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International fraud artists have invented an investment scheme that supposedly
offers extremely high yields in a relatively short period of time. In this
scheme, they claim to have access to "bank guarantees" that they can buy at a
discount and sell at a premium. By reselling the "bank guarantees" several
times, they claim to be able to produce exceptional returns on investment. For
example, if $10 million worth of "bank guarantees" can be sold at a two percent
profit on 10 separate occasions—or "traunches"—the seller would receive a 20
percent profit. Such a scheme is often referred to as a "roll program."
To make their schemes more enticing, con artists often refer to the "guarantees"
as being issued by the world's "prime banks," hence the term "prime bank
guarantees." Other official sounding terms are also used, such as "prime bank
notes" and "prime bank debentures." Legal documents associated with such schemes
often require the victim to enter into non-disclosure and non-circumvention
agreements, offer returns on investment in "a year and a day", and claim to use
forms required by the International Chamber of Commerce (ICC). In fact, the ICC
has issued a warning to all potential investors that no such investments exist.
The purpose of these frauds is generally to encourage the victim to send money
to a foreign bank, where it is eventually transferred to an off-shore account in
the control of the con artist. From there, the victim's money is used for the
perpetrator's personal expenses or is laundered in an effort to make it
disappear.
While foreign banks use instruments called "bank guarantees" in the same manner
that U.S. banks use letters of credit to insure payment for goods in
international trade, such bank guarantees are never traded or sold on any kind
of market.
Tips for Avoiding Prime Bank Note Fraud:
- Think before you invest in anything. Be wary of an investment in any scheme,
referred to as a "roll program," that offers unusually high yields by buying and
selling anything issued by "prime banks."
- As with any investment, perform due diligence. Independently verify the identity
of the people involved, the veracity of the deal, and the existence of the
security in which you plan to invest.
- Be wary of business deals that require non-disclosure or non-circumvention
agreements that are designed to prevent you from independently verifying
information about the investment.
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