Wednesday, November 30, 2005

Fraudulent Investment Schemes

The Royal Canadian Mounted Police website describes a number of scams, including fraudulent investment schemes. The RCMP refer to one scam as the "Prime Bank Instrument Investment Scheme," the common features of which include:

Persons promoting these schemes lead prospective investors to believe they are being invited to participate in an otherwise secret trading regime. Investors might be required to sign non-disclosure and non-circumvention agreements which prevent them from disclosing to any persons the identity of the parties involved in the investment programs and the terms of the transactions.

One or some of the following items characterize the schemes:

(1) Often, some part of the schemes would be transacted through a country regarded as a secrecy haven. This "offshore secrecy" feature conceivably enables investors to avoid paying any taxes on proposed investment returns.
(2) The scams are characterized by promises made to investors of above-average returns or guarantees of unrealistic rates of return, within a short period of time (e.g. 20% return per month), completely risk free.
(3) Legal-looking documents that often use technical language in an attempt to confuse investors into believing their investments are worthwhile. They may make reference to trading programs like “forfeiting program”, “high yield cash trading program”, and “high yield investment program” (HYIP).
(4) Little or no information is provided to the investors about the specifics of the prospective trading programs utilized (example: how investors’ returns are generated).
(5) Monetary rewards provided to investors already involved in the schemes to encourage them to induce others to invest. Many individuals brought into these schemes are relatives or friends of the initial investors and, as such, are less skeptical of the investments because they trust the family members/friends who made the referrals.
Unfortunately, by the time those taken in by such schemes consult with their lawyers, it is usually too late: the money is long gone, and there is little realistic prospect that the victim will get any of it back.

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