NIGERIA, to many of its citizens' dismay, is know for its scams. Since moving to Abuja, Baobab has received over 100 obviously dodgy e-mails a day with offers of millions of dollars accompanied by assurances that "pls this is not a joke and i would not like you to jeopardise it". Some e-mails are marginally more convincing with senders claiming to be bankers or bureaucrats. They are well written and free of typos. Some play on greed, others on charity and many on sheer stupidity. The scammers, who mostly use internet cafes, are hard to trace.

Now a different type scam has been uncovered. In 2010 an ex-employee of AT&T, an American telecoms giant, filed a lawsuit against the company accusing it of knowingly allowing their service for hearing-impaired callers to be abused by Nigerian fraudsters, costing the American government $16m. IP Relay allows deaf people to type messages over the internet which operators from companies such as AT&T then read out to recipients. Each call costs around $1.30 a minute, which is reimbursed by the Federal Communications Commission (FCC).

The Department of Justice, which is now suing AT&T, estimates that as much as 95% of AT&T’s IP Relay revenue since December 2009 has come from fraudulent abuse of the system by foreign criminals. Thousands of calls came from Nigeria. The American government says that criminals working out of Nigeria used the service to order goods with stolen credit cards and counterfeit checks, defrauding a host of American companies. AT&T provides a trustworthy American voice and total anonymity. 

Though the details are only now coming to light, the fraud appears to have been going on for years. An internal study at AT&T found that on January 14th and 15th 2004, 10 out of 12 users of the service were from Lagos. One IP address racked up 100 hours of calls in those two days alone. The lawsuit says AT&T did little to stop it and retained loopholes in their verification systems to facilitate the fraud. Avoiding stricter registration policies allowed international callers ineligible for the service to sign-up, said the Ministry of Justice, which earned the telecoms giant millions of dollars in payments from the FCC.

Foreign investors say corruption—which conservative estimates say costs Nigeria between $4 billion and $8 billion dollars a year—is the main reason to avoid the country. Operations like this will do little to assuage their fears.

http://econ.st/HnzWVx

It is in the latest issue of the Economist Magazine.