Lawyer Sues Citibank For Not Stopping Him From Losing Money In Nigerian Scam

from the blame-goes-around dept

A lawyer in Houston is suing Citibank after he got scammed in a variation on the classic Nigerian email scam. There are a few interesting tidbits here that are worth discussing. First, the details: the lawyer, who does collections work, was contacted via email by a company that claimed to be a Japanese company that was trying to collect money from four clients in the US -- offering a contingency fee to the lawyer for help in getting the customers to pay up. Soon after that, the "Japanese company" claimed that one client had agreed to pay some of what it owed -- and it sent the law firm a check for $367,500. Citibank said the check cleared, and the law firm wired $182,500 to the company. Of course, it later turned out that the check was fraudulent, and the law firm was out the $182,500.

This is a variation on a popular version of the Nigerian email scam. The way it usually works is that the scammer buys something that's for sale... and then sends a check that's for significantly more than the purchase price using some sort of excuse. Once the check "clears," the seller is asked to wire back the excess money. This version is interesting in that it's slightly more sophisticated -- carefully going after law firms that do collections. Rather than being a totally "out of the blue" situation, they worked hard to make it seem like business as usual until the scam is done. Sneaky.

While it's easy to mock the lawyer for getting tricked, the basic version of the scam and this more sophisticated version both rely on a very unclear part concerning check processing. Most people assume that once a check "clears" it's confirmed as valid. That's not true. Banks clear the check before it's actually validated, and the scammers exploit both the time between these two events and the fact that most people assume (or are told) that once a check clears, the money is definitely theirs. There are a few ways to solve this that banks could take. They could not clear the check until it's absolutely declared valid. Or, they could make it much clearer that, while the money is available, the check has not been validated and the money could be pulled. Since most banks do neither, the guy's lawsuit against Citibank is at least somewhat understandable -- though, it's unlikely a court will agree with him.

Filed Under: 419, advance fee, law firm, nigeria, scams
Companies: citibank


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  1. identicon
    Joe, 10 Jan 2011 @ 12:13pm

    The whole problem is someting nobody has mentioned - there is no system in place that tells a bank when an item has cleared another financial institution. They are only notified when a check DOESN'T clear. The other way around would require moving 1000 times more data around, since a lot fewer checks bounce than clear.

    Banks CAN'T know when individual checks clear under the current system - even a phone call to the issuing bank isn't useful, as there is a lot of liability involved if something goes wrong. While such a system may exist in the future, doing such a thing now would require 1000 times more information going back and forth between banks and the Fed as does now - it would be a logistical nightmare.

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