This is a very simple fraud. A businessman or investor requires access to capital for his own purposes. Let us say that the individual wants a line of credit of $50 million or more. That individual or business discovers that to obtain such a line of credit means paying significant fees, commissions and possibly providing huge quantities of security. That the other party will say that all you have got to do is pay a one off sum and you will have a guaranteed bank facility can make the offer seem hard to resist.

The individual will commonly be told that an AAA bank will provide a guarantee for, say, $50 million subject to a payment of $1 million as a fee. Obviously the businessman says he is not going to pay until he has seen the facility from the bank. Arrangements are therefore made for the $1 million dollar fee to be lodged in an escrow account, usually either with a solicitor in London or with a fiduciary in Switzerland . The solicitor or fiduciary has clear instructions that he is not to release the monies until such time as the facility letter is to hand.

In due course a facility letter from a major bank does arrive appropriately signed at the bottom guaranteeing the $50 million facility. The fiduciary releases the money. The investor then calls upon the bank to honour their facility. It is at that stage that the investor discovers that the two people who signed the facility either never existed or if they did exist had no authority to grant the facility and have left the bank, or there is some other fraud involved.

The investor quickly attempts to hold the fiduciary or solicitor to account, whose excuse for his role in the transaction is that he simply followed his client’s instruction in releasing the monies on delivery of the facility letter. The investor then attempts to trace the monies and discovers they have moved through various different bank accounts and have ended up either in Lithuania , The Virgin Islands, or another location where it becomes increasingly difficult to either trace the monies further or to recoup them.

B. Discounted Bank Instruments

Many senior lawyers, accountants and businessmen continue to believe that there exists a secret market in bank instruments. Fraudsters play upon this continuing belief by persuading individuals and companies that they should make investments in “prime bank guarantees”. The documentation relating to the investment talks about “prime banks”, “discount houses” and “cutting houses”. The documentation is produced so that at first sight it appears hugely complex and obviously beyond the understanding of anybody who is not actually involved in this very specialised market.

Typically individuals are asked to participate in a block of something like a $100 million investment. It is usually explained that individuals are excluded from this market and the only way they can possibly join is by contributing $100,000 or so to a pot that is being built up by the generous individual who is giving them the opportunity to participate in this secret market.

The lure into this investment is the phenomenal profits that will be generated, sometimes described as being in excess of 100% in one year.

It is worth repeating that there is no such market. It is never explained to anybody how the profit is generated or why the banks feel that it is necessary to trade in this market.

Usually what happens is that the hugely complex documentation is delivered to the person who is going to make the investment, for typically between $1 million and $10 million. He is required to sign a certificate to say that his money is clean and then sends the money to nominated bank account. From there the monies pass into the hands of the investment manager or his nominee. Shortly after that, the excuses start.

Usually some other contributor has not paid on time his due contribution to the $100,000 block and therefore it has not been possible to “roll” the money at the first stage. After that, there is an incessant string of excuses ranging from “my wife is having a baby” to “the banks are on holiday” or “difference in time zones make it difficult to communicate with banks” to just straightforward silence.  Sometimes the fraudsters are able to keep the investors at bay for years with excuses.

One has to ask why this fraud persists. The answer quite often is that individuals who make such investments have quite often parted with all of their spare cash and are no longer in a position to finance assistance from lawyers and accountants to recover the monies. Quite often the monies are so well hidden that it is difficult to recover them, even when still available. There is also the embarrassment factor of an otherwise sensible businessman or investor not wanting to admit that he has been the victim of financial fraud.

Guest Author:

Ioannis John Neocleous
NCI Law Group
info@ncilawgroup.com
T: +357-22-680670
http://www.ncicapitalgroup.com/
NCI Law is an international law firm founded by Ioannis John Neocleous that serves the needs of businesses, governments, non-profit organizations and individual clients around the world.

Prize draw, sweepstakes and foreign lottery mailings: many typical scams take the form of prize draws, lotteries or government payouts. Most appear to be notification of a prize in an overseas draw or lottery in return for administration or registration fees.

Premium rate telephone number scams: Notification by post of a win in a sweepstake or a holiday offer includes instructions to ring a premium rate 090 number to claim your prize.

Investment-related scams: An unsolicited telephone call offering the opportunity to invest in shares, fine wine, gemstones or other soon-to-be rare commodities. These investments often carry very high risk and may be worth a lot less than you pay. The shares are not quoted on any stock exchange and you will not be able to sell them easily afterwards. ‘Solid’ valuable investments, such as gem stones, are often said to be stored in secretive Swiss bank vaults, so you can never see your investment.

Nigerian advance fee frauds: THE MOST KNOWN SCAM. An offer via letter, e-mail or fax to share a huge sum of money in return for using the recipient’s bank account to permit the transfer of the money out of the country. The perpetrators will either use the information given to empty their victim’s bank account; or convince him or her that money is needed up front for bribing officials. Pyramid schemes: offer a return on a financial investment based upon the number of new recruits to the scheme. Investors are misled about the likely returns as there are not enough people to support the scheme indefinitely - only the people who set up the scheme are able to make any money.

Matrix schemes: are promoted via web sites offering expensive hi-tech gadgets as free gifts in return for spending £20 or similar on a low-value product such as a mobile telephone signal booster. Consumers who buy the product join a waiting list to receive their free gift. The person at the top of the list gets their free gift only after a prescribed number – sometimes as high as 100 – of new members join up. In reality, the majority of those on the list will never receive the expensive item they expect.

Credit scams: another advance fee fraud, originating in Canada. Advertisements have appeared in local newspapers offering fast loans regardless of credit history. Consumers who respond are told their loans have been agreed but before the money can be released they must pay a fee to cover insurance. Once the advance fee is paid, the consumer never hears from the company again and the loan never appears.

Property investment schemes: would-be investors attend a free presentation and are persuaded to hand over thousands of pounds to sign up to a course promising to teach them how to make money dealing in property. Schemes may involve the opportunity to buy properties which have yet to be built at a discount. A variation is a buy-to-let scheme where companies offer to source, renovate and manage properties, claiming good returns from rental income. In practice, the properties are near-derelict and the tenants non-existent.

Work-at-home and business opportunity scams: often work by advertising paid work from home but which require money up-front to pay for materials; or by requiring investment in a business with little or no chance of success.

Ebay Scams/Paypal and Bank Scams

1. You can receive an email from “your” bank or paypal asking you to log in in order to..(say verify something) the page you are redirected is actually a phishing page and all the information,including your account passwords will be stolen. DO NOT EVER trust any emails like this. If in doubt,call your bank or go directly to the website(eg. www.ebay.com) and inter your account details there.

2. EBay scams may involve people trying to buy goods from you with money order,where they pay you with  fraudulent bill. You sent the goods,thinking your bank will clear this up,but it would not…. Always wait until the money are cleared by your bank,before sending stuff. Sometimes they use their own shipping company.

3. Ebay scam which is also popular involves stealing someone else’s account (by the means of #1,etc). Then they post an item for sale for a price you can’t resist. When you purchase it, they will ask you to pay,using money order or similar service.  They can also set up a fake escrow service. Beware.

Use common sense for every purchase. If it’s too good to be true- IT IS. No free cheese in this world other than for your pets

Guest Author:

Dmitri is a Toronto photographer in Toronto,Canada.

However, like most traders who are faced with an innovation of this sort, the first question will always be: It is safe?

The answer is yes, but devious scammers seem to be plotting daily to forward their dastardly schemes and take advantage of eBay’s power.

So, what is the user’s recourse? The users of eBay must learn to gather information and take meticulous care in dealing on eBay. Only then can they be less gullible to scammers.

A common consensus is that bidders are often scammed by sellers.

But it is possible for things to be the other way around.

Here is a list of the common problems sellers encounter and the means to handle them.

Fake Escrow Services

A winning bidder may request that an escrow service be used to assure both parties of a fair transaction. Unfortunately, the seller is sometimes duped into using a fake escrow system.

To avoid this situation, the seller must always verify the authenticity of an escrow service. eBay recommends the use of escrow.com. If the bidder insists on his or her escrow service, chances are, that person is a scammer.

Victims of this fraud find it difficult to reclaim their items. They may, however, appeal to the legal system afforded by the state they live in. They must also contact eBay regarding the matter for any assistance they may be willing to offer.

Deadbeat Bidders

Deadbeat bidders (a winning bidder who doesn’t pay for an item at the auction’s close) are more common on eBay. If the winner of your auction does not pay, you may leave that person a negative feedback.

As for the listing fees the seller shells out, eBay lays out a four step procedure that sellers can use to potentially recover lost selling fees. If sellers complete the process to eBay’s satisfaction, they will receive a Final Value Fee credit and a re-list credit. Filing out an Unpaid Item dispute is the first step toward eBay reimbursing such fees. A person can report an unpaid item up to 45 days after an auction’s close.

Trade Dispute

This occurs when the seller and bidder disagree on some terms of the sale. This may also happen if there is a purported violation of any of these agreements.

If communication between both parties does not help, they may consider availing of a third-party dispute resolution outfit to help. SquareTrade.com is one of these outfits that eBay recommends.

An Ounce of Prevention is Worth a Pound of Cure

A seller’s life may be made terrible because of the constant scamming attacks unscrupulous individuals undertake. But, with proper information and care, he or she can continue trading on eBay with relative safety.

Today’s electronic world pushes the envelop further. With the advent of online trading systems such as eBay, many new forms of payment have flourished.

First of all, on eBay, the mode of payment depends on the agreement between the buyer and the seller. Most often, the seller will specify his or her desired payment method. In these cases, the seller often has primacy in the decisions regarding payment modes. However, the buyer may still communicate with the seller regarding a viable alternative if it suits both parties.

The following is a list of common eBay payment modes.

Cash On Delivery

Cash is, after all, still cash. This payment method can be done through a third party courier system or by the buyer and seller meeting each other at an agreed place. The advantage of a cash transaction is that the exchange of the item for payment is done in the presence of the buyer and the seller (or the seller’s representative). However, some people will not accept the risk present when two strangers meet.

Personal Check

One popular method of payment is personal check. Writing checks is easy and safe. However, many sellers do not like accepting check because they are easy to cancel.

PayPal

PayPal is the payment of choice on eBay. In fact, eBay owns PayPal.

Using PayPal is easy, convenient, and relatively safe. PayPal acts as like an internet ‘wire transfer.’

After signing-up for PayPal, one may send cash to anyone with an email address using the PayPal system. PayPal also has security features that safeguard against fraud in case there is a dispute between the seller and the buyer. This system is best for transactions up to $1000.

Escrow.com

Escrow.com is the payment of choice for purchases over $500. Escrow.com holds the buyer’s money from the seller until the seller delivers the item. Only then will the funds be released to the seller. This system makes for a very safe, although highly procedural transaction.

Wire Transfer

This is the payment of choice for countries that do not carry the PayPal service. Wire transfers are risky because the buyer usually has to wire over the funds before the seller sends the items. The chance for non-delivery of items is high.

Other Payment Systems

The number of third party payment services is steadily on the rise. Their systems for payment vary. However, to be successful they must be convenient to use and safe as well.

Despite it being safer to buy online from auctions today, it still pays to be on your guard when transacting in Internet auctions. Here are some tips to ensure you don’t get ripped off.

Only buy from sellers with good feedback scores. This is definitely one of your best protections. Indeed, this is a feature of Internet auctions which can’t be matched by other online retailers. This independent rating system will give you a very good indication of which sellers can be trusted. Just make sure that the seller has carried out enough selling auctions for it to be a reliable indicator.

Pay by the safest means you can. This will generally be credit card. This way, if you do have any problems you can seek redress through your credit card provider. Again, this is a facility you wouldn’t normally have when buying from a private individual, so make use of this extra security feature of online auctions.

Only use the big name auction sites. Stay clear of the small, out of the way sites that nobody’s heard of. The bigger sites have a reputation they want to protect. That means they’ll take any fraud complaints seriously and deal with the culprits quickly because it’s in their interest to do so.

Make sure you work out exactly what the product or service you’re intent on buying is worth to you. If you do this at the outset you’ll be in a better position to make sure you don’t overbid and end up paying more than the item’s worth. It may sound stupid, but there are plenty of people who’ll testify to having been caught up in a bidding frenzy. Auctions can be exciting and addictive, but it doesn’t make sense to pay more for items at auction than those items can readily be bought for elsewhere.

Remember that when you place a bid you have, in effect, entered into a contract with the seller. Don’t place a bid if you don’t really want the item. If you don’t adhere to this rule that pink, floral toilet seat could be yours!

And finally, the golden rule for buying on Internet auction sites - if it sounds too good to be true, it very probably is.

Resources: Top Auction News Auction Tips Insider