Legal Definitions - Investor Protection Guide: Advance Fee Fraud

Advance Fee Fraud is a deceptive scheme where victims are persuaded to pay an upfront sum of money, known as an "advance fee," with the false promise of receiving a much larger benefit, service, or financial return in the future. The fraudster's intention is to take the initial payment and then disappear, never delivering on the promised benefit. These scams often create a sense of urgency or exclusivity, making the offer seem too good to be true, and pressuring individuals to act quickly without thorough verification.

Here are some examples illustrating Advance Fee Fraud:

• Exclusive Investment Opportunity: A person receives an unsolicited email from someone claiming to be a representative of an international investment firm. The email details an "exclusive, high-yield investment opportunity" in a new energy technology, promising a guaranteed 400% return within a year. To participate and secure a spot in this limited offering, the email states that the investor must first pay a "regulatory compliance fee" of $750 to cover administrative costs and legal processing. After the individual transfers the $750, all communication from the supposed investment firm ceases, the website mentioned in the email becomes inaccessible, and the promised investment opportunity, along with the initial fee, vanishes.

  This illustrates Advance Fee Fraud because the victim paid an upfront fee ($750) with the expectation of receiving a significantly greater financial return (400% on investment). The fraudster disappeared after receiving the payment, and the promised investment and returns were never delivered.

• Guaranteed Loan Offer: An individual struggling with debt receives a text message offering a "guaranteed personal loan" of $50,000 with incredibly low interest rates, regardless of their credit history. When they respond, a "loan officer" explains that to process the loan and ensure its approval, a mandatory "loan insurance premium" of $1,200 must be paid upfront. The officer assures them the premium is fully refundable if the loan doesn't go through, which they claim is highly unlikely. After the victim pays the $1,200, the "loan officer" stops responding to calls and messages, and the promised loan never materializes.

  This is an example of Advance Fee Fraud because the victim paid an upfront fee ($1,200) in anticipation of receiving a much larger financial benefit (the $50,000 loan). The fraudster took the advance payment and then disappeared, failing to provide the promised loan.

• Unclaimed Inheritance Scam: An elderly person receives an official-looking letter from an individual claiming to be a lawyer representing a distant relative who recently passed away without heirs. The letter informs them that they are the sole beneficiary of a multi-million dollar estate. To release the funds, the lawyer requests an "inheritance tax" and "legal document processing fee" totaling $5,000, to be wired to an international bank account. The letter emphasizes the urgency to avoid forfeiture of the inheritance. After the victim sends the money, the "lawyer" becomes unreachable, and the promised inheritance is never received.

  This demonstrates Advance Fee Fraud as the victim paid an advance fee ($5,000) with the expectation of receiving a significantly larger sum (the multi-million dollar inheritance). The fraudster disappeared with the upfront payment, and the promised inheritance was never delivered.