When something sounds too good to be true, it usually is - too good to be true. The Nigerian scam, (also known as 419 scam) is one of these. Since the early 1980's, Nigerian scams have cheated individuals out of over US $1 billion worldwide. According to the National Consumers League, in 2005 the average loss caused by Nigerian scams was almost $7,000.
Nigerian scams take the form of a well written, official-sounding, unsolicited letter, fax or email from an individual who claims to be a Government official or agency representative, often from a Third World Country. Using different inducements, such as the opportunity to receive a part of a huge potential inheritance, lottery winnings or transfer of funds from over-invoiced contracts, the common theme amongst these letters is the request for payment of advanced fees with the potential to earn a huge fortune from the "locked-up" inheritance or lottery when the "funds" are realized or obtained. Most often, the potential victim is asked to provide extensive personal information and is tricked into entering a country illegally, without a valid visa, to participate in this exercise.
Using this as leverage, con artists coerce the victim into releasing more funds. In June of 1995, an American citizen was murdered while pursuing a scam in Lagos, Nigeria and numerous foreign nationals have been reported missing. Those who escape with their lives lose large sums of money and fall prey to identity theft or assault.
Despite the longevity of Nigerian scams and the publicity they have received, individuals continue to fall prey to these scams. In 2002, a US resident in her mid 40's nearly lost everything: her well-paying job, her retirement savings and 17 years of hard-earned house payments. She paid over $70,000 in advanced "fees" to a Nigerian "doctor" who claimed funds were needed to bring clean water to his village. She refinanced her house at a higher interest rate and used her equity to pay for credit card withdrawals. Prior to the scam, she had 13 years left on her loan, now she has 30. She also had to quit her well-paying job to access her retirement funds, and now works at one-third her former salary.
Even the most intelligent individuals can get caught up in these scams. In 2004, a Harvard University instructor received an email from a Nigerian investment group promising him $50 million. He raised over $600,000 in advanced fees by telling unsuspecting co-workers he was setting up a SARS research centre in China. One of his friends even took out a second mortgage on his house to lend him the money. The instructor now faces larceny charges with possible jail time, a $25,000 fine and termination of employment.
Nigerian scams may go beyond just email. In more elaborate schemes, scammers send cashier's cheques to victims after winning a bid in an online auction. The amount on the cheque is more than the winning bid and the victim is asked to wire some back. After successfully depositing the cheque, the victim wires the overage back to the buyer. Weeks later, the bank discovers the cheque is invalid and the victim loses both the merchandise and money.
Internet chat rooms are also being used to bait potential victims. Usually vulnerable individuals, such as recent divorcees, are lured into "Internet" relationships. Once the victim is invested in the relationship, he/she is convinced to help transfer funds out of the bank.
Con artists even take advantage of the Internet Relay system for the deaf to trick consumers and merchants. The system allows the deaf to use web pages to connect with trained operators, who place telephone calls on their behalf and act as translators. Nigerian con artists often use this system to place free international calls to merchants requesting for items to be sent to Nigeria to be sold for a small profit.
How to avoid being a victim of Nigerian scams:
Avoid wire transfer - particularly ones out of the country
Research the individual/organization on the Internet - many sites contain lists of Nigerian scams. Do a quick search of parts of your story to see if any matches come up.
Use the telephone - Most con artists communicate via email to allow themselves more time to create ploys. If you request for specific contact information or to speak on the phone, they may pull away.
Con artists are constantly finding new ways to target victims. Since the emergence of email, they now have an easier and quicker method of reaching their victims.
Sources: Ultrascan Advanced Global Investigations, Hoax-slayer.com, Nigeria - 419 Coalition, FraudWatch International, The Harvard Crimson
Ultrascan FIU Financial Intelligence Unit - A mixture of intelligence gathering, investigations, reputational risk mitigation and Innovative Technology in line of objectives. Focused on external information and stakeholder engagement, to detect exposure to financial crime risk.