Avoiding Advance Scheme Fraud

With the Internet Age and constantly evolving con games, advance fee fraud is rising. Understanding the how advance fee scams work will help you identify them and avoid being a victim.

Advanced Fee Fraud, Defined

An advance fee scheme is put into motion when a con artist asks a victim to send money for some reason. The amount requested is usually minimal fee that is necessary to help secure some falsely promised reward, such as an inheritance.
 
The most common advanced fee frauds occur when victims are asked to send a cash advance fee for:
  • finder's fees
  • gifts
  • investments
  • loans
  • lottery Winnings
  • products
  • services.

Loan Advance Fee Fraud

Loan fraud is becoming a popular type of advance fee scam. Boasting on how they have connections with the lending industry, con artists approach victims with high promises.
 
The con starts when the con artist informs you that he has unique, profitable financing opportunity and that you need to send some cash to pay an initial fee. The victim pays a "finder's fee," which is listed in a fraudulent contract.
 
Here are some tips to avoid being a victim of a loan advance fee fraud:
  1. Ask the promoter/finder for referrals of past clients.
  2. Consult a contract attorney for advice.
  3. Don't sign a contract until you understand it completely.
  4. Don't sign a non-circumvention or nondisclosure agreement.
  5. Double check with the lender that the financing arrangements are authentic.

Researching the finder/promoter's legitimacy can also help spot a scam. You can ensure that you only deal with reliable, legitimate financier by:

  • avoiding doing business with a finder/promoter who has a P.O. Box address
  • calling the Better Business Bureau and inquiring about the company or financer
  • checking with the lending institution to see if it has a relationship with this finder/promoter
  • doing business with a finder/promoter who has a street address and direct phone line.

Nigerian Scams: 419 Cons

Another advance fee fraud that is becoming a popular con is the 419 scam, a con named after the Section 419 Nigerian Criminal Code. This scam starts when a victim receives a letter, usually in e-mail form.
 
Claiming to be a foreign official, the swindler asks the victim if he deposit a large sum of foreign money in his bank account. In exchange, the victim is told that he will earn a large percentage of this foreign deposit. After the agreement, the victim pays cash advanced fees for fictional taxes and bribes.
 
Here are some helpful tips to prevent yourself from being victimized by a Nigerian 419 Scam:
  • Do not release any bank account information to strangers.
  • Never reply to a Nigerian letter requesting your personal information.
  • Question the motives of a stranger wanting to give you large amounts of cash.
  • Remain cautious about individuals claiming to be part of a foreign government and needing to deposit money with you.

Report Advance Fee Scheme Fraud

If you come across a suspicious letter, e-mail or other type of con, report it to the authorities and the Better Business Bureau. Contact your local police, the FBI and the U.S. Secret Service.
 
For advance fee schemes that are sent through the mail, the US Postal Service recommends that you send questionable letters to:
 
Inspection Service Operations Support Group
Two Gateway Center, 9th Floor
Newark, NJ 07175-0001.
 
Resources
 
Federal Bureau of Investigation (2008). Fraud Schemes. Retrieved March 16, 2008, from the FBI Web site.
 
Looks Too Good To Be True (n.d.). Fraud Types. Retrieved March 16, 2008 from.
 
U.S. Securities and Exchange Commission (2008). Advance Fee Fraud Schemes. Retrieved March 16, 2008 from the SEC Web site.