SCAMS

Why is it that persons with good business sense and/or prudent investment reasoning seem to lose their thinking ability when moving offshore? So many scams are generated through offshore jurisdictions and so much "scammed" money comes from "reasonable people" that one wonders why?

The promises of astronomic returns that are just not realistic lure many "offshore investors". Why people would think guaranteed returns of 30% to 200% plus are obtainable offshore but not at home is beyond comprehension. Many of these so called "investment opportunities" follow the old tried and true frauds that have been the favourites of scam artists for years.

Ponzi schemes, pyramid schemes and similar scams are rife in the offshore and now more so with the use of the internet. With the new internet payment systems, the funds disappear even more quickly. (Unfortunately some of these payments systems have a substantial number of their transactions facilitating the laundering of scam payments. This means the legitimate users will lose when the authorities seize the company accounts!) There are large sums of money lost in these scams by "investors" who were reaching for the promised exorbitant returns. For example, the sum of over $74,000,000 was collected from over 2500 people in one scam which the US SEC put an end to in 2001.

One of the enticements or arguments made for eliciting the funds from "investors" is based around the "secret society", "international banking cartel" or a connection with a highly exclusive "internationally recognized" savvy investment adviser. Once the inevitable move by the authorities occurs, the explanation given to the investors is "see, we are making available to the public, the system which the "international banking cartel" does not want known"!! This argument has worked for at least one hundred years and will continue to work long into the future.

Huge annual returns on investment is a myth as are the secret financial societies and international banking cartels that supposedly have systems for making vast sums of money.

There are "legitimate" schemes in the investment field which are just as good at fleecing people on a regular basis. As these are vehicles which are accepted in North America and appear to be regulated there, then they must be legitimate in the offshore. We are speaking of hedge funds. Unfortunately these really are not regulated in North America for they do not need to issue a prospectus since the market is the sophisticated investor - meaning those who can afford to make a minimum investment of US$250,000 or more. So when this type of vehicle is sold in the offshore, too often it is sold as being an acceptable investment because such funds are available in North America. They are also targeted at anyone willing to invest and sold with the understanding of huge returns available. Is that ever a rare occurrence! Instead of going further, the best articles on this topic will be found in Forbes magazine (August 2001), Business Week (October 2001) and at CBS.Marketwatch.com (October 28, 2001).

Then of course there is the simple scam - the non-existent or fraudulent financial institution. This can be a set-up advertising as a bank but which is unlicenced, or, is licenced but has no intention of returning the bulk of the deposits. The business is "giving the business" which means bringing in as much money as possible and returning the least amount as possible. Once there is a feeling that regulators are finally moving in, the principals disappear with all the money. These are often partly run as a Ponzi scheme where money taken in as deposits is paid out to earlier depositors as interest payments at high rates.

Don't think that by listening to the approvals of a local lawyer or accountant will assist in making a "wise" choice. In a good number of offshore jurisdictions most professionals have not seen many scams and thus do not recognise even the most obvious. In fact in one Caribbean offshore centre, a lawyer wrote almost a full page newspaper article defending his clients "insurance" scheme which eventually took a lot of money from the local citizens who could ill afford to lose any money.

And stay clear of the e-mail letters from Nigeria, South Africa etc., asking for your help to get money out of their country. Answering is just asking for trouble. Acting on these letters just costs a lot of money with absolutely no return.

So if it sounds too good to be true, it likely is.

Then of course, there are all those internet chain letters, or good luck "pass them on" letters or young child dying letters. These are all a waste of time, including the one that Microsoft is going to drop your e-mail address if you don't use it by sending a letter off to 100 (or whatever) names. Go to: www.breakthechain.org website to find out about all of these types of letters - most are pure spam.

However the worst internet/e-mail "scam" is the hoax virus which makes the recipient into his/her own virus. That is, the letter from a friend says to look for a specific file which has ".exe" at the end. If it is found, the letter goes on to describe how this "virus" can be erased. Unfortunately, the file is a valid file and the computer operator by erasing it has become his/her own virus!! The file has been forwarded by a friend who has been fished in by the letter. Before doing anything of this nature, always check with your anti-virus software's website and look up any virus or "hoax virus" there.