Forward Planning: There's no shortage of bogus trading programmes

If someone approaches you about investing in a "prime bank" programme, "prime World Bank" financial instrument, or similar sounding high-yield security, you should know that these investments do not exist. They are all scams.

The U.S. Securities and Exchange Commission warns investors to avoid putting their money in so-called "prime bank investments", the supposedly huge yield return secretive portfolios.

Taking advantage of the low interest rates situation and volatile equity markets, financial scam artists are finding new investment vehicles, using financial jargon and the names of well known banks to lure investors.

These fraudulent schemes involve the purported issuance, trading, or use of "prime" bank, "prime European bank" or "prime World Bank" financial instruments, or other "high yield investment programmes" (HYIP). They come also as "Prime Bank Trading Programmes", "Roll Programmes" and "Private Placement Programmes".

It is estimated that investors lost more than $10 billion in the United States alone, to such bogus trading programmes. The scam artists' typical pitch, increasingly made over the Internet, promises investors access to secret, high-yield investments made through trades among the world's top or "prime" banks.

So many scams succeed that the Commercial Crime Bureau of the International Chamber of Commerce calls them the "fraud of the century".

These investment instruments actually do not exist and the claim that prime banks investments are guaranteed or secured by some sort of collateral or insurance is false.

In the U.S., state regulators across the country have brought actions on behalf of more than 41,000 people who invested at least $470 million in prime bank scams. Some victims failed to report losses for fear of looking foolish.

One example was the fraudulent firm called Marquis International which carried out a scheme to defraud investors by inducing them to send money to the firm on the promise that the money would yield a return of at least 70 per cent interest.

The scheme involved the use of telephone conference calls in which potential investors were enticed to invest in "international bank debentures". These investment instruments are, of course, non-existent. The banking department of Connecticut then worked with the federal authorities to quickly shut down the firm's illegal activities.

The con artists claim to have access to a secret trading programme sanctioned by the Treasury Department, the Federal Reserve Bank, the World Bank, the International Monetary Fund or the International Chamber of Commerce. They also claim that only a privileged few are invited to participate in the trading.

The traded bank securities are bank guarantees, notes, stocks or debentures, which can be bought at a discount and sold at a premium. By conducting these "trades" several times, they claim to be able to produce exceptional returns, ranging from 6 to 100 per cent per month.

They require the victim to enter into "non disclosure and non circumvention agreements" ( meaning not to talk) and require the invested funds to be good, clean, clear and of non-criminal origin and to send the money to a well-known foreign bank. The money then gets transferred to the con artist's account. Just remember that there are no "secret" markets in which banks trade securities.

Any representation to the contrary is fraudulent. And offering such programmes, or claiming to be able to introduce investors to people who have access to them just violates numerous federal laws including criminal ones.

The writer is a UAE-based insurance consultant and director of Gulf Insurance Consulting