The U.S Department of Treasury Bureau of Fiscal Service has generally classified fraud schemes that go by a variety of names as “Prime Bank Instrument Fraud.” Such a categorization is simply a general term given to fraud schemes including, but not limited to: High-Yield Trading Programs, Stand by Letter of Credit, or Guaranteed Bank Notes. These banking instrument scam schemes are generally presented to individuals who:
- Seek funding for large project for which they cannot qualify;
- Claim to be any kind of financial intermediary;
- Are legitimate investors looking for high returns.
Banking instrument scammers attract individuals by claiming to have connections at legitimate banks and claiming access to large sums of money. Such claims tend to scam victims into believing these fraudulent actors (“fraudsters”, “scammers”) are legit and in return, these fraudsters attract investors. Such fraudulent actors use messages or documents to try and prove their legitimacy. For example, a fraudster may allege a Standby Letter of Credit (SBLC). An SBLC is a legal document guaranteeing a bank’s commitment of payment to a seller in the event that the buyer–or the bank’s client–defaults on the agreement. A fraudster may enhance its legitimacy by using forged documents or messages that deceive investors into believing the SBLC is a legitimate letter. Fraudulent actors provide victims with documents that seem authentic, attracting a false sense of security to victims of banking instrument fraud. To be aware of such scams, look out for misused banking and legal terms, as this is often present in such scams. Some examples of commonly misused words by fraudsters are:
- Standby letter of credit (SLC)
- Blocked Funds Investment Program
- Asset Management Programs
- Fractionalize or collateralize the funds
- Prime Bank Trading Program, Debentures, Notes, Guarantees, Letters of Credit
- High-Yield Debenture Trading, Financial Programs,
- Trades are “Tranches”
- “Conditional” S.W.I.F.T. Payment
Bank Instrument Fraud occurs in very high quantities. A common amount sought out by scammers is one-hundred million dollars ($100,000,000.00), but the amount can vary and be sought out in U.S. dollars or even Euros. Scammers often begin their business by requiring an initial fee which is to be paid before the actual business of the transaction takes place. For example, an fraudster may ask for a 1% fee of the total transaction as their initial fee; this often ranges from $10,000.00 to $100,000.00 or sometimes more. Notably, this fee is the only fee that the scammer seeks to collect. Since such fees are often large quantities, their entire motive behind the scam is to defraud the investor of this so-called “initial fee.” For this reason, it is vital to pay attention to who you speak to in conducting business transactions, and most importantly, to be vigilant of authenticity.
One of the most common instrument frauds is the case in which the fraudster offers financing of the project in exchange for the investor paying an advance fee for the instrument that will “finance the project.” This instrument is usually a bank guarantee (outside of the U.S.) or standby letters of credit (used in the United States and other places).
