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January 25
Business America
 
     Fraudulent Business Proposals From Nigeria Persist
 
The vast majority of business firms in Nigeria are legitimate and
reputable.  However, the illegal activities of a minority of
individuals sometimes overshadow the legitimate operations of the
majority.  Fraudulent business solicitations by Nigerian companies and
individuals continue unabated.  This article updates previous reports
on the operations of Nigerian fraud artists.
 
Estimates by the U.S. and Foreign Commercial Service in Lagos, Nigeria
indicate that fraudulent Nigerian business activities have involved
many thousands of unwary companies, and caused financial losses
amounting to millions of dollars worldwide.  In 1992, the Nigeria Desk
of the U.S. Department of Commerce received more than 500 letters sent
to U.S. firms targeted by Nigerian scam artists.  This represents only
a small percentage of total fraudulent solicitations, since it does
not include unreported letters or letters sent to the U.S. Embassy in
Lagos, or to other federal or local government agencies.
 
     The large financial losses, combined with the persistence of the
scam artists, have made attempted fraud an important issue for the
American business community.  Nigerian scam artists are now sending
solicitations that exhibit increased sophistication.  Fraudulent
propositions may include any one or combinations 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'';
     *Requested payment by a U.S. citizen of an alleged Nigerian tax,
registration fee or service charge to finalize a transaction;
     *Efforts by Nigerian nationals to acquire a U.S. visa under the
pretext of visiting the United States for legitimate business
purposes;
     *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;
     *A post office box indicated as the contact address, with no
street address given, and no telephone, fax, or telex numbers listed;
     *Vague or implausible explanation of how the sender obtained the
company's name as a contact.
 
     Money Transfer Schemes.  The most prevalent occurrence of
Nigerian fraud involves money transfer schemes, which account for
nearly half of all reported scams.  These schemes typically attempt to
involve foreign firms or individuals in efforts to defraud the
Nigerian government, and some may also violate U.S. statutes.  The
scam artists propose to transfer a large amount, usually millions of
U.S. dollars, to an overseas bank account owned by a foreign firm.
The funds are often described as overpayments from previous government
contracts.  They request information about the company's bank, as well
as blank, signed company letterhead and proforma invoices.  The firm
owning the account is told it will receive a percentage of the
transferred funds as ``commission.''
     The U.S. firm is sometimes solicited for a ``transaction fee'' to
enable the supposed transfer of funds.  The victim may be strung along
for up to a year, paying various ``fees'' which add up to thousands of
dollars, before realizing that the funds do not actually exist.  The
Nigerian fraud artists may also attempt to use the letterhead and bank
information to extract money from the account of the U.S. business.
In a new variation of the money transfer scam, fraudulent Nigerians
have begun to target charities, non-profit organizations, and
religious groups, which receive letters from schemers who profess
their devotion to the group's cause and their desire to make a
sizeable donation.
 
     Travel to Nigeria.  In some cases the fraud perpetrators may
attempt to persuade the victim to travel to Nigeria to conclude a
contract, money transfer, or other transaction.  Although travelling
to Nigeria is essential in order to establish an investment, a
continuing business relationship, or to perform a major project or
service, it is rarely necessary for a one-time sales transaction.
     In some cases, the victim may be told that because of the special
nature of the business, e.g., a government contract, no visa is
required, or a visa has been prearranged to be issued upon arrival.
In fact, Nigerian law requires a valid visa both for entry and
departure, without exception.  Visas are not available upon arrival,
but must be secured in advance through a Nigerian diplomatic mission.
Entry without a visa has been used by scam artists as leverage against
their victims.  Business travelers have been subjected to other forms
of extortion as well, including physical harm.  No travel to Nigeria
should be undertaken without first verifying the bona fides of
business partners and securing a valid entry visa.
 
     Fraudulent Orders for U.S. Products.  One-quarter of reported
fraudulent business solicitations from Nigeria involve large orders
for the products of U.S. companies.  Fraudulent parties may request
samples for which they never intend to pay, or ask the U.S. firm to
forward bogus registration or import licensing fees.  If an American
exporter sells to the Nigerian government through an agent, there is
no 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 $215).
     Scam artists 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 suspicious of all overseas bank drafts used as payment by
Nigerian companies or individuals.  While it is possible that a such a
draft is legitimate, it is safer to request payment in the form of an
irrevocable letter of credit.  The letter of credit should be
confirmed by a well-known U.S. or European bank.
 
     In the newest wrinkle, the Nigerian fraud artist may place
several smaller orders and pay for them with legitimate overseas bank
drafts in an effort to build a business relationship.  The fraud
artist then sends an urgent letter alleging to have immediate need of
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 requests 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.
 
     Crude Oil Scams.  Another scheme that occurs repeatedly is an
offer of a contract to purchase crude oil.  The alleged contract
details the availability of a ``special allocation'' by the Nigerian
National Petroleum Corporation (NNPC) of crude at below market prices.
The Nigerian individual may ask the U.S. firm to pay a bogus
registration/licensing fee with the NNPC or the Ministry of Petroleum
Resources.  In reality, ``special allocations'' do not exist, and
there are no intermediaries involved in the sale of Nigerian oil.  The
Crude Oil Marketing Division of NNPC is the only authorized seller of
the Corporation's crudes.  Businesses that lack experience with the
petroleum industry in Nigeria should avoid all proposals involving
crude oil.
 
     Increased Sophistication of Fraud Letters.  Scams are emerging
with alarming frequency and increasing sophistication.  While some are
blatant or transparent, others are subtle and complex, which may make
them all the more convincing.  For example, the scam artists may
utilize actual companies, ministries, or government contracts on
official-looking letterhead and displaying government seals in order
to lend a sense of legitimacy to the offer.
     When the fraudulent solicitation is finally introduced, it may
consist of more than a simple one-page business opportunity.  Scam
artists have developed an impressive array of follow-up letters,
supporting documents, and contracts, in an attempt to convince U.S.
firms of the alleged importance and authenticity of the business
propositions.  This supporting documentation mitigates the skepticism
which might normally meet such proposals.
     Once a targeted firm forwards money and/or products to Nigeria,
it is difficult if not impossible to reclaim losses.  The individuals
involved shift the location of their operations, change P.O. boxes,
and choose new company and individual names to continue their
fraudulent activities.
 
     U.S. Efforts to Halt Fraud.  Scam artists compile mailing lists
from trade journals, business directories, magazine and newspaper
advertisements, trade shows, and chance encounters.  The initial
contact letter typically begins with a vague or implausible
explanation of how the sender obtained the company's name as a
contact.  The Department of Commerce has suspended distribution of its
publication, Commercial News USA, in Nigeria in order to withhold
potential contact information for American firms from the scam
artists.
     Fraud letters sent by U.S. companies to the Department of
Commerce are forwarded to the U.S. and Foreign Commercial Service at
the American Embassy in Lagos.  The Embassy works closely with other
foreign embassies to identify patterns in the scam operations and warn
their citizens.
     In response to the increased frequency of fraudulent activity,
the Department of Commerce has issued two press releases and published
a previous article in Business America (Jan. 13, 1992).  As a result
of the publicity, many more U.S. businesses now contact the Department
of Commerce or the U.S. Embassy in Lagos before pursuing Nigerian
business proposals.  Last-minute intervention by the U.S. and Foreign
Commercial Service in Lagos saved an estimated $225 million in
potential losses to U.S. business during the first three quarters of
1992.
     Fraudulent business activity tarnishes Nigeria's commercial
reputation and hinders its ability to develop further legitimate
commercial links with trading partners.  Nigeria's large number of
reputable firms have encountered a new reluctance on the part of
foreign businesses to conduct business with them, due to the
activities of a relatively few unsavory individuals.  Through prudent
skepticism, American companies can avoid falling victim to Nigerian
individuals involved in fraudulent business activities, yet continue
to do lucrative business with legitimate Nigerian companies.
 
For information on how to verify the bona fides of proposals, contact
the Nigeria Desk Officer, Office of Africa, Room 3317, U.S. Department
of Commerce, Washington, D.C. 20230; tel: (202) 482-4388, fax: (202)
482-5198.  Or, you may contact the U.S. Embassy in Lagos directly;
2 Eleke Crescent, Victoria Island, Lagos -- tel: 234-1-261-0050 or
234-1-261-0097, fax: 234-1-261-2218.
 
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  bt630@po.cwru.edu
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