Foreign advance-fee scams: there are many variations of these con games.
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," page 59), these frauds fall into one of four types.
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 of 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.
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.
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 interested 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.
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?" page 60) 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 (set "Earmarks of Foreign Advance-Fee Frauds," below). Education is the real key to helping your clients avoid becoming victims.
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.
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 lees 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 lees 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.
CPA's Handbook of Fraud and Commercial Crime Prevention (# 056504JA) Financial Reporting Fraud: A Practical Guide to Detection and Internal Control (# 029879JA)
Introduction to Fraud Examination and Criminal Behavior (# 730275JA) Identifying Fraudulent Financial Transactions (# 730244JA) Finding the Truth: Effective Techniques for Interview and Communication (# 730164JA)
AICPA Conference on Advanced Litigation Servies 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, www.aicpa.org/antifraud/homepage/htm.
* 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.
Is It Legit?
Report any fraudulent foreign business proposal to the
U.S. Secret Service
Financial Crimes Division
1800 G Street, NW
Washington, D.C. 20223
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
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. 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 firstname.lastname@example.org.
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|Author:||Wells, Joseph T.|
|Publication:||Journal of Accountancy|
|Date:||Apr 1, 2004|
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