- Advance Fee Fraud Schemes
- Advance Fee Scams
- Advance fee fraud
Advance Fee Fraud Schemes
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 any proceeds, money, stock or warrants in order for the deal to go through. The fee may be in the form of a commission, regulatory fee or tax, or some other incidental expense. These secondary “advance fee” schemes work very similarly to boiler room operations, the difference being that an advance fee scheme generally targets investors who already purchased underperforming securities, perhaps through an affiliated boiler room, offering to arrange a lucrative sale of those securities, but first requiring the payment of an “advance fee.”
Characteristic of some advance fee fraud solicitations and other fraudulent schemes to deceive and defraud unwary investors is the use of websites and e-mail addresses ending in “.us” or “.org” and containing “.gov” as part of the domain address. We are not aware of any U.S. government agency that has a website or e-mail address that ENDS in anything other than “.gov”, “.mil”, or “fed.us”. Accordingly, investors should beware any website or correspondence purporting to be from a U.S. government agency bearing an e-mail address that does not end in “.gov”, “.mil”, or “fed.us”.
For more information about advance fee schemes and boiler rooms, please see the following:
- The Fleecing of Foreign Investors: Avoid Getting Burned by “Hot” U.S. Stocks
- Worthless Stock: How to Avoid Doubling Your Losses
- Protect Your Money: Check Out Brokers and Investment Advisers
- Nigerian Advance Fee Fraud
- Fake Seals
- SEC Warns of Government Impersonators
Source: SEC Gov
Advance Fee Scams
Protecting Yourself From Advance Fee (419) Scammers
Advance-fee scams continue to be a major problem today and have spawned many other variations of scams that target individuals via phone, email, fax and snail mail. Dating all the way back to the 1700s, advance-fee scams are nothing new. Back then cons would target businesses and tell them that they were trying to free a wealthy nobleman stuck in prison in Spain. They would ask the business owner to help finance the release of the prisoner and in return they’d receive a large reward. In the 1990s and early 2000s, these advance-fee scams made a major resurgence and were referred to as 419 scams because they originated in Nigeria and violate the 419 section of the Nigerian criminal code.
Today these scams can originate anywhere in the world. In Jamaica, there is now a highly profitable lottery phone scam that uses the same idea as the advance-fee scam: You have won a large amount of money and only need to pay a few fees to process the payment and receive your winnings. The fees will continue to pile up until the victim runs out of cash, or realizes they are being used.
Though scams can start anywhere, Nigeria still remains a center for internet and phone fraud. Millions are stolen every year by Nigerian romance scammers who impersonate people on dating sites and trick singles, who are looking for love, into wiring thousands of dollars to them.
The more traditional advance-fee scam is still an issue and just recently two men were arrested for stealing millions of dollars from their victim by using fraudulent crude oil contracts. Here at CallerSmart, we specialize in protecting individuals from phone scams, but it’s important to be aware of scams that target people via email, fax and letter, too.
Here are some of the tactics that advance-fee scammers will use:
- You or your company receives a call, email, fax, or letter from someone who claims to be a government official, works with a government organization, or is involved in crude oil.
- You are told about a business proposition or situation and promised that if you help you will receive millions of dollars deposited into your bank account.
- You are asked to pay for things throughout the process, such as taxes, attorney fees, transaction fees and bribes.
- You are requested to provide your bank account information along with blank letterhead forms and your phone number.
- You are encouraged to travel overseas to complete the transaction.
Scammers will switch up the story behind why they are contacting you. The most common schemes used in advance-fee scams are over invoicing of government contracts, reduced sale price of crude oil, cash on delivery shipping of goods, real estate opportunities, will beneficiaries and currency conversion. The most recent major advance-fee fraud case in Nigeria used a crude oil scheme to trick the victim.
One of the main reasons these scams still have success today, and why in recent years phone scams have gotten to be such an issue, is because no one thinks it will happen to them and if it does they won’t fall for it. In reality, it could very possibly happen to you and you might fall for it. It’s something that happens to millions of Americans each year and collectively scams people out of billions of dollars.
Signs that you’re dealing with an advance-fee scammer include the following:
- Too good to be true – if something seems to good to be true then it probably is.
- Illegal – along with too good to be true, the business proposition usually isn’t legal. The most common type of advanced fee scams take on the scenario in which a government official realizes that the government has been over invoiced millions of dollars for a contract. Rather than return that money to the government they’d like to move it into a foreign account.
- Urgency – scammers will pressure you and say that the situation is very urgent. They want you to react quickly and not think about what you’re doing.
- Extreme confidentiality – the scammer doesn’t want you to talk about the scheme that you’ve been pulled into with friends or family.
- Unexpected fees – the fact that the caller asks for money in the first place is a major red flag. Stop communication and block the person if someone requests you to wire them cash.
- Wire transfers – the request to wire money anywhere internationally. Once you send this money you will not see it again.
- Claims of strong ties to high level officials – the scammers want you to think that they are well-connected and will claim ties to government officials and businesses that they really have no connection to. These claims will often be backed up by forged, official-looking documents.
- Requests you to travel abroad – as a final step you are asked to travel to Nigeria or a surrounding country to complete the deal.
Scammers are able to access information about their potential victims via the internet, stolen caller and mailing lists, and trade journals. They don’t go after one person at a time, but send out a barrage of letters, faxes, emails and phone calls. The scammer will state that they have a business opportunity, from which the victim will profit from greatly. They will talk to the victim to learn more about them and try to befriend them, once they feel that they’ve earned the trust of the victim they will begin to request full contact information, bank account information, and blank company letterheads.
The blank company letterheads are used to fool more victims into falling for the scam by creating letters of recommendation. They are also used in the process of requesting U.S. tourist visas from the U.S. Embassy located in Nigeria.
The bank account information is used not to steal the money from the victim, but as a test for the scammer. If the person is willing to give their bank account information after initial talks it is likely that they will be willing to pay unexpected fees and travel abroad, as a condition of the scheme.
In the process of pulling off the business transaction, problems will arise. Someone that the scammer had “helping them out” will demand money or be uncooperative, or the government will supposedly catch on to the plan and people will need to be paid off. These inconveniences will fall on the victim to pay. If the victim refuses to pay the scammer can turn violent and make threats against the victim and their family.
There is never a happy ending with scams, not even for the scammer, as countries are cracking down and combining forces to serve justice. The victim loses the most though. It is unlikely that they will ever recover their money, leaving them financially ruined and with the guilt and shame of falling for a scam. It is believed that the reported amount of money scammers steal is grossly inaccurate because many people do not file complaints.
If you, a friend, or a family member has received a letter, email, phone call, or fax from Nigeria do not respond to it. If a letter was received be sure to send it to your local FBI field office and the U.S. Postal Inspection Service. Any other form of contact should be reported via the FTC’s Complaint Assistant, or the FBI’s Internet Crime Complaint Center (IC3).
For phone numbers associated with advance-fee fraud you can help warn others by downloading CallerSmart’s app for unknown number look ups and leave your feedback. If you don’t have an iPhone, you can still use our community phone book for reverse caller searches and leave your feedback to let others know about potential scams.
Advance fee fraud
Advance fee fraud is when fraudsters target victims to make advance or upfront payments for goods, services and/or financial gains that do not materialise.
Types of advance fee fraud include:
- Career opportunity scams
- Clairvoyant or psychic scams
- Cheque overpayment fraud
- Dating or romance scams
- Fraud recovery fraud
- Impersonation of officials
- Inheritance fraud
- Loan scams
- Lottery, prize draw and sweepstake scams
- Racing tipster scams
- Rental fraud
- West African letter or 419 fraud
- Work from home and business opportunity scams
- Vehicle matching scams
Source: Action Fraud
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