Question 1 – Financial Investment Scam

Prime Bank Investment Scheme

Prepared by : Farhana Adila Bt Ishak
What is a Prime Bank Investment Scheme?
A scam that promises extremely high yields
over a short period of time

Fraudulent prime bank campaigns often

claim investor’s funds will be used to
purchase and trade prime bank financial
instruments for huge gains

Instruments – NEVER exist = people lose

their money
Why – “Prime”
To describe a large, well-known bank
Trade large sums of securities
To give some legitimacy to their scheme
There are also other names used
Prime bank debentures
Guaranteed bank notes
High Yield Investment
What are the elements needed in order for this scheme to be successful?

1) Banker
 They normally recruited officers at a small bank or a low ranking officer at a
big bank.
 The idea is to obtain from the officer a letter or cable to the buyer or its bank
which indicates that the customer of the first bank is ready, willing and able
to perform a certain transaction.
 With such a document , the fraudster can perform financial miracles – make
money out of nothing

2) Businessperson / investors
 The person who are eager for a fantastic deal that would generate money
 They were often convinced to advance funds based on the letter that is said
to be from the recognized bank
 How does it works?
Fraudsters will contact the
potential investors – mail and
phone
The promised returns in these
schemes are usually high annual
returns fro 20% to 200%. The
returns that the investors will
receive is from the money that
they invest. However, the
payment will never be made
because the fraudsters take the
money offshore or squander it all
on themselves.
Tell and start to convince the
investors that they are
participating in secret trading
regime with the world’s major
banks
Investors may be required to sign
non-disclosure agreements that
prevent them from disclosing the
identity of the parties involved and
the terms of transactions.
Why Investors fall for this scheme?
The instruments they claim to bring
Standby letters, bank debentures and bank-secured trading
programs
Mimic legitimate financial instruments closely enough to
deceive people outside the specialized world of international
banking
The fraudsters usually use a lot of financial jargon
Investors don’t question – don’t want to appear naive
Characteristics of this scheme
• Surrounded by aura of secrecy and
conspiratorial sense
• Materials and documents lack the
professional characteristics typically
associated with major financial transactions
• Cynically allude warnings and emphasise
them suggesting that the scheme being
proposed does not constitute a fraudulent
scheme
• They promised high returns in a short
period of time with minimal risks
• Assurance of the investment is guaranteed
by a recognized international or central
bank
Case - US
• Richard S. Markey, of Simsbury, using the name Marquis
International, carried out a scheme to defraud investors by
inducing them to send money to him on the promise that their
money would yield a return of at least 70 per cent interest.
Investors were told to send the money to a private mailbox
rented by Markey in Simsbury.
• Markey’s scheme involved the use of telephone conference calls
in which potential investors were enticed to invest in
"international bank debentures." Such investment instruments
do not exist.
• While investigating Markey’s activities his agency learned that federal
authorities were also conducting an investigation. The banking
department then worked with the federal authorities to quickly shut
down Markey’s illegal activities to ensure quick and decisive law
enforcement action.
• In 1999, Markey was arrested and subsequently convicted by the
United States Attorney’s office on a charge of wire fraud. He was
ultimately sentenced to over 10 years in prison and required to make
restitution to investors he had victimized
Authorities effort - New Zealand
• The Ministry of Consumer Affairs introduced in August 1999 a very
helpful section to its Internet website www.consumerministry.govt.nz ,
with the sub-title Scam Watch.
• Numerous examples of the types of scams being found around New
Zealand, and tips on how to avoid them, make this website a valuable
point of reference. It also provides links to similar Internet sites in
Australia, Canada and USA that provide examples of prevalent scams
and warnings of what to watch out for