, many people try phoning or faxing the perpetrator in an effort
to determine the legitimacy of the deal, or at least the legitimacy of the perpetrator's
side of the deal. As a result, phones are answers, explanations are given, and fax
messages are sent and received. All of this tends to add credence to the scam, as a live
human is taking calls, the phone number exists, etc. In the end, after some amount of
negotiations, either the pot is sweetened with promises of a larger cut, or the amount of
up-front money being demanded is reduced, all in an effort to show the good faith
involved. The perpetrator will agree to pay a part of the required bribe himself to keep
the bankers or government officials happy.
At this point, most people have
decided to back out, or to wire the facilitation fee. For those who decide to back out,
this is not the end if they have supplied bank account information and signed letterhead,
or just bank account numbers and have given a sample signature by signing a letter or two
when corresponding with the perpetrator. Attempts will now be made to wire transfer money
directly to the perpetrator's account or to a business enterprise in the U.S. using the
signed letterhead and/or the sample signature. In the case of a U.S. enterprise, this is a
relatively new twist, but banks seem to fall for it more often than the direct wire
transfer to a foreign account, which they may have had alerts not to do, or to check with
the account holder if this is not a common transaction.
The way this scam works is that the
perpetrator will place an order with a legitimate company who has no involvement
what-so-ever. The Company will be advised that they will be paid, either by check, draft,
or wire transfer, from a brother-in-law, partner, or whoever, in the U.S., and that the
company should wait until the money arrives, but should ship immediately when the money
does arrive, as the products are desperately needed. Asking the company to wait, rather
than trying to establish credit terms, tends to put the company at ease since they are
being paid in cash. And in regard to shipping immediately, why not? Isn't it good business
to keep your customers, especially cash customers, happy? In a number of cases, money had
been successfully withdrawn, either by draft or wire transfer, and sent to pay for goods
that are being ordered by the same perpetrator. Many times the bank, since they were
requester to do so, will not only prepare the draft, but will mail it directly to the
company. Once the company receives payment and ships the merchandise, there is little the
bank can do to recover the money unless they can prove the company knew what was going on.
As with all scams, there is growth in
a new twist. University students, military officers, and others from developing countries
who have long terms stays in industrialized nations have been used to gaining confidence
of classmates or others, then set them up for yet another form of advance fee fraud.
In one case, a foreign military
officer who was attending a course conducted by one of the branches of the U.S. Military
convinced several of his classmates and one of his instructors that they could double
their money if they bought certain items and shipped them to him, or alternatively he
could just tale them with him as excess baggage. He said he had gotten to come to the
course because his uncle was Deputy Minister of Defense, and that the uncle would handle
the invoicing and process the paperwork, obtain the payment, and make the distribution of
funds. He played upon the fact that he was a fellow officer, a gentleman, and a friend,
having gained their trust during the lengthy course.
The foreign officer even produced
documents that appeared to waive arrival custom's duties as the items were intended for
governmental (military) use. He told his victims that he needed their secrecy because he
did not want it to appear that his country was using his attendance at the U.S. sponsored
course as an excuse to obtain the items. The items to be purchased -underwear, socks, and
other clothing-were not restricted from export, and he was not trying to break the law-he
was only trying to help his country and his friends.
There are many variations of these
schemes, but greed is the fuel of all of them, whether it be greed of the perpetrator or
of the victim.
There have been people whom prior to
paying the advance fee, insist upon meeting their newfound business partner before parting
with their money. In such cases, vises are arranged, the person travels to the
perpetrator's country (at his own expense), is wined and dined, and is taken to an
official government office or large bank, where introductions to someone with the title
"Prince," "Chief," etc., are made with much ado. Most of the time this
convinces the traveler of the legitimacy of the deal and the wisdom of parting with the
facilitation fee. Threats and intimidation are also used, depending upon the situation.
There is, at least initially, an attempted casualness to the negotiations, the insistence
of secrecy, the attempt to form a bond, and a subtly hint that someone else is prepared to
participate, for a lesser share. If possible, the person is persuaded to part with the
money immediately, or to wire, call or fax his bank prior to departing for home, so that
he can enjoy his new wealth shortly after his arrival back home. Some who were foolish
enough to risk going to jail by traveling without declaring large sums they were carrying
ended up having their money confiscated by customs on arrival in the perpetrator's
country, probably after the perpetrator alerted his contacts in customs to the fact that
the money could be gotten for sure, even though it had to be split. The perpetrator
sometimes splits with customs and still convinces the person to wire transfer additional
funds, with promise to pay him back once the deal is complete. In some instances, rather
than settling for a split with customs, the perpetrator will wait to see if the money is
going to be confiscated and if it is not, arrange for the person to be robbed.
There are any number of variations of
this scenario, and there are also advance fraud fee schemes where export companies quote
extremely low prices in conjunction with advance fees to hold goods and then never ship,
and also bogus import companies which take delivery of shipments on credit and then
vanish. Sometimes one or two small orders are paid for, even in advance, to build
confidence, then a rush shipment of a large amount of goods is requested, on credit.
One of the most amazing aspects of
these schemes is the number of victims who have come forward. In 1991, over 2,500 cases in
one European nation alone originated from just one African nation, and another 70 from a
single Asian nation. These are only the reported cases! It is impossible to know how many
people failed to report an actual loss out of embarrassment, shame or fear of prosecution.
Several nations have begun to crack
down on these schemes in an effort to clean up their images abroad, particularly when
trying to attract outside investors. Other either ignore or tolerate the corruption (which
is sometimes politically backed) rationalizing that all parties involved are of a criminal
mind, so the fraud is merely a case of one crook outsmarting the other.
Other perpetrators, in the course of
their day in court, have pointed to the stupidity of the respondent in replying to poorly
typed, poorly worded overture and to the fact that since there will be no penalty for the
respondent, even though the respondent had a criminal mind and was willing to participate,
that he should not be subject to any punishment, either. This has also been a successful
defense.
Although victims of these scams are
usually smaller companies or individuals, executives of large companies have been known to
respond, without seeking advice to the Security Director, Legal Department, or others,
only to be embarrassed or to suffer a loss.
Charles N. Richardson, C.S.T., was the
Managing Director of Protection and Safety Ventures, Ltd., in Okokomaiko (Lagos), Nigeria.
He had direct involvement with victims of advance fee fraud scams and has unique
perspectives on the social, economic and political forces affecting these schemes, having
spent nearly three years in Nigeria. He is a member of A.S.E.T.
Copyright © 2003, Executive Protection Institute
