Nigerian Transaction Scams
Nigerian transaction scams are pervasive problems worldwide. Over the last several years, Nigerian transaction scams have cost U.S. businesses several hundred million dollars, while internationally, losses have been estimated to exceed one billion dollars.
Nigerian transaction scams take a variety of forms, the most common of which are detailed throughout the remainder of this article.
- The money transfer scheme typically involves a proposal to transfer a large amount of money, usually millions (or even billions) of U.S. dollars, into a bank account owned by a U.S. firm or U.S. individual in return for which the account holder is promised a commission equivalent to a specified percentage of the transferred funds. The funds to be transferred are often described as an overpayment from a government contract or as an excess amount budgeted for payment to a foreign firm. Generally, some reason is given as to why the funds have to be kept out of Nigeria and deposited into a non-Nigerian account. With these explanations as background, the proposal typically either:
- requests information about the recipient. s bank account as well as blank, signed company letterhead and proforma invoices or
- solicits the recipient for a "transaction fee" to enable the supposed transfer of funds to occur.
In cases when a recipient responds, the result is either that money is extracted from the recipient's bank account or that the recipient is duped into paying a series of "transaction fees," which add up to thousands of dollars before realizing that the promised funds transfer was bogus from the start.
- A fraudulent offer of a contract to purchase Nigerian crude oil typically details the availability of a "special allocation" by the Nigerian National Petroleum Corporation (NNPC) of crude at below market prices. The U.S. firm may be asked to pay a bogus registration/licensing fee with the NNPC or the Ministry of Petroleum Resources. In reality, "special allocations" do not exist. There are no intermediaries involved in the sale of Nigerian oil. The Crude Oil Marketing Division of NNPC is the only authorized seller of Nigerian crude oil. Businesses unfamiliar with the petroleum industry in Nigeria should avoid all proposals involving crude oil.
- A fraudulent order for U.S. products is the most commonplace Nigerian transaction scheme. One-quarter of all reported fraudulent business solicitations from Nigeria involve large orders for the products of U.S. companies. Such proposals may request samples for which the writers never intend to pay, or ask the U.S. firm to forward registration or import licensing fees. These fees do not exist and are in reality nothing more than veiled attempts to acquire funds. Only if an American exporter sells to the Nigerian Government through an agent is there a registration fee requirement. When registration fees are legitimately connected to government contracts, they are clearly published by the ministries to which they are payable, and they do not exceed Naira 5,000 (approximately $61.00). Swindlers may stress the urgency of the transaction, and send a fraudulent bank draft as payment in hopes that the victim will ship the order before realizing the draft is invalid. American businesses should be cautious whenever overseas bank drafts are used as payment by Nigerian companies or individuals. While there is a possibility that a such draft could be legitimate, it is far safer to request payment in the form of an irrevocable letter of credit. The letter of credit should be confirmed by a reputable and known financial institution.
In another version of the fraudulent order scheme, several smaller orders are placed and paid for with legitimate overseas bank drafts in an effort to build a business relationship. The fraud target then receives an urgent letter alleging immediate need for a large amount of the U.S. company. s product, in order to meet a short deadline for a lucrative government contract. The letter may be accompanied by a bank draft and request shipment within a short time period. Confident at this point of the validity of the bank draft, the U.S. company sends the requested shipment, only to discover later that this time the bank draft is fraudulent.
Nigerian transaction scams may include one or more of the following characteristics:
- Requests for blank letterhead and proforma invoices, stamped and signed, as well as bank account information from the U.S. firm for the alleged purpose of transferring funds from a Nigerian account;
- Supposed urgent need for products or samples to be shipped immediately, before payment can be secured or verified, or with promise of later payment;
- Requests to ship goods by air freight from stock immediately upon receipt of a "certified bank draft";
- Requests for payment by a U.S. citizen of an alleged Nigerian tax, registration or legal fee, or service charge to finalize a transaction;
- Efforts to acquire a U.S. visa under the pretext of visiting the United States for legitimate business purposes by requesting letters of invitation;
- Promises to the U.S. firm of contracts to supply goods or services to the Nigerian Government, often through the "Federal Tenders Board," which does not exist;
- Requests that correspondence and shipment be sent via air/express courier services, although the solicitation letter came by regular mail;
- Requirement that a U.S. company representative travel to Nigeria to sign contract and money transfer documents, or alternatively, that the U.S. company provide power of attorney to a lawyer to sign said papers. The latter involves hefty (and phony) legal fees;
- Vague or implausible explanation of how the sender obtained the company. s name as a contact.
Not all transactions involving Nigeria are scams. If a transaction seems legitimate, after having been carefully checked against all the red flags mentioned in this article, the U.S. company is strongly urged to run a check on the bona fides of the Nigerian company before sending out any letterhead, invoices, bank account information, or product samples. Companies should keep in mind, however, that many Nigerian transaction scams use the names of legitimate companies or Nigerian Government agencies in fraudulent proposals. Therefore, it is important to verify both the transaction and the company.
Through prudent skepticism, American companies can avoid falling victim to Nigerian transaction scams and take advantage of legitimate business opportunities with legitimate Nigerian companies.
For more information, please call the Law Office of M. Gatti and Associates at 856-428-3104.