Due to the the current worldwide capital crunch, there is an ever increasing rise in financial scams, frauds, and joker brokers that attempt to capitalize on borrowers becoming more and more desperate to find legitimate lending sources. They use promises of easy loans or money, wrapped in a series of complex financial terminology shrouded by confidentiality, designed to confuse their target.
We actually believe that legitimate Intermediaries are more important than ever as long term financial powerhouses have either limited, or lost entirely, their ability to fund new transactions.
The burden on legitimate Mortgage Bankers, Brokers, Financial Intermediaries and Correspondents is doubled these days. Not only do we have to do our research on the borrower to ensure that they are capable of completing a transaction, we also have to make sure that our funding sources are legitimate and capable of actually funding a transaction.
Here are some warnings directly from the FBI website:
Legitimate letters of credit are never sold or offered as investments.
Legitimate letters of credit are issued by banks to ensure payment for goods shipped in connection with international trade. Payment on a letter of credit generally requires that the paying bank receive documentation certifying that the goods ordered have been shipped and are en route to their intended destination.
Letters of credit frauds are often attempted against banks by providing false documentation to show that goods were shipped when, in fact, no goods or inferior goods were shipped.
Other letter of credit frauds occur when con artists offer a “letter of credit” or “bank guarantee” as an investment wherein the investor is promised huge interest rates on the order of 100 to 300 percent annually. Such investment “opportunities” simply do not exist. (See Prime Bank Notes for additional information.)
Some Tips to Avoid Letter of Credit Fraud:
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If an “opportunity” appears too good to be true, it probably is.
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Do not invest in anything unless you understand the deal. Con artists rely on complex transactions and faulty logic to “explain” fraudulent investment schemes.
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Do not invest or attempt to “purchase” a “Letter of Credit.” Such investments simply do not exist.
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Be wary of any investment that offers the promise of extremely high yields.
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Independently verify the terms of any investment that you intend to make, including the parties involved and the nature of the investment.
Advance Fee Scheme
An advance fee scheme occurs when the victim pays money to someone in anticipation of receiving something of greater value, such as a loan, contract, investment, or gift, and then receives little or nothing in return.
The variety of advance fee schemes is limited only by the imagination of the con artists who offer them. They may involve the sale of products or services, the offering of investments, lottery winnings, “found money,” or many other “opportunities.” Clever con artists will offer to find financing arrangements for their clients who pay a “finder’s fee” in advance. They require their clients to sign contracts in which they agree to pay the fee when they are introduced to the financing source. Victims often learn that they are ineligible for financing only after they have paid the “finder” according to the contract. Such agreements may be legal unless it can be shown that the “finder” never had the intention or the ability to provide financing for the victims.
Some Tips to Avoid the Advanced Fee Schemes:
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If the offer of an “opportunity” appears too good to be true, it probably is. Follow common business practice. For example, legitimate business is rarely conducted in cash on a street corner.
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Know who you are dealing with. If you have not heard of a person or company that you intend to do business with, learn more about them. Depending on the amount of money that you intend to spend, you may want to visit the business location, check with the Better Business Bureau, or consult with your bank, an attorney, or the police.
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Make sure you fully understand any business agreement that you enter into. If the terms are complex, have them reviewed by a competent attorney.
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Be wary of businesses that operate out of post office boxes or mail drops and do not have a street address, or of dealing with persons who do not have a direct telephone line, who are never “in” when you call, but always return your call later.
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Be wary of business deals that require you to sign nondisclosure or noncircumvention agreements that are designed to prevent you from independently verifying the bona fides of the people with whom you intend to do business. Con artists often use noncircumvention agreements to threaten their victims with civil suit if they report their losses to law enforcement.
Feel free to visit their website here for additional information. This is far from an exhaustive list, but there are resources available to research these parties.
Please, whether you are a Broker, Financial Advisor, a Borrower, or just a curious reader, please do your research before sending money to any firm. There are scam alert websites and other sources available if you will take the time to do the necessary legwork.
Please fee free to send us a message if you feel that there are oher instances or examples that should be added to this list. Ultimately, the frauds and con artists hurt everyone, not just their victim. They damage the industry, drain capital from the finite amount that is there, and cause deals to move slower and more cautiously.
There are plenty of good articles out there as well, but you may also want to read this one HERE.