An advance fee scam is a scam where you are asked to pay a fee of some kind to receive a product or payment, but after paying the scammer money you never get anything.

People who have bad credit are often getting caught with these, when they are turned down for loans by most of the reputable lenders they can fall prey to the advance fee loan scam.

This classic scam boils down to a very basic formula: you are promised that you can get your loan after filling in the requisite paper work and paying your application fee. After paying your fee, you never hear from the lender again.

The advance fee loan scam can take many forms, and frequently overlaps with multi-level marketing. Many of those "lose weight fast and make money" or "you can earn $1,000 a week" type ads you get in your mailbox are advance fee scams. When you call up for info you are asked to send a self-addressed stamped envelope with $10 or something similar so you can get your info pack. Sometimes the info pack arrives, sometimes it doesn't. If you do get a pack you can be assured it will be some more worthless junk mail recruiting you to MLM or telling you how you can recruit others to MLM.

Sometimes it won't involve you physically sending them money. Instead the info line to call is a 0055 number costing four bucks a minute, where someone s-l-o-w-l-y explains to you about their little scheme, the mark maybe not realising that the real scheme is getting you on the phone to listen to their stupid pre-recorded message.

Other variations include letters from "solicitors" advising that you have just been left a large estate by some great aunt you never knew you had, you must of course pay various fees in order to get your money.

"Treasure hunting" is also a popular one, some wealthy sucker gets asked to finance a recovery operation to get back Spanish gold or NAZI loot, but instead the conmen just run away with the money.

The most famous advance fee scam is known as the Nigerian scam. This scam, which often actually does involve Nigerian nationals, involves sending out "secret" letters to people making them a fantastic offer.  Nigeria unfortunately has a very highly developed fraud economy and scamming people is almost a national passtime. 

In the Nigerian scam, you get a letter from someone claiming to be an important person in Nigeria requiring your help. He may be claiming to be a government official, a military officer, a businessman, the wife or relative of one of these or maybe even a gangster. They need your help to facilitate a transfer of a huge amount of money.

For some reason, they can't transfer the money out of the country by the usual channels, so they are sending you a very secret letter offering you a percentage of the millions of dollars they want to move, for providing your bank account.

The sums involved are always huge, tens of millions of dollars, and you are offered a fee of 5 or 10% of this for helping them. All you have to do is give them your bank account details and make a few payments to get things rolling.

A hundred here, a thousand there, to bribe this or that official, get papers signed, etc. Many victims get taken for tens of thousands of dollars, and some gullible rich folk have actually lost millions. The reason why this is an advance fee scam is that these bribes and fees are the only money that changes hands, they take your money and that is it. Of course they won't give up on you that easily, once they have taken your money they know you are a first class Patsy and will continue to ask for more and more, until finally you wizen up and stop paying.

The "Nigerian Scam" uses a very old formula.  Back in the days of the Spanish Inquisition it was called the "Spanish Prisoner" scam.  The schtick was that a wealthy person was locked up in jail by the inquisition and they needed your help to bribe certain people to help them get out.  When they're out, they would share some of their considerable fortune with you.

The really clever part about this scam is that you have been asked to do something that is obviously illegal. Do you dare report to the police that while you were helping an African despot drain the treasury of his country before he flees to some tropical paradise, the guy took your money instead? Some people have gone to Nigeria to find the person who is scamming them, still hoping to receive their money, then been kidnapped and held for ransom by the scammers, one American was found dead on the steps of his hotel, they killed him by setting him on fire. I think if there is one thing worse than being kidnapped by gangsters, it would be being kidnapped by gangsters in some forsaken third world country where the locals think all westerners are billionaires and attract 8 figure ransoms.

According to the Australian Institute of Criminology, since 1992 17 people have been killed in Nigeria attempting to recover their funds, and the U.S. State Department has documented over 100 cases where US nationals have had to be rescued from Nigeria. There is also evidence of repeat victimisation, where victims get letters supposedly from the Nigerian government advising that their funds have been recovered. Again they are asked to send money to enable these funds to be released. Naturally this is just another crack at an advance fee fraud.

This is a big scam, authorities estimate over five billion dollars has been taken through these scams since 1989. In four months in 1998, Australia Post intercepted 4.5 tonnes of advance fee correspondence which had counterfeit postage (and this was just Sydney!), this was some 1.8 million items! Clearly these are not small operations, but a booming industry. Postal authorities catch many of them because the gangsters frequently use fake stamps. In some cases customs have intercepted courier packages from Nigeria containing hundreds of letters to be reposted in Australia, and arrests have been made in many countries.

I have received a couple of Nigerian scam letters as spammed email, and one in the post. The offers were close to the stereotypical Nigerian scam formula, some sort of coup in the works or somebody trying to scam the world bank or defraud a multinational company. For participating I could make over a million dollars as my commission, just for letting them launder their money with my bank accounts, they wanted me to send some money to bribe certain officials. To someone who doesn't know better the opportunity to make a million dollars does sound rather tempting, and I am sure the whole cloak-and-dagger aspects of being able to participate in third world revolutions and international money laundering would have a certain appeal for those wanting a bit of excitement and the chance to participate in something really naughty. It is the ultimate once-in-a-lifetime too-good-to-be-true opportunity.

The Nigerian scam is worldwide. While many of the letters are from Nigeria, this is a large operation making big money, with representatives all over the world, some even in Australia. If you get some amazing offer from some other country, to help someone drain the treasury of another nation, don't buy into it. It is still just the Nigerian scam, or a copy-cat.

There is a very simple technique to avoid advance fee scams. Don't send money to any mysterious characters offering money making schemes. If you take a loan, let your application fee be included in the loan itself. Avoid calling 0055 numbers (really, they're all crap anyway). Don't send money in the post to PO BOX operators just for an "info pack".

A very interesting book by a former Deputy Superintendent in the Nigerian Police Force and later an investigative specialist at the United States Embassy, Lagos, Nigeria on the "Nigerian Scam" is 419 Scam: Exploits of the Nigerian Con Man.  It gives a lot of insight not just into the various forms of Nigerian scam, but also the Nigerian fraud economy and how this affects society.