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Banking instrument scam is peddled on Internet

Paris, 7 May 1998 - The International Chamber of Commerce issued a warning to investors against an alleged trading programme based on fraudulent instruments and falsely quoting its name and rules. It said the scam, which is being promoted over the Internet, has already fleeced investors of tens of millions of dollars.

ICC London-based Commercial Crime Bureau reports that investors are being asked to put their money into a spurious "Bank Debenture Trading Programme". The sales pitch describes it as "an investment vehicle, commonly used by the very wealthy, where the principal investment is fully secured by a Bank Endorsed Guarantee."

Documentation claims that the investment involves the purchase and sale of fully negotiable bank instruments that purport to be a debt obligation of the top 100 world banks in the form of 'Medium Term Notes (MTN)', 'Standby Letters of Credit' or 'Bank Guarantees'.

Potential investors are told that a few people would qualify for these investment opportunities, which were 'by invitation only'. All transactions are said to be kept strictly confidential by all parties and for this reason no client references would be available.

Eric Ellen, Executive Director of ICC Commercial Crime Services, said: "These instruments are falsely said to conform in all aspects with the Uniform Customs and Practice for Documentary Credits as published by the International Chamber of Commerce." Reference is made to ICC Publication 500, the current version of the documentary credit rules that came into force in 1994.

Mr Ellen added: "ICC Commercial Crime Bureau warns investors against these fraudulent programmes. The 'Bank Debenture Trading Programme' described in the documentation does not exist and has claimed tens of millions of dollars from victims worldwide."

ICC has long campaigned against scams based on phony banking instruments. In 1996, ICC Commercial Crime Bureau published its second special report Prime Bank Instrument Fraud II, the Fraud of the Century which details fraudulent techniques and lists danger signals investors should watch out for it they want to stay out of trouble.





Fictitious Financial Programs attributed to the Federal Reserve
Proposals to banks and municipalities to participate in investment programs reportedly sponsored by the Board of Governors of the Federal Reserve, the Chairman of the Federal Reserve, or district Federal Reserve Bank.

The Office of the Comptroller of the Currency is aware of an increasing volume of bogus proposals currently being promoted and directed toward banks and municipalities to leverage investment portfolios through some type of secondary market activity. These programs are purported to generate high yields, up to 10 percent per month or more, at no risk to the original investment because they are allegedly managed by the Federal Reserve, the U.S. Central Bank, or are under the personal supervision of the Chairman of the Board of the Federal Reserve System. The Federal Reserve System of the United States does not support, issue, or supervise any such programs. These types of programs have no financial validity and will place the participant at extreme financial risk and reputation risk.

The scenarios currently being proposed may utilize deposit, trust, or safekeeping accounts at major financial institutions which are stated to be totally under the investor’s control at all times. Control of the account is not assured due to the following: ambiguous wording in the documentation, changes in the program immediately prior to or after startup, or other seemingly insignificant events that will provide the opportunity for access by persons other than the investor’s legally authorized employees. The request is usually based on a scenario requiring immediate action to protect the investment or take advantage of a unique investment opportunity.

These programs are fictitious. They appear to be “too good to be true,” and they are. We strongly suggest that you exercise caution to ensure that any proposal presented to you is legitimate by

1. obtaining directly verifiable references from the promoters, and

2. verifying the facts presented with reputable investment advisors and banks known by you.