Many senior lawyers, accountants and businessmen continue to believe that there exists a secret market in bank instruments.  Fraudsters play upon this continuing belief by persuading individuals and companies that they should make investments in “prime bank guarantees”.  The documentation relating to the investment talks about “prime banks”, “discount houses” and “cutting houses”.  The documentation is produced so that at first sight it appears hugely complex and obviously beyond the understanding of anybody who is not actually involved in this very special market. 

Typically individuals are asked to participate in a block of something like £100million investment.  The point is usually made that individuals are excluded from this market and the only way they can possibly join is by contributing $100,000 or so to a pot that is being built up by the generous individual who is giving them the opportunity to participate in this secret market. 

The lure into this investment is the phenomenal profits that will be generated, sometimes described as being in excess of 100% in one year. 

It is worth repeating that there is no such market.

It is never explained to anybody how the profit is generated or why the banks feel that it is necessary to trade in this market.

Usually what happens is that the hugely complex documentation is delivered to the person who is going to make the investment, for typically between $1million and $10million.  He is required to sign a certificate to say that his money is clean and then sends the money to nominated bank account.  From there the monies pass into the hands of the investment manager or his nominee.  Shortly after that, the excuses start. 

Usually some other contributor has not paid on time his due contribution to the $100,000 block and therefore it has not been possible to “roll” the money at the first stage.  After that, there is an incessant string of excuses ranging from “my wife is having a baby” to “the banks are on holiday” or just straightforward silence.  Sometimes the fraudsters are able to keep the investors at bay for years with excuses.

One has to ask why this fraud has continued for so long.  The answer quite often is that individuals who make such investments have quite often parted with all of their spare cash and are no longer in a position to finance the necessary detailed work to be carried out by lawyers and accountants to recover the monies.  Quite often the monies are so long gone and so well hidden that even when monies are spent it is difficult to recover them, even when monies are still available.  There is also the embarrassment factor of a grown up sensible businessman/investor not wanting to admit that he has been defrauded of a very large sum of money.

In my experience, perseverance and the economic use of lawyers and accountants can pay dividends by uncovering the network of fraudsters and putting pressure on them in different jurisdictions. 

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