Advance Fee Fraud: How It Works, Warning Signs, and Ways to Protect Yourself

Advance fee fraud is among the highest successful fraudulent scams in the world. The scam consists of a victim tricked into paying a “fee” for subsequent services or, under the promise of more significant, later returns (neither of which ever actually appear). These scams are particularly dangerous for young adults, as they prey on those looking for investment and employment opportunities. However, by learning about these scams and how to identify them, consumers can help each other avoid becoming another victim of fraud. 

What is Advance Fee Fraud? 

Advance fee fraud is a specific category of financial fraud. Also called an “advance fee scam,” these events are premeditated by malicious actors. In such scams, the perpetrator asks the victim to pay an upfront fee to obtain services that the victim never receives. Victims may be encouraged to pay for any reason: a “down payment” on a loan, a “sure thing” on lottery numbers, a “start-up fee” for investment returns; scammers could even ask to get plane tickets for a meet-up, only for those plans to never complete. 

Advance fee fraud threatens everyone, but 58% of victims are between 25 and 34. There is a distinct overlap between this victim demographic and the scammers’ success using social media to initiate first contact (55%, the next highest being video game platforms and texts, respectively). Further, the US has a record of advance fee fraud accounting for almost 10% of our total fraud environment; that means it is a matter of when, not if, we fall victim to these schemes. 

How Does Advance Fee Fraud Work?

To understand how advance fee fraud unfolds, it’s essential to start with the scammer’s first move—establishing initial contact.

Initial Contact by the Scammer 

A scammer can initiate contact with their victim in many ways. As mentioned above, 55% of scammers used in that study used social media to initiate contact with their victims. However, this does not indicate if the scammer contacted the victim directly—as is the case with 419, inheritance, romance, and charity scams—or if the victim made contact following the scammer’s marketing—as is the case with many lotteries, business opportunities, job offers, rentals, and loan scams. Scammers can make contact through any channel, looking to push their narrative; be weary of emails, phone calls, social media messages, and mail with enticing offers. 

Promise of a Reward 

Advance fee fraud disproportionately targets those with employment and investment goals. Scammers often lure their victims in by promising high-value rewards. For example, an inheritance scam may start with the victim needing to pay “document” or “filing” fees, “start-up fees” for investigative services, or various other excuses to “start the process.” 

On the other hand, the scammer promises more: additional loan credits, millions in inheritances, and even more from lottery winnings. The circumstances differ, but each scheme shares the manipulation of the victim. Scammers prey on those who are emotionally vulnerable or looking for a way to change their lives. 

Request for an Advance Payment 

After initiating contact and laying the groundwork for a potential future interaction, scammers could wait to ask for money, or they might ask right away—depending on the situation’s context. Some scams may frame the request as a “necessary” cost. When the scammer comes to this phase of their plan, they may purposely avoid answering questions, push victims into making immediate choices, or promise sky-high returns. Other scammers may imply that the victim “has no choice” but to comply with the demands, but this is never true. 

Disappearance After Payment 

After obtaining their victim’s information or money, scammers have another choice: Do they disappear with their profit, or do they return for additional scams? Scammers who disappear after getting their goods are likely to return later. As a result, those who have been scammed and ghosted will need credit monitoring at the least. 

Meanwhile, those who have been scammed and continue to speak with the scammer put themselves at risk for further losses. Reoccurring losses appear for a variety of reasons, from victims not wanting to admit mistakes to victims ignoring or dismissing red flags. Regardless of why the fraudster continues to succeed, family members must separate the victim from the scammer so they cannot continue to abuse their victim. 

Common Types of Advance Fee Fraud 

Advance fee fraud comes in various disguises, with one of the most common being lottery or prize scams, designed to lure victims with promises of unexpected windfalls.

Lottery or Prize Scams 

Of the many advanced fee fraud examples in the world, lottery and prize scams are among the easiest for scammers to create. They haunt social media until they find a reasonable target, usually someone who has made it clear that they are financially challenged. The scammer may impersonate an officiant and offer to give the victim “their” lottery winnings—for a fee. After the scammer has collected the victim’s money, they’ll disappear.

Loan Scams 

These schemes target the unlikely but desperate business owner and cash-strapped individual; the scammer poses as a financial entity, offering falsified loans or insurance payback services in exchange for “approval” or “processing” fees. These loans tell on themselves in most cases, particularly when the loan “officer” requests money from the victim without any money transaction beforehand. Some loan scammers may also stick around to collect exorbitant “interest” fees or make up another reason to stay in their victim’s life.

Romance Scams 

As implied above, romance scams are another type of advance fee scam, although the given situation may vary in terms of both process and legal recourse. In these cases, scammers often hunt their targets online, crafting the perfect persona to entice their (typically elderly) victim. These fake relationships are rife with cash exchange, from bail money to emergencies, fake travel accommodation, and even business start-up ventures. 

Business Opportunity Scams 

Also called “investment” scams, these schemes are “partnership” opportunities or “sure thing” stocks gambling. The investment fraud class mainly comprises younger individuals, with some victims as young as 18. Younger adults are also high-value targets for these scams, as criminals know the younger generations are less likely to deviate from an established relationship. 

Employment Scams 

Employment scams are the number one form of successful advance fee scams for victims 25 to 34. They fill the online job-finding environment. In these schemes, victims pay fees for training materials, equipment, visas, background checks, and other “processing.” These scammers can also return after obtaining money, touting an “even better” position. 

Red Flags of Advance Fee Fraud 

Here's when you should start questioning the legitimacy of an offer:

Requests for Upfront Payments 

The clearest warning sign of any advance fee scam is the scammer requesting upfront payments or information for a service. Legitimate opportunities like jobs, sweepstakes winnings, and survey rewards are all completely free; any organization requiring the “winner” to pay a fee to access these “accounts” is a massive red flag. 

Too-Good-to-Be-True Offers 

Another sign of fraud is when the scammer’s offer is too good to be true. These offers promise unrealistic returns or benefits for little to no cost. In loan scams, this may look like huge interest rewards for “small fees,” while in a job scam, it may look like an above-average hourly rate with great benefits—all of it a ruse to obtain the victim’s personal and financial information. 

Urgent or High-Pressure Tactics 

No matter the context around the scammer’s story, they will eventually resort to urgent, high-pressure tactics when it comes time to request money. They may aggressively push the victim into compliance with blackmail or other emotional manipulation—the goal is to force the victim into acting without giving them room to think critically about the situation. 

Poor Communication and Grammar 

Communications from any stranger account are a cause to be wary, but those with egregious spelling and grammar errors are clear signs of a lurking scammer. Parties who cannot provide specified details about their company or organization should also use caution until you can ask detailed questions, as scammers often do not know or dance around answers. 

Unverifiable Contact Information 

One must always be careful when interacting with information given to them by a stranger. The common rule of thumb is to delete unsolicited messages from others, but additional dangers can also become consumer traps. Some scammers can even make entire websites to trick their unsuspecting victims. Unreachable or differing phone numbers for a business, inconsistent email addresses, and random direct messages are common signs of a scheme. 

How To Avoid Advance Fee Fraud 

Learn to protect yourself by being more informed and digging deeper when receiving any offers. 

Research the Offer and the Sender 

Most individuals can avoid advance fee fraud by researching the proposed offer and the sender of the offer before ever contacting the prospect. It’s vital to do this research before getting on the phone (or another channel) with the other party because scammers are disproportionately likely to have a successful scheme when speaking directly to the victim. However, by verifying who you are talking to through people search websites and other resources, you can help curb these malicious opportunists. 

Never Send Money to Unknown Parties 

If it isn’t clear by now, our social rules ask that no one send money to strangers—no one should send money to unknown or new acquaintance parties either. However, some scammers may find cause to remain in their victim’s life for a long time to circumvent this social rule. Subsequently, family members should be encouraged to “check in” with each other and elders; Grandpa’s 22-year-old best friend, Emily, may accidentally come up in conversation. 

Use Trusted Sources for Financial Transactions 

There are countless ways to charge for a service; do you use direct transfer, a payment platform like PayPal, a mobile solution like Zelle, a third party like Square, or some other option to oversee your transactions? No matter what the transaction is, you should always work with known banks and financial institutes in your region. 

Verify Job and Business Opportunities 

Nowadays, getting a job without sending your resume to a stranger is impossible. However, what happens after you apply can make the difference between falling victim to a scammer and getting out before it’s too late. Prospects must take the time to confirm job offers and business deals with officials before committing themselves to these false opportunities. 

Be Skeptical of Unsolicited Communications 

Finally, as indicated in the passages above, everyone should be skeptical of unsolicited communications like emails and direct contact methods like phone calls and texts. Notice, that the criteria include any unsolicited message—even those that come from your friend’s account (which, unbeknown to you in this situation, could have recently been hacked). 

What to Do If You’re Targeted by Advance Fee Fraud 

Keep this strategy whenever you feel you’re in the hands of the scammer.

Stop Communication Immediately 

You must end the conversation if you suspect a scammer on the other side of the communication. Hang up, shut down whatever device they used to talk to you, and avoid the scammer’s direct influence. They may continue to attempt to call their victim, and some scammers may escalate to threats to encourage a renewed conversation. Ignore and document all the communications if possible. The more evidence gathered, the better response the Federal Trade Commission (FTC) can enact on your behalf. 

Report the Scam 

The FTC investigates fraud claims reported to their website, https://reportfraud.ftc.gov/. The process is streamlined, with only a few questions separating the victim from speaking with an agent about the situation. Of course, notifying the Feds is only one interested party. Victims may also want to inform their financial institutions via their “report fraud” process (usually found within the Terms and Conditions documents). 

Protect Your Financial Information 

Some victims may want to notify the credit bureaus to obtain an account or credit card “freeze.” This status may also be available online, depending on the service provider. However, the answer to protection may come with enlisting account monitoring services for those who believe they’ve exposed financial payment information. Such monitoring services often include bank account and credit report reviews and flagging consumers when unauthorized activity occurs.

Educate Others 

After ensuring your financial and personal information is safe, consider talking to those around you about the event. When such experiences are shared, everyone becomes safer because spreading awareness among family, friends, and online communities helps prevent others from falling victim to similar schemes. 

Advance fee fraud is a form of financial abuse in which the victim is tricked into paying for goods “up front” instead of after receiving their promised services. Advance fee scammers then turn around and disappear without delivering the agreed-upon goods.

Scams of this type tend to succeed against individuals 25 to 34. Because these scams are so prevalent, it should be no surprise that consumers lost over $19 billion globally to scammers in 2024. Regardless of these figures, as long as individuals exercise vigilance and skepticism toward those they interact with, they’ll do much of the work of identifying and avoiding these and other scammers.