Monday, June 4, 2012

Fraud Prevention Tips: Bank Guarantees and Discounted Bank Instruments - 1

In today's electronic world, there are several new instances of sophisticated financial fraud. Some cases are easier to detect, however, in an increasingly uncertain economic environment, mostly because of the unease of the US Dollar and the increasing strength and influence of the Euro. This has resulted in banking instrument fraud becoming increasingly common. I decided to write this article because as an international tax lawyer my offices have been receiving more than a dozen requests per month from honest clients looking to make money with a sophisticated project simply to discover that the project was on par with letters from Nigeria that promise unclaimed fortunes to appear on your doorstep because a dying uncle mentioned you in his will. I also compiled the list below with help from other credible sources I found on the internet.

In general, if you are approached to make a high yield income investment or to become involved in the prime bank investment fraud, then you should carefully look at the documentation that you are asked to sign and always use the advise of an experienced professional such as an accountant or a lawyer. Such documents are normally filled with meaningless legal gibberish that are relatively easy to spot if you are dealing with fraudsters.

Some of the typical phrases you should look for are set out below. Some of them are meaningless and have no legal definition, but they were inserted into the documents or proposal in order to impress unsuspecting investors:

Ready Willing and Able

Prime Bank Guarantees (PBGs)

Prime Bank Notes (PBNs)

Guaranteed by Top 100 World Prime Bank

Unconditional S.W.I.F.T. Wire Transfer

Freely negotiable, irrevocable, clear SWIFT wire transfers

Callable Conditional Sight Drafts

Closing Bank

Issuing Bank

Fiduciary Bank

Bank Menu

International Banking Days

ICC (International Chamber of Commerce) 400

UCC (Uniform Commercial Code) Form references

Banking co-ordinates

Fresh cut paper

Seasoned paper

Collateral Houses, Collateral Source, Collateral Supplier

Collateral First Transaction

Grand Master Collateral Commitment

Validation of the MCC (Master Collateral Commitment)

Collateral Purchase Orders

Collateral Provider

Instruments delivered free of all liens and/or encumbrances

Non-circumvention and Non-disclosure agreements

Irrevocable Pay Order

Irrevocable, irretraceable commitment of funds to purchase instruments

Lending Bank, Funding Bank, Closing Bank

Good clean cleared funds of non-criminal origin

With full corporate and legal responsibility

Interest at seven and one half percent, payable annually in arrears

5, 10, 20 years etc. plus one week or one day

Fully binding commercial letter contract

Client Company Principals

Transaction Trenches

Millions or Billions of US dollars with rolls and extensions

Emissions, remission, commissions and fallout

Transaction parameters

There is to be no communication with our bank other than through the normal bank channels, no phone call allowed.

If you see two or three of the above all in one document, then you ought to seriously consider whether or not fraud is involved and take reputable independent legal advice.

In the next part we will describe more about the most common fraudulent transactions: Bank Guarantees and Discounted Bank Instruments.

Ioannis John Neocleous, NCI Law Group

T: +357-22-680670

Author: Ioannis John Neocleous

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