If you’ve been involved in online business for any reasonable length of time, or just been around the web generally, no doubt you’d be aware of “419” Nigerian scams; aka advance fee fraud. These have little bearing on ecommerce, but there’s a reasonably new Nigerian-type scam that has a huge direct impact for online merchants; the “shipping clerk” scam, more on that later.

“419” – Nigerian Scams

Just in case you’re one of the lucky few who has never been hassled by 419 scammers, it is the oldest Nigerian scam around. This classic Nigerian scam is also known as advanced fee fraud. My father used to work with the Department of Consumer Afffairs in Australia in the 1980’s and he saw it regularly then. In those days it was carried out by mail, fax and telephone. Even though it has had so much press coverage, it’s estimated that billions of dollars are fleeced from unsuspecting (and greedy) people each year.

The target receives an email claiming to be from an official representative of an important official (royalty, government). The scammer doesn’t ask for money up front, but wants to establish a working relationship with the target to help transfer money (which doesn’t exist) out of Nigeria or other African countries on behalf of their “client”.

The target is promised a healthy fee for their assistance, sometimes millions of dollars. There are other variations on this theme, but the the basics remain – a large sum of cash needing to be transferred to a Western country.

The scammer sends official looking documents etc. to convince the target of their credentials. The scammer then gets the target’s bank details under the premise of depositing cash *into* their account.

That’s when problems start occurring. The scammer tells the target that in order to shift the money, they need to bribe government officials or pay for security of the transporting of the cash etc. The target often pays large amounts of money in order to help these scammers to release the fictitious amounts of cash. The scammer will siphon from the target for as long as they possibly can.

Up until recently, 419 scammers had reasonably free reign in Nigeria and were fearless in their approaches. It’s my understanding that the Nigerian government is now cracking down on these gangs. Still, it doesn’t appear to have slowed down the number of scam emails I receive. While the Nigerian scam is performed in other countries, the vast majority of them will be from African states.

Nigerian scams affecting ecommerce

It’s an unfortunate thing that every time I hear the word “Nigeria”, I instantly think “fraud”. In nearly a decade of being on the web, I can say with a great degree of certainty that I have received *1* legitimate business email originating from Nigeria. Most other merchants will have had similar experiences. I feel very sorry for those legitimate merchants trying to run an online business on a global scale from African countries; it must be very challenging for them.

In my article on card fraud strategies, I mention that tracing the IP on an order receipt is a good way to prevent being defrauded. Also, if the billing address is the USA and the delivery address is Africa, Asia, Eastern Europe or other high risk countries, you can be reasonably confident that the order is fraud.

The Nigerian scammers realize this and have added a new string to their bow – the “shipping clerk” scam.

Nigerian “shipping clerk” scam

As with the 419 scam, Nigeria is not the only source of the shipping clerk scam, but it does appear to be the major point of origin currently. Here’s how it works:

– The scammers steal the credit card numbers

– They recruit people via email and forum postings in other western countries such as the USA to act as a delivery point for goods – i.e. a “shipping clerk”. They might also represent themselves as an export company wanting to service western clients, wanting to recruit clerks as payment processors.

I received a “recruitment” letter a few days ago; here’s a sample:

——

I represent COMPANY NAME based in Lagos, Nigeria. My company purchases electronic products from all over the world for resale in Nigeria and we need reliable shipping clerks to act as reshippers. We will pay for products and have them shipped to you. In turn, you will ship them onto us – we will provide you with pre-paid shipping boxes etc.

We choose this method of business as it circumvents some of the logistical issues we have experienced in the past.

Note that, as our representative, you will receive $x for each $x value of goods we purchase that you ship to us. Please, to facilitate the conclusion of this transaction if accepted, do send me promptly by email the following:

(1)Your full names,

(2)Contact address and,

(3)Phone/fax numbers.

———-

In some emails, Nigeria may not be mentioned. The scammer may state they are based in another country such as the UK; but when the clerk is “hooked”, they are directed to ship to another country.

– The scammers then place orders with the stolen card numbers using a forged IP in order to make the order look as though it came from country of the cardholders’ address. They would use a delivery address of the shipping clerk.

– The shipping clerk receives the goods and then reships them to the scammers.

– The shipping clerk is paid via a cashier’s check, which is also fraudulent. Usually the check is for more than the clerk’s wage, so the clerk is directed to wire the excess to the scammer

or

– They would send the “clerk” fraudulent cashiers checks, purportedly from the scammers “clients” for the clerk to cash, directing the clerk to keep a percentage and to wire the rest to the scammer.

After a period of time, the bank that cashed the check would discover that it is fraudulent and the clerk is then liable for the entire amount.

In the case of the reshipping angle, then not only does the “clerk” get stung, but also the merchants who provided goods. The merchant not only loses the goods, but will also probably incur a chargeback fee. If a merchant has enough chargebacks recorded against them, then their account with the processor may also be threatened or higher processing fees applied.

This kind of scam has cost ecommerce merchants millions of dollars in the last year. It is difficult to catch as all the usual initial anti-fraud screens would see it as a legitimate order; i.e., the order IP matches the country as does the delivery address. In some cases, the scammer may provide the credit card details to the clerk and direct them which goods to buy and from where.

In order for merchants to pick up on these sorts of fraudulent transactions, further screening is required. It’s not unusual for people to provide a delivery address different from the card billing address, so automatically voiding these transactions is not recommended, but the order should be placed in suspension until further investigations are carried out.

It may be that merchants need to look at the transaction details in their entirety i.e.:

– the $ amount of the purchase
– the number of items purchased
– does the IP match the state of the cardholder?
– does the delivery address match the billing address?

In regards to IP tracking, you can use a free tool such as is offered onDNSStuff.com (using the WHOIS Lookup) feature. Just enter the originating IP of the order in that box and if you find that the ISP doesn’t operate in the State of the cardholder, that could indicate possible fraud.

When in doubt, pick up the phone – call the cardholder and find out if they indeed made the transaction and if they did, ask them if it was on behalf of another company.

It’s a sad world that we have to spend so much time in battling online parasites; but the problem isn’t going to go away any time soon. In the world of ecommerce, anti-fraud vigilance is equally as important as marketing and product presentation skills.

Related resources:

Card fraud strategies

Pay per click anti-fraud strategies

Michael Bloch
Taming the Beast
http://www.tamingthebeast.net
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