I have been in communication with a company from Nigeria who is
interested in purchasing one of my company's products.

Fully realizing that just by using the word "Nigeria" sets in motion a
number of red flags, what would be the safest way to accomplish a
business transaction?

I have a business bank account set up for this purpose, and have $5 in
the account.  They can transfer their dollars into this account for
the purchase, and then I can transfer the money out of this
"sweep" account into another hidden account.  Once done, I will ship them the
goods.

Are there any drawbacks to this procedure?  Can they "un-do" a wire transfer?

Should I close down the account after this transaction is completed to
avoid using the account number for any other activity?

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Request for Question Clarification by denco-ga on 20 Sep 2005 19:53 PDT

Howdy timtitus-ga,

Does the Nigerian company have any (bank/business) references at all?  Thanks!

Looking Forward, denco-ga - Google Answers Researcher

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Clarification of Question by timtitus-ga on 20 Sep 2005 20:20 PDT

I've already asked the company for their bank and trade references and
am awaiting a response.  I'm just wondering what precautions should be
employed beyond what I'm currently doing.

There must be a number of legitimate business deal from American
companies with Nigerian companies every day, and I'm interested in
learning what most businesses do to safeguard themselves.

Howdy timtitus-ga,

A reminder of the "Important Disclaimer: Answers and comments provided on
Google Answers are general information, and are not intended to substitute
for informed professional medical, psychiatric, psychological, tax, legal,
investment, accounting, or other professional advice."

If you really, really, really want to do business with someone that is
from one of the most fraud ridden countries in the world, here is this.

I would probably suggest that you work this the opposite of what you are
doing, that is, have them set up a bank account, put the amount of money
the contract is for in that account, and give you access to the account,
making sure they never have any account, etc. information of yours.

Even then, I would do a "double" transfer, such as you outline, on top
of the above.

The way companies safeguard themselves is avoiding doing business with
companies in countries such as Nigeria, ask for and check references,
see if there is any information on them at Dun & Bradstreet, see if they
have a web site, and if that has been around for awhile, do searches on
Google for them, etc.

Looking Forward, denco-ga - Google Answers Researcher

Why don't you discuss this with your own bank (ie the one with which
you have set up the special bank account)?  If you just follow the
procedure you have outlined and the payment from Nigeria fails or is
reversed in some way, you will just be overdrawn with your own bank,
which you will presumably have to sort out quite quickly or risk
harming your home credit standing.  Better to tell them that this
account is for a special payment, ask them when they consider the
payment in to be irrevocable, and undertake not to withdraw the money
until then.  They ought to be able also to monitor the account for any
other attempted activity.

You could charge your Nigerian customer a premium for all this extra
work.  Extra risk normally menas a higher price. Whether this is all
worth the hassle depends on the amount of money.

Timtitus --

I might suggest using the following Google search strategy.  It
explains how normal international trade issues are handled:
why use a "letter of credit"

Best regards,

Omnivorous-GA

Quite right, a "documentary letter of credit" is an instrument to do
exactly what you and the customer want:  assure that you will get your
money, and that they will get their goods.  You can read all about it
on this site:

http://www.sitpro.org.uk/trade/lettcredintro.html

Be very careful

Chances are that they will transfer in money from another account that
they have hijacked.

- or get some daft sucker to deposit money into that account

Many banks allow you to set up a "deposit only" account that will only
accept wire transfers in, and not out.  This is recommended highly by
Frank Abagnale of "Catch Me if You Can" fame in his excellent book on
fraud protection, "The Art of the Steal."  You could then, of course,
have the nightly sweep set up to offer that additional layer of
protection.  Your bank may also have a reputable escrow service either
as part of their operations or one they could recommend.  That way,
the only information you are giving them is of the escrow service.

Documentary Letter of Credit

This is the established and time-tested international way to handle
the export transaction.  It gives both parties as much security as
possible. The Nigerian purchaser can only open the L/C if a bank there
accepts the credit risk  - the BANK pays when the required documents
are presented that show that the goods as specified have been shipped
in accordance with the shipping instructions of the L/C.
So you don't trust that bank?  That is covered by involvement of a US
"correspondent bank" which does know and trust Nigerian bank.  Of
course there are fees, you are getting the assurance that you will see
your money.

Myoarin

However, the Nigerians are notorious for setting up fake banks
- of all apparent nationalities

So you need to make sure that your US Correspondent Bank is of /your/ selection
- preferably your current bank

I've lived in Nigeria and done business with many Nigerian
corporations from here in the US. The key phrase is "cash up front".
No exceptions. Period. The comments others have made about letters of
credit also apply. Just make sure it's a bank you're familiar with,
and that you verify the LoC _on_ _your_ _own_ directly with the bank.
Legitimate Nigerian companies are used to doing this when doing
business with foreign companies (they don't like it, but they
understand it).