hances are you or your clients have received a
letter similar to the one shown in the exhibit
below (usually with more errors of punctuation
and usage). If not, it’s probably just a
matter of time. These solicitations used to come
by mail, but now they appear in your e-mail
inbox. Have you lucked out, about to receive a
big windfall? Hardly. Someone is attempting to
victimize you in an “advance-fee”
fraud. Advance-fee frauds operate on only one
premise: They make false promises of forthcoming
funds in order to get a target to part with
money. This article explains how these schemes
work so you and your clients can avoid becoming
unfortunate statistics of this crime. While advance-fee frauds have been
around for centuries, the current variations
surfaced in Nigeria in the mid-1980s amid the
economic chaos created by the collapse of the
price of oil, the country’s chief export.
Subsequently, the schemes have spread to other
nations.
The Nigerian scams (also called
“4-1-9 frauds” after the section in
Nigerian law that makes them illegal) have become
so prevalent they have seriously affected
legitimate businesses in the country. The crimes
have continued despite efforts to thwart them;
the Nigerian government and its central bank
regularly post warnings in newspapers around the
world. Although there are multiple varieties (see
“Other
Foreign Advance-Fee Scams”), these frauds fall into one of
four types.
| Request
for Confidential Business Relationship Having
consulted with my colleagues, and based
on information gathered from the Nigerian
Chamber of Commerce, I am pleased to
propose a confidential business
transaction to our mutual benefit. I and
my colleagues have in our possession
instruments to transfer the sum of
$35,500,000.00 into a foreign
company’s account in our favor. This
amount emanated as a result from an
over-invoiced contract, executed,
commissioned, and paid for about two
years ago by a foreign contractor. We are
therefore seeking your assistance in
transferring this money to your account
as it can be only remitted to a foreign
account, and as civil servants, we are
forbidden to operate foreign accounts.
The total sum will be shared as follows:
30%
for the account owner (you)
|
60% for us 10% to
settle any incidental expenses
We
shall commence the transfer of funds
immediately, as soon as you send the
following documents/information through
the above fax number:
Four
copies of your company’s letter head
and invoice papers signed and stamped
Your
banker’s name, address and fax
numbers
The
account number and name of would be
beneficiary.
Bear
in mind that this is absolutely a private
and personal deal, nonofficial; and
should be treated with all measure of
secrecy and confidentiality.
|
OVERINVOICED CONTRACTS
Nine out of ten of
the scams start with a letter from a foreigner
falsely claiming that a contract—usually
with the government—has been purposely
“overinvoiced,” necessitating the money
be secreted out of the country. Names and
addresses of potential victims are obtained from
a variety of sources, including trade journals,
chambers of commerce lists and the Internet.
If you are the target, the
correspondent asks you to provide bank account
information and company letterhead to initiate
the transfer of funds. Contrary to a widely held
belief, the purpose of this information is not to
empty your account. Rather, the documentation
serves two purposes. First, it perpetrates the
illusion the deal is legitimate and moving ahead.
Second, the blank letterheads are altered for use
as props in other frauds and as letters of
reference to obtain fraudulent visas for
criminals. Once you furnish the documentation,
you will be strung along for a week or two with
promises the money is forthcoming. You may even
be sent a photograph of the loot—what
appears to be a trunk full of cash. It’s all
fake.
At some point you may be asked
to travel to Nigeria to complete the transaction.
There, meetings take place in what appear to be
government offices. In reality the con artists
have rented the real estate. You’ll be
introduced to actors posing as crooked government
officials who are purportedly in on the
arrangement. And then comes the sting: They tell
you they need more money to complete the
deal—for example, they might say an official
needs to be bribed or that “transaction
fees” must be paid before millions are
transferred to your bank account.
If you pay, the crooks will use
other excuses to get you to pay again. Indeed,
some people have been victimized for years before
realizing they’d been had. Should you refuse
to pay, you may be subjected to threats or
physical abuse. Violence is unusual, but there
have been at least two dozen documented murders
of individuals who have traveled to Nigeria in
unsuccessful efforts to collect nonexistent
riches.
| Other
Foreign Advance-Fee Scams Sale
of crude oil at below market prices. The
victim receives an offer to purchase
special crude oil allocations at a price
substantially below market rates. The
catch: Victims are required to pay
special registration and licensing fees.
Once paid, the sellers disappear.
Purchase
of real estate. If you are
actively advertising real estate for
sale, you may receive an offer to
purchase your property from a foreign
concern. The catch: You are required to
pay up-front fees to a “special
broker.” Once paid, you cannot
locate this special broker to consummate
the purchase.
Disbursement
of money from wills. The
victims of this scheme typically are
charities, religious groups, universities
and nonprofits. They receive an
unsolicited letter from a mysterious
“benefactor” interested in
contributing a large sum. The catch: The
victim must pay “inheritance
taxes” or “government
fees.” Once the fees are paid, the
benefactor vanishes.
Clearinghouses.
In this scam the victim
receives a letter falsely claiming the
writer represents a reputable foreign
bank, which will act as a clearinghouse
for venture capital in the country. To
alleviate suspicion the deal is not
legitimate, the criminals set up a
“correspondent” bank account in
the United States. Once victims deposit
money in the domestic account, it is
transferred internationally and into the
hands of the crooks.
|
CONTRACT FRAUD
Although much less
common than the scam described above, this fraud
preys on small businesses with little experience
in the import/export trade. The targeted company
receives several small orders for goods from what
purports to be a Nigerian corporation, along with
legitimate bank drafts for payment. The purpose
of making these legitimate purchases is to build
a business relationship with the victim company.
| Once a level of trust has been
established, you or your client will
receive an urgent letter or e-mail
falsely claiming a buyer has just
received a lucrative government contract.
The scam artists place a large order,
which is accompanied by a
legitimate-appearing bank draft. The
victim company—relying on its
previously satisfactory business
relationship—ships the goods, only
to find out later the bank draft was
fraudulent. Recovery of the goods usually
is not possible. HARD
CURRENCY (AKA BLACK MONEY)
It is
difficult to believe any reasonably
intelligent person would believe this
flimflam, but it happens. The scam begins
when you receive a letter or e-mail that
purports to offer you a “once in a
lifetime” opportunity. You are
persuaded to travel to Nigeria or, in
some cases, another country. Once there
you are shown a suitcase “full”
of $100 U.S. bills that have been defaced
with a black, waxy substance.
You are told the
luggage holds up to $40 million of the
defaced bills. Then, in your presence,
one of the bills is “washed”
with a supposedly expensive cleaning
solution, rendering it usable.
You’re told you can have the entire
suitcase of currency but there is one
requirement: You must purchase the
cleaning solution for a price that starts
at $50,000. The cleaning solution usually
is no more than denatured alcohol. Those
dumb enough to fall for this scheme find
out too late the crooks had filled the
suitcase with blank paper.
|
Is It Legit?
| Report
any fraudulent foreign
business proposal to the U.S.
Secret Service
Financial Crimes Division
1800 G Street, NW
Room 942
Washington, D.C. 20223
Phone: 202-435-5850
Fax: 202-435-5031
|
| |
| Determine
the legitimacy of a
Nigerian business
proposal through the U.S.
Department of Commerce
Office of Africa, Room
2037
Nigerian Desk Officer
Washington, D.C. 20230
Phone: 202-482-5149
Fax: 202-482-5198
|
|
|
CHECK FRAUDS
Danielle Gowler,
owner of Bighorse Farm in Illinois, placed an ad
to sell one of her mares. She then received this
curious e-mail:
My name is Keth. My client
is in terested in buying it. I would like to know
the last cost price so that I can proceed further
on this, meanwhile my client pay with cashier
cheque. Best regards, Mark
Danielle, who’d seen
Nigerian scams before, thought she might play
along for fun. Here was her reply.
I’m confused. Is your
name Keth or Mark? Anyway, my price on the mare
is $1,500. Please let me know if you are
interested.
In no time she received this
response.
The price is okay by me,
and I want you to know that I have a client who
is owing me $6000. I will instruct him to issue
you a cheque on my behalf. As soon as the cheque
gets to you, I want you to go and cash it
immediately and send down my balance through
Western Union to my shipping agent. My name is
Mark.
In an attempt to see where Mark
was going with his proposal, Danielle wrote him
that she would accept only a money order. Mark,
who obviously was not a spelling-bee winner,
replied.
Thanks for you have
instrunct most of my associate about the money
order, but they told me they can only pay buy
caher chek so don’t worry I will instruct
him to issue you 100 percent cather cheque.
Sure enough, Danielle
eventually received a cashier’s check in the
amount of $6,000. But she wasn’t naive
enough to cash it and forward the proceeds to
Mark. First, she called the bank and verified
that the check was a counterfeit. Then Danielle
sent Mark an e-mail telling him that she’d
cashed the check and forwarded the proceeds per
his instructions, supplying him with phony
Western Union wire transfer information. After
Mark made several unsuccessful attempts at
collecting his nonexistent funds, Danielle burst
his bubble.
Mark, the check you sent me
is no good. You need to get ahold of your client
and tell them to have money in the bank next
time. I have spent a lot of time with you in this
transaction and I would appreciate your still
buying the horse.
It came as no surprise to
Danielle that she never heard from Mark again. In
reality Mark wasn’t interested in the horse
at all. He simply was trying to get her to cash a
phony cashier’s check and send him money.
You can view Mark’s scam and others Danielle
has documented at www.bustedupcowgirl.com/scampage.html.
| Earmarks of Foreign
Advance-Fee Frauds  An unsolicited
get-rich offer.
A sense of urgency.
Enticements to travel
to a foreign country.
Official-looking
documents, which are forged.
Requests for your
company’s letterhead or
banking information.
The confidential
nature of the arrangement.
Communications with
grammatical and/or spelling
errors.
Claims of strong ties
to foreign officials.
Up-front fees
requested for processing
transactions.
|
|
AVOID BECOMING A VICTIM
Should you or one
of your clients fall for a scam and hand over
money, it probably is gone forever. The U.S.
Secret Service accepts complaints from victims of
foreign scams (see “Is It Legit?”)
but acknowledges the unlikelihood of recovery of
funds. The majority of Nigerian citizens and
businesses are legitimate and therefore unlikely
to contact complete strangers with nefarious
get-rich offers. The U.S. Department of Commerce
can provide some assistance in determining
legitimate business proposals from foreign
countries.
The best defense against these
scams is to recognize their warning signs (see
“Earmarks
of Foreign Advance-Fee Frauds”). Education is the real key to
helping your clients avoid becoming victims. 
Joseph T. Wells, CPA, CFE, is
founder and chairman of the Association of
Certified Fraud Examiners and professor of fraud
examination at the University of Texas at Austin.
Mr. Wells won the Lawler Award for the best JofA
article in 2000 and 2002 and has been inducted
into the Journal of Accountancy Hall of
Fame. His e-mail address is joe@cfenet.com.
| |
|
Resources |
Books
CPA’s Handbook
of Fraud and Commercial Crime Prevention (#
056504JA)Financial Reporting
Fraud: A Practical Guide to Detection and
Internal Control (# 029879JA)
CPE
Introduction to Fraud Examination and
Criminal Behavior (# 730275JA)
Identifying Fraudulent Financial
Transactions (# 730244JA)
Finding the Truth: Effective
Techniques for Interview and
Communication (# 730164JA)
Conference
AICPA Conference on
Advanced Litigation Services and Fraud
September 26–29, 2004
JW Marriott Desert Ridge, Phoenix
For more information or to place an
order or to register, go to www.cpa2biz.com
or call the Institute at 888-777-7077.
AICPA
Antifraud Initiatives
Antifraud and Corporate
Responsibility Resource Center, http://antifraud.aicpa.org/.
 SAS no. 99
information.
Management
Antifraud Programs and Controls (SAS no.
99 exhibit).
Fraud Specialist
Competency Model.
Free corporate
fraud prevention training and CPE.
Academia outreach
and assistance.
Other antifraud
activities.
|
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