Types of Advance Fee Fraud
Since the evolution of the “419 Fraud” letters from the 80’s, scammers have evolved and updated their tactics. Today, the types of advance fee fraud schemes are limited only by the imagination of the perpetrators who create them. They may involve the sale of products or services, offering of investments, lottery winnings, “found money”, or other opportunities. Some fraudsters will offer to find financing arrangements for clients who pay a “finder’s fee” in advance. Soon after the contract is signed and the finder’s fee is paid, the victim finds out that they are not eligible for financing and the perpetrator has made off with their money. The following are some common examples of advance fee fraud scams:
- Beneficiary fund scam –
The scammers often present some type of story about needing your help to get money from a bank in another country. The story will usually involve someone who has died and the perpetrator alleges that if they do not act quickly, the money will be turned over to the government.
- Lottery scam –
Scam claims that you have won money in an overseas lottery. The letter or e-mail will usually ask for personal information to confirm your identity so you can collect your winnings.
- Investment scam –
An investment company contacts you and needs your assistance in investing money overseas. The letter or e-mail will look as though it is coming from a reputable investment firm or government official. The letter will ask you to contact the company, where you will be asked to pay some sort of fee up front in return for a hefty profit that does not exist.
- Romance scam –
Scammers pull at the heart strings of those on internet dating websites and chat rooms by asking for money for sick relatives, or money for a plane ticket to meet you in person.
An article recently published in the New York Times described an advance fee fraud scheme that carried on for years, claiming almost 2,000 victims and $26 million. The Company appealed to people looking for investors for their businesses. During a time when job insecurity was high, bank requirements for loans were strict, the Company provided high hopes for those just trying to make a living by making them believe they would invest in their business or find investors for them. The hopeful entrepreneurs only needed to pay up-front fees of between $10,000 and $40,000. Unfortunately, the Company did nothing with the money. When clients started complaining and asking for their money back, phone calls were not returned and files were transferred to someone else. One victim, who felt as though he was fairly business savvy, looked to the Company to help him find investors for a multi-use development project. After paying $15,000 in “due diligence” fees and over $1,000,000 in pre-development costs, the victim was forced to declare bankruptcy on one of his businesses. Because the Company worked diligently to make their business appear legitimate, they were able to de-fraud even the smartest of business owners. Sadly, the money lost by victims is generally very difficult to recover. Companies like this word their contracts to make it almost impossible for victims to sue for fraud. Therefore, it is imperative to understand the warning signs of a suspicious business opportunity.
