Most of us laugh when we hear the latest Nigerian scheme (or from Ghana, South Africa, or Uganda and the like and commonly known as "419" or "advance-fee schemes"). I receive about 25 419-related fraud E-mails every day. You probably receive almost as many. According to the National Consumers League's Internet Fraud Watch Web site, Nigerian schemes rank third on the top 10 Internet fraud list. Four percent of all reported Internet fraud involves the Nigerian-related scheme. The Secret Service receives thousands of E-mails a month reporting 419 advance-fee schemes at their site.
The schemes' frequency is growing very quickly; they recently had an explosive rebirth via mail sent to harvested E-mail lists. But 419 schemes existed long before the Web. The Nigerian scheme started as an offline fraud. The con artists would send letters to the marks, claiming that they needed reliable "backers" in order to free up multimillions of gold or funds. In 1989, I was approached by an Arab royal-family insider who lost U.S. $5 million in one of these scams. He was promised ownership of the Nigerian airport and a 1,000% return of his "investment." Being a careful businessman, he had flown to Nigeria and met personally with the "general," an "official of the Bank of Nigeria" and "government representative." He saw the palaces firsthand and met the president's "brother" at the palace. To guarantee his "investment," he was given an irrevocable letter of credit from the "Bank of Nigeria" in the amount of U.S. $10 million. The "letter of credit" turned out to be bogus and the "general," "bank representative," and "government representative" disappeared--along with the "presidential sibling" and the full U.S. $5 million. As long ago as 1997, the Secret Service estimated that the annual losses from the Nigerian schemes were in excess of $250 million. The more recent estimates fall into total losses in the $5 billion range. It's obviously a growth industry.
Typically, the scheme involves the purported transfer of funds into the mark's account. The con artists promise that after payment of taxes and other related charges, the mark will be able to keep 30%, more or less, of the total. The scam also involves fronting of certain expenses to get the legal permits for the funds. If the mark is skeptical, the con artists sometimes salt the account with some of their own money. In doing so, they obtain banking account information, Social Security information, etc., and often use this information for standard identity theft. They also empty the account after bleeding the mark of all available funds. The U.S. Secret Service has a wonderful Web page on its Operation 4-1-9.
Many large investors have been stung by this scheme, both online and offline. Some perpetrators have recently been located and prosecuted with the help of the U.S. Secret Service Agency. If you have been stung by one of the Nigerian schemes via E-mail, reach out to your bank and the credit-reporting agencies, as you would on any suspected identity theft or fraud. Then contact your local office of the Secret Service. At its Web site, there is a place to report 419 E-mails that you receive, if you haven't fallen victim to them. Either way, reporting the fraud is the best way to stop it. That, and not believing everything you read.