The Economics of Advance Fee Fraud (“Nigerian Scams”)

Western Union, Avenue de Choisy, Paris 13There’s a fascinating academic paper by Microsoft Research [PDF link] on the classic Nigerian advance fee fraud email scams. I’m sure you’re familiar with the basic principle but perhaps some readers might be younger than the best spam filters so here’s a quick rundown. You get an email from a supposed Nigerian prince or president’s son and so forth. They’ve had some trouble s and need to transfer a gargantuan some of money through someone in your country. If you help you’ll get a commission that works out to be in the millions. Naturally, problems arise and you need to wire them little bits of money here and there to help with paperwork and of course the money never comes.

The first interesting thing is that of course advance fee fraud is nothing new. A very similar thing called the Spanish Prisoner scam was around at the end of the 19th century. There, a wealthy aristocrat or magnate is being unjustly held as a prisoner in Spain. If you would only bail him out, oh how he would reward you!

Another thing to note is that the people who engage in these scams are often indeed from Nigeria. There are not many job opportunities, especially in the more rural areas. For someone whose English and computer skills are at a reasonable level, this presents a very strong temptation: do I struggle to scrape by to feed my family or do I go and get access to these hoards of money? This article outlines how one person has struggled with the dilemma. Also if you are very poor and there are people across the world who have so much more than you and yet are greedy enough for more to fall for the scam, it becomes very easy to rationalise that they’re privileged wankers who deserve it.

But now onto the academic paper. Have you ever asked yourself why these emails are so outlandish? Surely, you might think, they could be a little less obvious. Most of them say they are from Nigeria, a country about which most people know nothing except the scam. Why don’t they take the most basic measures and make their emails more effective by being just a bit less obvious?

The paper analyses the economics of the operation and concludes that they can only be successful if their emails are obvious and outlandish. There is a mathematical side to this but I’ll just go into the intuitive explanation which should be enough. In order to make it worthwhile, the scammer has to make a positive return on investment. But where are the costs? Because this is email spam, the cost of distribution is close to 0. There are some fixed costs in getting a computer, internet, spam server and so on. But the biggest ongoing cost would be the time in corresponding with a potential victim. A scammer has failed not if their email didn’t get a response, that’s easy to live with. A scammer has failed if they’ve spent hours corresponding with someone only to end up not getting any money from them.

Now, the email addresses number many but the victims number few. Most people have heard of similar scams. Of those who haven’t most are likely to smell a problem in the initial email. Of those who don’t, most are likely to back out at some time in the process. Not to mention that some people make sport of pretending to fall for these to waste the scammers’ time (for instance see the wonderful site 419 Eater). So, to a scammer, finding someone who will actually give money (as opposed to responding to the email) is like finding a needle in a haystack. The initial email is the only filter they have to separate those who are likely to give them money from those who will respond but back out. It is therefore in their interests to make this filter as conservative as possible. The more ridiculous the initial email is, the more likely that a response would only come from the type of person who would also complete the transaction.

So that’s the potentially-surprising answer — the scammers want fewer responses and not more. If their emails were more believable they’d go out of business.

I’ll end with a fascinating thing, an item of true con artistry, the second degree Nigerian advance fee fraud that I’ve only seen this year. It’s so wrong and yet I salute whoever came up with it. It basically targets scam victims and says “I was a victim of a Nigerian scam and thought I lost my money forever. Then I went to Nigeria and I recovered it with the help of this agency! All I had to do was pay then $200.”

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The thinly-veiled identity of lives and rants in Sydney. Views not his own, provided by hivemind. All my original work on this blog is licensed under a CC BY-NC License.

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