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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 (212) 563-4783number. 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 (212) 563-4783messages 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 (212) 563-4783his 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