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Office of the Inspector General
 

About

 Prime Bank Investment Fraud

Prime Bank Instrument fraud schemes have attracted significant international attention, since individuals and organizations have lost billions of dollars worldwide. "Prime Bank Instrument Fraud" is the general term given to fraud schemes that go by many different names, including:
  • Prime Bank Debentures
  • Prime Bank Guarantees
  • High-Yield Trading or Roll Programs
  • Standby Letters of Credit
  • International Chamber of Commerce (ICC) 3039 or 3034 Letters of Credit
  • Guaranteed Bank Notes
  • Discounted U.S. Treasury Securities
  • International Monetary Fund Backed Securities

 

Common Examples

In these schemes, the fraud artists purport to have access to a secret trading program sanctioned by the Federal Reserve Bank, the Treasury Department, the World Bank, the International Chamber of Commerce, or the International Monetary Fund. Read about a fairly common example of how this fraudulent world is explained to potential investors. The more the explanation given to you resembles this explanation, the more likely you're being offered a fraudulent investment.
  • Various "prime bank" trading programs or similar trading programs that offer secret, private investment markets, which purport to offer above average market returns with below market risk through the trading of bank instruments are fraudulent.
  • Offering such programs, or claiming to be able to introduce investors to people who have access to such programs, violates many federal laws including criminal laws.
  • There are no "secret" markets in which banks trade securities. Representations to the contrary are fraudulent.
Also, investment programs in which a financial institution is asked to write a letter, commonly referred to as a "Blocked Funds Letter," advising that funds are available in the account, "clean, and of non-criminal origin," and free of "liens or encumbrances" for a certain time frame, are frequently used to perpetrate fraud schemes. These letters have no use in legitimate banking circles.
The symbols, names, and products of the U.S. Treasury Department are misused in these schemes in several ways. Some schemes claim that the U.S. Treasury:
  • Backs or approves such programs
  • Has a "secret trading room"
  • Must approve the humanitarian projects connected to these schemes
  • Has purchased securities for investors to guarantee against loss
  • Has a way to pool investor funds and buy and sell securities "just like the Rockefellers can."
NONE of these assertions are true.
 
It is illegal to engage in fraud in the offer or sale of a security. Under most circumstances, it is also illegal to sell securities that have not been registered with the U.S. Securities and Exchange Commission. A security includes the following items: "note," "stock," "bond," and "debenture" and more general terms such as "investment contract" and "any interest or instrument commonly known as a 'security'." Designating such instruments as "loans" does not change their legal status as securities. SEC v. W.J. Howey Co., et. al, 328 U.S. 293 (1946).
 

Warning Signs

  • Name dropping
  • Buzzwords
  • Excessive secrecy
  • Over-reliance on authentication
  • Excessive disclaimers
  • Unwarranted appearance of professionalism
  • Big player behind the scenes
  • Yields are too high
  • Lack of transactional basis
  • A secondary market where these investments can be laid off quickly and profitably
  • Flawed documentation

 

What to Look For

There are many terms that are commonly seen in documents presented by fraudsters in marketing fraudulent investment schemes. Fraudsters often mimic and misuse legitimate banking terms. Many of the following genuine terms are misused along with those that have no meaning in the real world. They are thrown together in documents that contain a mix of fact and fiction, often confusing to a first-time investor.
  • Non-circumvention
  • Non-disclosure
  • Good, Clean, Clear, and of Non-Criminal Origin
  • Blocked Funds Investment Program
  • Prime Bank Trading Program
  • Federal Reserve Approved
  • Treasury Approved
  • Roll Program
  • Irrevocable Pay Orders
  • Prime Bank Debentures, Notes, Guarantees, Letters of Credit
  • Fresh-Cut Paper
  • High-Yield Investment Program (HYIP)
  • ICC 3034 or 3039 Letter of Credit
  • Off Balance Sheet Program
  • Prime Bank Debenture Trading
  • Prime Bank Instruments, Notes, Guarantees, Trades, or Letters of Credit
  • Prime European Bank Letters of Credit
  • Prime World Bank Debentures or Financial Instruments
  • Prime Insurance Guarantees
  • High-Yield Debenture Trading, Financial Programs, Asset Management Programs
  • High-Yield Investment Programs (HYIP)
  • High-Yield Promissory Notes or Bank Notes
    Guaranteed Bank Notes
  • Intermediate Bank Notes
  • Roll Programs or Bank Debenture Roll Programs
  • ICC 500 or 600 Bank Debenture Instrument
    IMF (International Monetary Fund) Stand-by Letters of Credit
    IMF Backed Securities, Bill of Exchange, Bill of Equity, or Backed Bonds
    Discounted U.S. Treasury Obligations, Renting or Leasing of Treasury Securities
    Blocking of Assigned Treasury Securities
  • "Limited Edition" or Defacto Treasury Securities
    US Dollar Bonds, Federal Notes, Medium, or Mid-Term Notes or Bank Notes
    Blocked Funds Letters or Investment Programs, Documentary Letters of Credit
    Irrevocable Pay Orders, Collateral First Debentures, Money Center Bank
    Fresh Cut Paper or Bank Debentures, Bank Paper
  • Seasoned Bank Debentures
    Private Placement Programs
  • Private Trading Programs
    International Certificate of Deposit (LCD)
  • Irrevocable Bank Purchase Order (IBPO)
    Irrevocable Corporate/Confirmed Purchase Order (ICPO)
    Irrevocable Prime Bank Commitment
  • Zero Coupon L/C
More Prime Bank Investment Fraud phrases to watch for:
  • Secret trading program
  • Banks or Federal Reserve will deny involvement in these programs
  • Non-circumvent / non-disclosure Agreements
  • Funds are "Good, Clean, Clear, and of Non-criminal Origin"
  • Funds pooled together for minimum trade amounts of $10,000,000 or $100,000,000 (sometimes listed as "Ten [10] Million USD,"and the like)
  • Interest rates guaranteed from 6% to 100% to 1000% each month
  • Trades with only the top 10, 25, or 50 banks in the world, such as Barclays or Credit Suisse
  • Program backed, approved, or sanctioned by the Federal Reserve Bank (FED or FRB), the International Monetary Fund (IMF), or the International Chamber of Commerce (ICC) or the Treasury Department
  • "Trader," "Facilitator," or "Broker"
  • Only 5 to 10 "traders" in the world have access to this program; Trader will conduct 40 trades each year.
  • Percentage of the yield will go to charity, social programs, or humanitarian efforts
  • U.S. Government Agencies will deny the existence of these programs because the Government does not want your money to leave the U.S.
  • U.S. Government Agencies try to seize the funds for themselves
  • "Due 1, 5 or 10 years and 1 day"
  • "108" bank to bank certificate which guarantees the principle + 8% annual interest
  • "Funds of non-criminal origin, are legally owned by or assigned for the participation in a specified High Yield Asset Management Program"
  • Principal is guaranteed and/or secured by letters of credit "The funds will remain in a bank account that only you are signer on. These funds will be used as collateral."
  • Offshore trust accounts / tax free interest
  • Can obtain proceeds through Visa debit cards
  • Advised to remove from legitimate pension/WA accounts and send funds to self directed pension companies who collateralize the funds with a note, and are then invested in Prime Bank Instruments
  • Our "Facilitator" has access to the worlds top "trader"
  • "Trader" "Trading Bank" "Exit Buyer"
  • The way all banks or big banks make their money
  • Trades are sometimes referred to as "Tranches"
  • Only a select few are invited to participate in the trading program
  • Originally established by the elite families such as the Rockefellers, Gettys, Rothschilds, and the Carnegies.
  • Fractionalize or collateralize the funds
  • Fractional banking laws
  • Hypothecation with insurance companies ($1.2M needed for insurance company to "hypothecate" $l00M needed for the trade)
  • Investment periods quoted on contracts would be "90 banking days," "one year and one day," or "five years and one day"
  • Program developed to level out the yo-yo syndrome in the banking industry
  • "The information contained in this document is for information purpose only and is not intended as a solicitation nor an offer to sell any form of securities"
  • Invested funds are fully secured by a Bank Endorsed Guarantee
  • "Cash" Wire Transfer
  • C&F ASWP
  • Comfort Letter
  • "Conditional" S.W.I.F.T. Payment
  • CUSIP Number
  • Discounting L/Cs
  • "Trades are specifically established at a term of 1 year and 1 day, so it does not have to appear on the bank's balance sheet"
  • Foreign Bank Advice
  • Irrevocable, Divisible, Assignable, Transferable, Fractionable, Revolving, Confirmed L/C Payable 100% at Sight
  • Key-Tested Telex (KTT)
  • Market to Buy or Sell L/Cs
  • Proof of Funds
  • Proof of Product
  • Ready, Willing, and Able (R,W, & A)
  • Soft Probe
  • 2% Performance Bond
  • Pre-advise issued by bank
  • Bank responsible commitment of funds
  • A claim that the "promoter" has a steady business relationship with a large international bank
  • A refusal to give "full disclosure" of all involved
  • The expression "mandated agent"
  • Standby letter of credit (SLC)
Last Updated: 9/21/2012 2:16 PM
REPORT WASTE, FRAUD,
ABUSE
OIG Hotline: Click Here
For information about whistleblowing and reprisal and about your rights and responsibilities as a Treasury employee or contractor, please contact the OIG Whistleblower Ombudsman Program at
202-927-0650
or
OIGCounsel@oig.treas.gov

COUNCIL OF INSPECTORS GENERAL ON FINANCIAL OVERSIGHT
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The Council of Inspectors General on Financial Oversight was established by the Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203). Council members share information about their ongoing work, with a focus on concerns that may apply to the broader financial sector and ways to improve financial oversight. The Council is made of nine financial regulatory agency Inspectors General and is chaired by Eric Thorson, Inspector General, U.S. Department of Treasury.

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