What is advance fee fraud?

The payment of upfront fees is not per se fraudulent. However, as with many legitimate business activities, also the payment for services that are never delivered happens. Such advance fee fraud in the financial industry often emerges in the application of credit facilities, project finance and commercial loans. It also occurs in international transactions where products, services and even foreign currency is offered against a discount. On the front of investment programs, Ponzi Schemes and other vague high yield investment programs often require participants to prepay for entry into the program.

Consumers who enter into an agreement expect to receive a product or service for their payment. Contract law sees the obligations of the contract parties as separate tasks. This means that the contract provides leverage for legal action imposed on one of the contract parties when breaches occur. The financial industry is based on mutual trust and extensive contractual agreements limit the responsibility and liability of the investment firm. It is argued that where investors seek above market returns, they should adapt to a higher risk profile. Even though this applies to the financial industry in general, advance fee fraud often abuses similar parameters and agreements consumers are familiar with.

Advance fee fraud and other upfront payment scams gain altitude where consumers are able to take their quest for advice to the internet. The range of publicly available information from high quality and reliable content to hyped up dreams and fairy tales drives uninformed and vulnerable groups into the hands of careless and very commercial salespeople. Some of which will sell a dream that turns into a nightmare.

Victims of advance fee fraud feel wronged and often want their moneys returned. The inclusion of the international element in the deliberate act to defraud investors with advance payments without follow up makes recovery cumbersome. This difficult situation is furthered by the relatively small amounts that got lost that often do not justify legal action and expensive recovery actions. The lack of genuine activities gives a civil lawsuit against the wrongdoer an uncertain and unpredictable outcome. As such, being right and getting justice done is something different than the practical implementation of rights being protected, maintained and recourse of damages.