 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. | |
A new line of business to consider
Maximizing the higher education tax credits