The Daily Record, September 2014

Advance Fee Fraud 

According to the Securities and Exchange Commission, Advance Fee Fraud gets its name from the fact that an investor is asked to pay a fee up front or in advance of receiving something of greater value. This type of scam has been around for quite some time. Over 100 years ago, the “Spanish prisoner letter” scam was used, where scammers contacted businessmen via letter alleging that someone connected to a wealthy family in Spain was in prison, and in exchange for a small fee to help smuggle them out, the wealth would be shared. The fee was paid, there was no prisoner, and no wealth shared. During the 1980’s, variations of these letters starting coming from Nigeria. They began as letters mailed to potential victims and evolved into e-mail scams, as it drastically cut the cost of sending. Advance fee fraud is sometimes referred to as “419 Fraud”, 419 being the article of the Nigerian criminal code dealing with fraud.

Types of Advance Fee Fraud 

Since the evolution of the “419 Fraud” letters from the 80’s, scammers have evolved and updated their tactics. Today, the types of advance fee fraud schemes are limited only by the imagination of the perpetrators who create them. They may involve the sale of products or services, offering of investments, lottery winnings, “found money”, or other opportunities. Some fraudsters will offer to find financing arrangements for clients who pay a “finder’s fee” in advance. Soon after the contract is signed and the finder’s fee is paid, the victim finds out that they are not eligible for financing and the perpetrator has made off with their money. The following are some common examples of advance fee fraud scams:

• Beneficiary fund scam – The scammers often present some type of story about needing your help to get money from a bank in another country. The story will usually involve someone who has died and the perpetrator alleges that if they do not act quickly, the money will be turned over to the government.
• Lottery scam – Scam claims that you have won money in an overseas lottery. The letter or e-mail will usually ask for personal information to confirm your identity so you can collect your winnings.
• Investment scam – An investment company contacts you and needs your assistance in investing money overseas. The letter or e-mail will look as though it is coming from a reputable investment firm or government official. The letter will ask you to contact the company, where you will be asked to pay some sort of fee up front in return for a hefty profit that does not exist.
• Romance scam – Scammers pull at the heart strings of those on internet dating websites and chat rooms by asking for money for sick relatives, or money for a plane ticket to meet you in person.

An article recently published in the New York Times described an advance fee fraud scheme that carried on for years, claiming almost 2,000 victims and $26 million. The Company appealed to people looking for investors for their businesses. During a time when job insecurity was high, bank requirements for loans were strict, the Company provided high hopes for those just trying to make a living by making them believe they would invest in their business or find investors for them. The hopeful entrepreneurs only needed to pay up-front fees of between $10,000 and $40,000. Unfortunately, the Company did nothing with the money. When clients started complaining and asking for their money back, phone calls were not returned and files were transferred to someone else. One victim, who felt as though he was fairly business savvy, looked to the Company to help him find investors for a multi-use development project. After paying $15,000 in “due diligence” fees and over $1,000,000 in pre-development costs, the victim was forced to declare bankruptcy on one of his businesses. Because the Company worked diligently to make their business appear legitimate, they were able to de-fraud even the smartest of business owners. Sadly, the money lost by victims is generally very difficult to recover. Companies like this word their contracts to make it almost impossible for victims to sue for fraud. Therefore, it is imperative to understand the warning signs of a suspicious business opportunity.

What to look for 

When it comes to recognizing potential advance fee fraud schemes, the Federal Bureau of Investigation suggests thinking about the following tips:

• First and foremost, if the opportunity appears too good to be true, it probably is.
• Know who you are dealing with – If you have not met the person or Company you will be doing business with, do some due diligence. Contact the Better Business Bureau, consult with your bank, attorney, or local police.
• Make sure you fully understand any agreement you enter into – If the agreement is too complex, have a professional review it for you.
• Be wary of businesses that operate from a post office box, with no actual street address connected to the business.
• Be suspicious of anyone who does not have a direct telephone line and who is not around when you call, but promises to return your call later.
• Be wary of business deals that require you to sign non-disclosure or non-circumvention agreements that are designed to prevent you from independently verifying the integrity of the people with whom you intend to do business.

Who’s fighting?

The Advance Fee Fraud Coalition was created in October 2008 in response to the threat caused by lottery hoax e-mails, a common form of advanced fee fraud. The Coalition’s initial goal was to educate internet users so they are better able to protect themselves against fraudulent online activities. As advance fee fraud has become more prominent, the Coalition works to increase public awareness of the types of advance fee fraud schemes that exist. Coalition members continually seek to identify service accounts or transactions used by fraudsters, and take appropriate action against them to disrupt and/or prevent the fraud schemes from occurring.  If you suspect you are a victim of an advance fee fraud scheme, the Coalition encourages you to make a report with local police. In addition, you can file a complaint with the Internet Crime Complaint Center (“IC3”) at www.ic3.gov.

Be skeptical

In a world where scammers can simply hide behind a computer screen and pretend to be just about anyone, it is important to remain skeptical of business opportunities or requests for assistance that may come across your inbox. Remember to perform some due diligence and ask a professional to review the transaction before signing any contracts, sending money or giving any personal information to anyone.