As recently as February 2009, we published an article in this e-Update on Advance Fee frauds. These are frauds where the fraudsters promises a produce, service or commonly a loan, but a fee – whether termed a deposit or an application fee or something similar – is payable before the goods, services or loans are provided.
Most of us are used to having to pay some form of deposit on a number of contracts. The purchase of cars and land are the two most obvious, but many smaller transactions also involve some form of ‘deposit’. Usually these deposits are paid to known and reputable businesses.
This topic was raised again last month with reports of an advance fee fraud leaving two Gold Coast victims penniless. The headlines sensationalize the story, but the underlying points are that a couple tried to arrange loans to be used to repay other loan facilities that were supported by mortgages over real property.
They found a ‘lender’ in Sydney in the Yellow Pages who said that they would lend the money and asked for a $15,000 application fee. This was paid. The Sydney lender, it turned out, was a broker for a ‘lender’ in Thailand.
The excuses and delays in providing the loan started even though a quick settlement of the loans was promised. A further fee of $15,000 was requested and paid for updated valuations, but with no settlement of the loans. Pressure from the original borrowers to repay their loans gave rise to a ‘Gold Coast Representative’ of the new lenders contacting them and saying that they could arrange a bridging loan until the requested loan was settled by the overseas lenders – for a $5,000 fee.
The victims paid and lost $35,000 to the fraudsters. This is the classic advance fee fraud. Their main problems came when the original lenders foreclosed on their mortgages as their debts were not being serviced in the interim period.
What is an advanced fee fraud?
It is a fraud aimed at getting the victim to pay an amount of money (the fee) in advance of getting a product or service. The product or service is then never supplied, or supplied at a lesser ‘quality’ than expected. Usually the fraudster never attempts to collect the balance of the money under the transaction, they only aim to obtain the upfront ‘fee’.
The fee can be paid as part of any transaction to supply any type of product, service, a loan or other benefit. As long as the fraudster can convince the victim that the product or service will be provided at some time in the future and he can obtain a payment before delivery, the fraud can be committed.
How are these frauds committed?
Fraudsters target people or businesses with a difficulty or problem and offer a solution to that problem. They will also target a business and offer some service at a reduced price. Victims will be told that the solution or offer will take some time to put together. The fraudster will ask for some money to be paid up front (in advance) for commissions, fees, bribes, stamp duty or other costs that seem appropriate to the types of good or service to be supplied. Most people are used to paying deposits, so this request may not seem unreasonable.
The victims, who generally want to have the solution offered, will either be encouraged to pay the fees in advance, or will be maneuvered and manipulated into a position where they will offer to pay the fees to speed up the process.
Confidence tricksters can be anyone selling any product or service, or proposing a solution to vulnerable and desperate people. If the victims are desperate, they will be open to many schemes that they would not otherwise consider and may do almost anything to try to get the needed solution.
Fraudsters are practiced at making bad ideas look like they were originated by the victim, by guiding the victim to conclusions that they want them to reach. They can create a position where a desperate or gullible person will offer to give the fraudster money to get a solution to a problem, or a profit on a ‘deal’. Fraudsters earn their living talking money out of victims.
Fraudsters prepare a story to tell the victim. People should look behind the gloss and hype of the story as this may show the actual position. Conducting searches and demanding proof of the proposed deal may expose – or at least raise serious doubts about – its fraudulent nature.
- Is the deal too good to be true, because it may be too good to be true.
- Is the person just too friendly or doing too much for you in an attempt to gain trust?
- Why do they need the money now? Why can’t they find the money for fees etc. themselves?
- Who would be worse off if the proposal was a fraud and the benefit was never received? What will you lose and what are the chances of that happening?
- Are the fraudsters happy for you to take some time to get an independent person’s opinion, or is there some reason why this should not be done?