One of the most insidious scams ever is the infamous 419 scam and if you are doing online business, I am sure that you have been targeted multiple times (hopefully not victimized). Scamming the worlds population is a major industry in Nigeria - as a matter of fact it is named the 419 scam after the relevant section of the Nigerian criminal code. I won’t go so far as to say this is government sponsored, but they certainly don’t seem too anxious to prosecute these criminals.

This is not limited to online businesses and there are many permutations of this scam. I am sure you have received the emails regarding the millions the Nigerian government has for you - just send your banking information so they can transfer it (Translation - so they can clean out your bank account). Phony fund raising letters for disaster victims are also common. Scamblog and b.removed have actually turned tormenting these guys into entertainment and Insult #3 is probably the funniest one I have seen. If you think scam baiting is wrong or just want an interesting read see The Ethics Of Scambaiting.

In the most common business scams, they place what appears to be a large order. Usually shortly thereafter they ask if you could pick up some cell phones (or other high price gear) and include it on their order. Even when a legitimate payment actually arrives from them they just claim that they never received it and get the credit card company to refund them leaving you with a charge back fee and neither the money or your merchandise. Sometimes the scammers will have accomplices in other countries and from what I understand at least one bank is under investigation also for their part in some of these scams.

This blog has an “interoffice email” from one scammer to another showing a high degree of organization, and it is estimated that there are at least 250,000 criminals running this scam and raking in hundreds of millions of dollars.

There are many versions of this scam, but they have one of two things in common - greed or pity. One man actually embezzled 1.4 million dollars from his company to participate in one of these because they dangled a 20 million dollar carrot in front of him. Fakes also have their part, from fake chemical companies to lottery winners, 419 is pervasive and jams the worlds in boxes with spam.

One thing scammers are is tenacious, and they will hang in there as long as they think they have a fish on the line. One good clue that someone is attempting to scam your business is an inordinate amount of email for a simple order. Although sometimes legitimate customers have many questions, scammers do this for a living so they will send constant emails if they think you will bite.

The Following from the U.S. Secret Service PUBLIC AWARENESS ADVISORY REGARDING “4-1-9″ OR “ADVANCE FEE FRAUD” SCHEMES:
Several reasons have been submitted why Nigerian Advance Fee Fraud has undergone a dramatic increase in recent years. The explanations are as diverse as the types of schemes. The Nigerian Government blames the growing problem on mass unemployment, extended family systems, a get rich quick syndrome, and, especially, the greed of foreigners.

Indications are that Advance Fee Fraud grosses hundreds of millions of dollars annually and the losses are continuing to escalate. In all likelihood, there are victims who do not report their losses to authorities due to either fear or embarrassment.

Overall what it really comes down to is using common sense and not letting greed get the best of you.

• Charity emails - Make sure it is a legitimate organization. One popular scamming method is to include links in email that look like they go to a legit organization yet resolve to an IP address with a phony web site designed to look like that organization’s web page. Personally, I never ever click a link in any email. Just open your browser and type in the web address.
• Get rick quick emails - If it sounds too good to be true you can be fairly sure it is. Anyone who wants you to pay them to give you money is pretty much a scammer.
• Business Order Scams
• Don’t accept orders from Nigeria or that ship to Nigeria. If you feel like flirting with disaster, at the very least ship only to legitimate freight forwarders in your own country so you can provide proof of delivery.
• Ship only via methods that allow you to provide proof of delivery.
• Cancel any orders that request you include cell phones or other electronic gear.
• Suspect any order that seems to require extensive back and forth emailing.
• Make sure any money orders are from legitimate banks and that they have cleared before shipping.

I know it is harsh, but I outright just trash any email I suspect as being from a 419 scam, and do not ship to Nigeria - period. I don’t have time to waste emailing back just to have it turn out to be a scam, and the risks for selling to person in Nigeria far outweigh any minor profit I might make from an order.

The shame of all this is that I have no doubts the vast majority of Nigerian people are not scam artists. Unfortunately the prevalence of scam artists in their country makes it impossible for me to have anything to do with shipping orders to that country.

Food For Thought - Do you need business insurance?

If you sell your crafted products the answer is probably yes. If you have any major assets the answer is definitely yes. In this day and age the concept of taking responsibilty for your own actions does not apply. While often you may look at a lawsuit and think that it is ridiculous, but any litigation involving you is a serious matter. I’m sure several corporations thought it absurd to be sued because their customer did something stupid with their products. You have heard about them - coffee was too hot, someone used their lawnmover to cut their shrubs, someone set themselves on fire while wearing their clothes, and so forth -  yet the plaintiffs won millions of dollars in these cases.

Cases like this often don’t come down to right or wrong or facts or common sense, but are decided by emotions. To be human is to have some degree of empathy for fellow humans and in such cases the injured person is typically sitting right in front of them for days or weeks. People dont show the same sympaty for businesses, and in fact a study I saw several years ago pointed out that much of the television programming we are watching reinforces the belief that businesses are evil (among other things). This starts at an early age - with cartoons aimed at children. Consider that for a second - we are conditioning our youngsters to hate businesses. Granted this is aimed mostly at big business, but can your child readily differentiate between a mega corporation and the store down the block?  I wish I could recall the name of the study as I would like to link it, but think about this next time you are watching tv.

The real nightmare of this for a small business owner is that the amount of these lawsuits is often way more than you could practically insure yourself for - not uncommonly hundreds of millions more. Fortunately most small businesses do not have enough assets to  make the expense of such litigation worth pursuing, although this does not make you immune altogether. If your business is not a corporation, then in most states you are personally liable and your non business assets are at risk in such a lawsuit.

Typically if you own anything big such as property or a house, incorporating your business will provide some personal protection in case your business gets sued. I highly recommend that at the very least you incorporate if you plan to sell your crafts. The rules on this vary from state to state so you should speak with an accountant and a lawyer on this to protect yourself.

Please comment or add your thoughts on this.