This article is written by Diganth Raj Sehgal, Student, School of Law, Christ University, Bangalore. The author in this article discusses the concept of Economic Crime and also analyses the Nigerian ‘419’ Scam in detail.

What is Economic Crime?

An Economic Crime, often also referred to as white collar crime, is any illegal act committed by any individual or a group of individuals to obtain a financial or professional advantage. In such crimes, the offender’s principal motive is economic/financial gain which also means that the victims in such crimes incur an economic cost. Victims may include individuals, corporations, governments, and entire economies. But apart from such crimes, there are ‘victimless crimes’ too, which means that unlike in traditional crimes, these do not harm anyone physically or personally but they have severe economic implications which make it an act against the society.

The offences of smuggling of narcotic substances, counterfeiting of currency and valuable securities, financial scams, frauds, money laundering and hawala transactions etc. evoke serious concern about their impact on the national security. Financial crimes committed by banks, money laundering, illicit capital heavens, crimes committed by public officials (like bribery, embezzlement, traffic of influences, etc.) among many others are the examples of Economic Crimes.

Economic offences not only inflict pecuniary losses on individuals but also damage the national economy and have security implications as well. It adversely affects the growth and development of the nation. Internationally, it diminishes the confidence in the financial credibility and stability of the nation, thus weakening the competitiveness of such nation at the international level and further, making the country unattractive for investments from within as well as outside the country.

Where there is a high occurrence of economic crime, the government and its officials are also viewed as being corrupt and weak. Some of the major impacts on the national economy that may be caused by economic crimes are:  

1. Increase in inflationary pressure
2. Uneven distribution of resources and creation of elitism
3. Marginalisation of tax base
4. Generation of abundant black money
5. Creation of parallel economy

Such an economy becomes a breeding ground for corruption, the illicit businesses thrive and legitimate businesses are negatively affected. This also inhibits any form of developmental measures. Resources of financial and commercial institutions which can be utilized optimally to grow and develop an economy are diverted and distorted, weakening the morale and commitment of and to the citizens of the nation, the poor population continue to be at risk,  country’s economic equilibrium remains to be at stake.

The Nigerian ‘419’ Scam

The Nigerian ‘419’ scam, also known as the Nigerian Prince scam, the Spanish Prisoner scam, or the Black Money scam is actually a series of scams involving a person overseas offering a share in a large sum of money (hereinafter referred to as the scammer) to someone (hereinafter referred to as the victim) or a payment on the condition that the victim will help them, i.e. the scammer to transfer money out of their country. These scams are often known as ‘Nigerian 419’ scams because the first wave of the scam started from Nigeria. The ‘419’ part of the name comes from the section of Nigeria’s Criminal Code which outlaws this practice.

While Nigeria is most often the nation referred to in these scams, these scams originated in other nations as well. In 2006, 61% of such internet criminals were traced to locations in the United States, while 16% were traced to the United Kingdom, and 6% to Nigeria.  Other nations known to have a high incidence of such advance-fee frauds include Ivory Coast, Togo, South Africa, the Netherlands, and Spain.

How does the scam take place?

The scammer usually contacts the victim at random by means of an email, letter, and text message or through any other form of social media. The scammer then tells an elaborate story about large amounts of money belonging to him/her trapped in banks or other investments during events such as civil wars or coups, and are in countries that are currently in the limelight due to one reason or another. Another line of the plot may be that the scammer has or is about to acquire a large inheritance that is ‘difficult to access’ because of government restrictions or taxes in his/her country. The scammer then offers the victim a large sum of money to help him/her transfer his/her personal fortune out of the country.

Scammers may also ask for the victim’s bank account details to ‘help him/her transfer the money’ and use this information to later steal their funds. Or the scammer may ask the victim to pay fees, charges or taxes to ‘help release or transfer the money out of the country’ through the victim’s bank. These fees usually start out as quite small amounts of money and if they are paid, the scammer might make up new fees that require payment before the victim can receive his/her ‘reward’. The demand for money keeps increasing as long as the victims are willing to be a part of it. Nevertheless, the victim is never sent the money that was promised.

In reality, the large sums of money or the inheritance do not exist, and the victim eventually ends up with nothing but loss. Once the victim stops sending money, the scammers use the personal information and cheques that they received from the victims to impersonate the victim, draining bank accounts and credit card balances. Though such an invitation may seem to most people a hoax, millions of dollars in losses are caused by these schemes annually. Some victims have even been lured to Nigeria and imprisoned against their will along with losing large sums of money.

What type of a scam is Nigerian ‘419’ scam?

The Nigerian ‘419’ scam is an advance fee scheme which occurs when the victim pays money to someone in anticipation of receiving something of greater value, such as a loan, contract, investment, or gift and then receives little or nothing in return. An advance-fee scam is a form of fraud and one of the most common types of confidence trick. The scam typically involves promising the victim a significant share of a large sum of money, in return for a small up-front payment, which the fraudster requires in order to obtain the large sum. If a victim makes the payment, the fraudster either invents a series of further fees for the victim or simply disappears.

There are a variety of advance fee schemes which may involve the sale of products or services, the offering of investments, lottery winnings, ‘found’ money, or many other opportunities. Some scammers offer to find financing arrangements for their clients who pay a ‘finder’s fee’ in advance. They require their clients to sign contracts in which they agree to pay the fee when they are introduced to the financing source. Victims often learn that the scammer is ineligible for financing and does not have or can arrange the money only after they have paid the ‘finder’ i.e. the scammer according to the contract. Such agreements may be legally enforced unless it can be shown that the ‘finder’ never had the intention or the ability to provide financing for the victims.

Legal Aspects of the Nigerian ‘419’ Scam

The Criminal Code Act of Nigeria under section 419 denotes the offence of obtaining the property of another person by false pretences or fraudulent conduct. This section criminalises the offence in the Southern part of Nigerian. The offence is criminalised under the Criminal Code Act, Section 1 of the Advance Fee Fraud and other Fraud Related Offences Act 2006. The Nigerian government is not sympathetic to victims of these schemes since the victim actually conspires to remove funds from Nigeria in a manner that is contrary to Nigerian law. This means that when the victim promises to move the ‘non-existent’ money which as per the knowledge of the victim is actually existing or intends to pay charges or taxes or the scammer, the victim violates the Nigerian laws and so, has no compensation or recourse under these laws.

The offence is said to be committed “when any person by any false pretence and with intent to defraud obtains from any person whether in or outside Nigeria for himself or for some other person; or induces a person whether in or outside Nigeria to deliver to any person; or obtains any property whether or not the delivery of the property is induced through the medium of a contract, induced by the false pretence.”

The offence is also committed when a person induces a person whether in or outside Nigeria to confer a benefit on him or on some other person on the understanding that such benefit has been or would be paid for. The offence of obtaining monetary advantages by false pretence denotes the offence of knowingly obtaining someone’s property by misrepresenting a fact with the intent to defraud that person.

The courts have stated that; in order for a person to be convicted for the offence of fraud and misrepresentation coupled with false pretence, it is necessary for the prosecution to prove to the satisfaction of the court i.e. beyond reasonable doubt that there was some wrongful statement as to an existing fact made by the accused person that is the alleged scammer, that such a statement which was made was false and false to the knowledge of the accused and that it acted on the mind of the person who parted with the money i.e. the victim and that the proceedings on the part of the accused were fraudulent. The only meaning of the statement was the intent to defraud.

Through cases, the following elements of the offence can be identified-

1.     That there was a pretence;
2.     That the pretence emanated from the accused person i.e. the scammer
3.     That the pretence was false;
4.     That the accused knew of the falsity of the pretence, i.e. he did not believe it to be          true
5.     That there was an intention to defraud
6.     That the property or thing is capable of being stolen
7.     That the accused induced the owner to transfer his/her whole interest in the property.

‘Pretence’ is this context refers to the misstatement or misrepresentation of facts with the intent to defraud the complainant, the accused person must have made a statement (either orally or in writing) which was false and he must have known it to be false. A conviction for this offence cannot be sustained if the complainant is not shown to have been ‘induced’ to part with his property based on the pretence of the accused person. The elements of the offence must be fully established before a court of law would convict a person of obtaining by false pretences.

The punishment for the offence under Section 419 of the Criminal Code Act is 3 years imprisonment, but where the value of the property is one thousand nairas (1 naira is equivalent to 19 paise) or above. Under the Advance Fee Fraud Act, the offence is punishable with not less than seven years and not more than twenty years imprisonment.

Conclusion

The Nigerian ‘419’ Scam is a wide-spread large scale scam which can be encountered with any time, anywhere and by anybody. Though this scam started off in Nigeria, it a global problem today and anybody with access to the internet and any form of social media is fully capable to be the catalyst of such scams.

Unlike conventional individual scams, this scam inherently is a series of scams due to its capacity of being a cyber scam and the wide reach of the internet. The amount of money lost in such scams is huge and is affecting economies negatively at a global level.

Though individual countries have their own legislation to deal with these issues, the wide reach of the internet makes cybersecurity a global issue which should be tackled in a joint effort by the countries. This is the only possible long term solution to stop such scams from taking place. An important measure apart from this would be to make people aware of such scams. The more people know about it, the lesser is the chance of anyone being caught up in such scams.