An advance fee fraud is a confidence trick in which the target is persuaded to advance relatively small sums of money in the hope of realizing a much larger gain. Among the variations on this type of scam are the Nigerian Letter (or 419 fraud).419 fraud
The most visible form of advance fee fraud today is the Nigerian Letter or 419 fraud, named after the section of the Nigerian criminal code that it violates. These scams have come to be associated with Nigeria due to the massive proliferation of such confidence tricks from that country since the early 1990s, as well as the reputation of the country for corruption. Originally the schemers contacted mainly heads of companies and church officials, often by fax or postal mail. However, the use of e-mail spam and instant messaging for the initial contacts has led to many private citizens also being targeted, as the cost to the scammers to make contact is much lower. A typical letter claims to come from a person needing to transfer large sums of money out of the country or from a lottery company. As the Nigerian letter has become well known to potential targets, the gangs operating the scams have developed other variations. The targets are often told that they are the beneficiaries of an inheritance or are invited to impersonate the beneficiary of an unclaimed estate.
In "The Spanish Prisoner" scam, one of the earliest forms of advance fee fraud, the target is told that a wealthy individual is being held hostage and will reward those who help to transfer the ransom money. Another common gambit is a fake lottery in which the targets are told that they have 'won' a large prize but must pay an 'administrative fee' before they can receive it. After the 'administrative fee' is paid, the scammer vanishes.
In one development of the scheme, the perpetrators use a counterfeit cashier's check to buy an expensive item such as a car or boat from people advertising goods in online classifieds. The target is given a fake check for an amount greater than the value of the item, and asked to return the difference.
Another recent variation involves the use of fake cashier's checks to pay for high-value items in Internet auctions.
The scammer sends a check for more than the purchase price asking that part of the money be forwarded to a 'shipper' or 'freight forwarder' after the funds have cleared. This will usually happen quickly as banking practice assumes that banks are liquid at all times and that there is no credit risk. The vendor will only discover that the check was fraudulent and the transaction has been voided a few days later, by which time the intermediary will in most cases have been paid.
The most recent scheme is to ask individuals to deposit a check into their account then to forward a percentage (80%-90%) to a company that supposedly is owed the amount. Of course the check is counterfeit and by the time the depositor's bank finds that out, the funds have been transferred.
The United States Federal Trade Commission has issued a consumer alert about the Nigerian scam. It says: If you receive an offer via email from someone claiming to need your help getting money out of Nigeria, or any other country, for that matter, forward it to the FTC at email@example.com. The United States Department of the Treasury maintains an account for the public to send 419 related documents: You may also email the 419er documents, especially any banking data they may have given you, marked as described above, to Task Force Main in DC firstname.lastname@example.org; that is also acceptable.
The 419 scam originated in the early 1990s as the oil-based economy of Nigeria went downhill. Several unemployed university students first used this scam as a means of manipulating business visitors interested in shady deals in the Nigerian oil sector before targeting businessmen in the west, and later the wider population. Early variants were often sent via letter, fax, or even Telex. The spread of email and easy access to email-harvesting software made the cost of sending scam letters through the internet extremely cheap. While various figures have wildly claimed that the 419 scam employs as many as 250,000 people in Nigeria, in reality it has often been linked to small organized gangs often working in concert in western cities and in Nigeria. In recent years, the 419 scam has spurred imitations from other locations in Africa and Eastern Europe.
In fact the advance fee fraud is a much older scam than that, dating back to 1588 where letters were written claiming to be from a prisoner trapped in a Spanish castle. The fictitious prisoner would promise to share a treasure with a person who would send them money to bribe their guards.
The 'investors' are contacted, typically with an offer of the type "A rich person from the needy country needs to discreetly move money abroad, would it be possible to use your account?". The sums involved are usually in the millions of dollars, and the investor is promised a large share, often forty percent. The proposed deal is often presented as a "harmless" white-collar crime, in order to dissuade participants from later contacting the authorities. Similarly, the money is often said to be the embezzled funds of a recently deposed or killed dictator. The operation is professionally organized in Nigeria, with offices, working fax numbers, and often contacts at government offices. The investor who attempts to research the background of the offer will often find that all pieces fit perfectly together.
If they then agree to the deal, the other side will first send several documents bearing official government stamps, seals etc., and then introduce delays, such as "in order to transmit the money, we need to bribe a bank official. Could you help us with a loan?" or "In order for you to be allowed to be a party to the transaction, you need to have holdings at a Nigerian bank of $100,000 or more" or similar. More delays and more additional costs are added, always keeping the promise of an imminent large transfer alive. Sometimes psychological pressure is added by claiming that the Nigerian side, in order to pay certain fees, had to sell all belongings and borrow money on their house, or by pointing out the different salary scale and living conditions in Africa compared to the west. Most of the time, however, the needed psychological pressure is self-applied; once the victim has put money in toward the payoff, they feel they have a vested interest in seeing the "deal" through. In any case, the promised money transfer never happens. The money or gold does not exist.
Such spam is often sent from Internet cafes equipped with satellite Internet. Recipient addresses and email content are copied and pasted into a webmail interface using a standalone storage medium, such as a memory card. Some London-based gangs have been known to use spamware on laptops which they surreptitiously connect to the cafe's network, but even this software is notably out-of-date. While this method is significantly more labour-intensive per mail sent than others, it offers near-total anonymity and allows them to very quickly and easily relocate. The often very professional layout of web pages and so on used in the scams suggests that they do not lack technical sophistication.
Sometimes, victims are invited to a country to meet real or fake government officials. Some victims who so travel are instead held for ransom. In some rumoured cases they are smuggled into the country without a visa and then threatened into giving up more money, as the penalties for being in a foreign country without a visa are severe. In the most extreme cases the victim has even been murdered.
Estimates of the total losses due to the scam vary widely. The Snopes website lists the following estimate: The Nigerian scam is hugely successful. According to a 1997 newspaper article: "We have confirmed losses just in the United States of over $100 million in the last 15 months," said Special Agent James Caldwell, of the Secret Service financial crimes division. "And that's just the ones we know of. We figure a lot of people don't report them. Although the "success rate" of the scam is hard to gauge, some experienced 419 scammers get one or two interested replies for every thousand messages. An experienced scammer can expect to make several thousand dollars per month.
Ultrascan Advanced Global Investigations, a Netherlands-based firm which has been studying 419 matters since the mid-1990s, has prepared a table quantifying 419 operations by country for 2005. These stats are based on Ultrascan's in-house investigations and include, by nation: number of 419 rings; number of 419ers; income of the 419ers (the amount of losses by victims to the 419ers); and additional data. 419 Coalition view is that these stats present a reasonably conservative and realistic look at the extent and magnitude of 419 criminal operations worldwide.
Since 1995, the United States Secret Service has been (somewhat) involved in combating these schemes, but they will not investigate unless the monetary loss is in excess of fifty thousand US Dollars. Very few arrests and prosecutions have been made due to the international aspect of this crime. In 2006, a report by a research group concluded that Nigerian scams cost the UK economy 150 million British Pounds a year, with the average victim losing 31 thousand pounds
In 2004, fifty-two suspects were arrested in Amsterdam after an extensive raid. An Internet service provider had noticed the increased email traffic. None was jailed or fined, due to lack of evidence. They were released in the week of July 12, 2004. An entirely phony "Nigerian embassy" was also discovered in Amsterdam; another allegedly exists in Bangkok.
As a result of the fraud, Nigeria is drafting legislation to make spamming a criminal offence punishable with a fine up to ?2,000 and three years in jail.