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Trade Fraud, Financial Fraud, and


the Joker Broker

The Art and Science of Smoking out, and avoiding,


the Joker-Broker.

A Manual and Guide for Investors, Traders, Businesspeople and the


curious on avoiding International Investment, Import / Export, Finance
and Bank Scams, and on how to conduct basic due diligence on any
potential International deal, for Trade Lawyers, Export Managers,
Intermediaries, Brokers, Agents, and the simply Curious.

By K. J. Southall
Copyright 2010 FTNX/Verde Distributing Ltd.
Revision 1.30, February 2010
Supersedes Version 1.20 July 2009

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Table of Contents:

Preface
Introduction: A wide world, and a trader’s lament.
2. Fraud and the Conman – A History Lesson, and What Fraud Is.
The South Sea Fraud.
The Ottoman Railroad Fraud.
The Match King
3. Fraud and the Victim: Psychology and types of fraud.
The Underground Broker Network Introduced.
Fraudulent Documents, NCND secrets, and Broker protection.
Prime Bank Scams, MTN’s – Real and Fake.
“Double your money” another fraud and more the tell-tale signs of fraudulent offers.
Emotions and Persuasion: Psychology of being scammed.
Credit and Investment Fraud Examples.
4. Letter of Credit and Export Trade Frauds, limits of Bank Mandates and undertakings.
Examples and Illustrations of Fraudulent Product Offers: Copper Cathode,
Sugar, BLCO Offers: “Is it Gold Dust or Brass Filings? Is it REBCO or Crap,
Simply read Platts. A Benin Import Scam, and a Transneft / Sibneft Pipeline
Scam illustrated.
Example of a Scam: “nontransferable DLC, issued revolving, after SGS at
discharge port.”
5. Bid Bond Frauds, and Victim Psychology.
6. More on Due Diligence and select illustrations of due diligence practices.
7. The Honest Wind down, useful resources for you.
8. Yet more useful Resources

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Disclaimer and Limit of Liability
Corporate finance, Trade law, and Securities law, are not matters of play. Procedures and
documentation in these fields can have serious ramifications.

This guide is based on my personal experience, and has been designed to provide
information about the subject matter covered. Nothing in this document is intended to be,
nor should be construed as, legal advice. As stated, the document is intended solely for the
purposes of providing useful general information and education.

Every effort has been made to make it as complete and accurate as possible. It is possible
that there may be mistakes both typographical and in content. Content, procedures,
documents, and website URLs can change rapidly, even overnight, outside of the author’s
control. If you attempt to connect to a site and it is no longer there, please contact the
author so that it can be corrected.

The author shall have neither liability nor responsibility to any entity or person, in respect to
any damage or loss alleged to be caused, or caused, indirectly, or directly, by the
information covered in this guide.

If you are considering any trade or investment opportunity, such as a private placement, a
purchase of goods, or any type legal transaction, the author strongly advises you to
consult with a competent attorney pertaining the advice you require, commensurate with
the specific context and circumstances in which you find yourself.

TRADEMARKS:
Any service marks, product names, trademarks, or named features mentioned in this work
are assumed to be the property of their respective owners. The author uses them for
reference only.

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Preface

Since the initial writing of this guide, we have seen the “slow” Financial meltdown, beginning at the
end of 2008, and proceeding through 2009 A.D – a year that some believe may have marked the
beginning of what may become the greatest financial meltdown in the world’s history.

A point of order, it is possible, perhaps, that this may be a premature assessment. It is possible that
the “meltdown” so described is but the beginning of a longer and more painful process, one that
will make the great depression of the early 20th century look like a pleasant banker’s picnic.

As in all things there will be winners, and there will be losers.

Some are already evident – we have already witnesses the largest transfer of real wealth in human
history, as undervalued assets were acquired and transferred at a feverish pace by some entities with
the fore-sight to realise the immense opportunity in front of their nose.

As it is, this whole chain of events was initiated by years of outright fraud, from many sources,
private and even public.

Which brings us to this point, the Bernard Madoff Scandal brings back shades of the old early 20th
century “Match King” Mr. Ivar Krueger. Krueger, a man most responsible for inventing complex
financial instruments like derivatives, A and B shares, a man who revolutionized the world of
financial capitalism, evolving it to new heights, and a man who has the distinction of having been
the largest fraudster in history…

Until now.

Thank you for purchasing this work, we wrote the original edition in a world somewhat different
than the one in which we write now. Though a scant two years separates us from when the first
revision of this book was typed hesitantly into a word processor (May 2007) the financial scene
today may well be a decade separated.

You made a good decision by purchasing this work. Let me ask you a single question. Are you
tired of scams?

Are you tired of jumping through daisy-chain after daisy-chain only to find nothing but smoke and
mirrors at the center?

We deal with privileged information, insider tips, as well as and practical, common sense easy to
understand principles on International Import/Export and Investment Scams, how they work, who
perpetuates them, a historical overview of particularly notorious ones, and how to protect yourself,
your time, and your money from “the Joker Broker Trap.”

The information itself is more valuable than the price you paid for this work, a thousand times over.
If you understand this information and use it then you will be astounded at what you will save in
lost time and resources. The complexity of many scams will amaze you, and how easy it is to
recognize them will become clear.

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This book will teach you:

How to Avoid Becoming a Victim of the Scam.

How to avoid being accidentally used by scammers to dupe other victims.

And also, how to protect yourself from the heavy hammer of the law hitting you when the
real fraudsters disappear and leave in their wake well meaning people in the middle who
had no idea they were serving fraudsters.

How to recognize a Fraud 100 yards away – the tell-tale signs that insiders know.

Tell-tale signs of a REAL Gold and a fraudulent Gold Dust offer.

Tell-tale signs of a REAL Crude Oil and a fraudulent Crude Oil offer.

Tell-tale signs of a REAL Copper Cathode offer, and how to spot a fraud 100 yards away.

The Secret to the NCND, what real traders and professionals say about it.

The BEST free on-line sources for Import/Export information.

Little known due-diligence resources to save you at that 11th hour.

What you hold in your hands, or see on your screen, is the Trade Intermediary's and Broker's Guide
to International Import Export Fraud Prevention. To my knowledge, no other work goes into this
detail.

Read on, and benefit.

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Introduction

INVESTOR, TRADER – KNOW THYSELF!

“Know Thyself”. The old reed inscribed upon the lintels of the temple of Delphi.
Or as an old Moroccan associate of mine once quipped:

“Business is the art and science of managing greed – yours, your partner's, and your
customer's.”

Therefore, it behooves a business person to “Know thyself, and know thy GQ”
(Your GQ? Why, of course, it is your Greed Quotient)

Lament:

I am a trader and agent for a commodity trading house. I thank you for buying and reading this
work. I think this information is priceless, and reading and comprehending what is contained in this
report can save you from thousands of dollars in losses, as well as mental anguish and possibly
physical harm, if it is understood and followed.

By purchasing this work you have made an investment in your future and education, be assured
that this modest investment will pay you a hundred fold. Keep in mind that this is a work in
progress and will be continually refined corrected and revised – now that you have subscribed such
updates will be sent to you from time to time free of cost as they are available.

Global trade today is amongst the most lucrative forms of business there is. This applies to
licit transactions and illicit transactions alike. Some illicit transactions are characterized not so much
by illegal products being traded, but by non-existent products being traded for financial
remuneration in which the buyer is convinced that the product he is purchasing is real – this is
essentially deceit and this is the essence of fraud. Fraud exists because it pays massively well to the
criminals perpetuating it. This is the crux of the problem.

So whoever you are, whatever your motivation, and whatever your level of knowledge and
experience, there is a reason for your purchasing this work – for some reason you want the
information it contains. No one knows it all, but if I can share a few things I’ve been taught by
people far more experienced and wiser than I, a few secrets that, perhaps, shouldn’t be secrets, and
if these can help you avoid serious pain is, perhaps you have seen it all.

The Internet is a sea of information. But there is a problem, for as much solid information on it
there is a massive amount of misleading information, or misinformation, as well. In your search for
knowledge of international business you’ve searched Google and looked high and low, finding bits
of knowledge on trading or investing here and there.

However the reality is that most self-taught brokers, intermediaries, and investors learn through
highly expensive “trial and error”. The wheel, re-invented each time. At times successfully, at other
times not. My sincere hope is to advance the state of the art and science, to advance the industry

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itself. It is no exaggeration to state that opportunities for independent non-corporate, home based
trade intermediaries and brokers, have dried up massively over the last few years. The Internet, thus,
has been both a blessing and curse.

A fortune can still be made in International business opportunities by those who are prepared and
willing to acquire the skills and knowledge necessary to find and close deals. And make no mistake, a
fortune can be lost in moments by those whose carelessness and greed causes them to underestimate
the wiliest of people, the con-man.

By understanding the information in this report and implementing its strategies you not only
stand a fighting chance of winning in an industry that seems cutthroat and disreputable to most
outsiders, but you can prevent yourself from falling into the ranks of that most tragic of creatures,
the “Joker Broker”..

This work can be your “get out of jail free” card but only if you understand the material, dutifully
apply yourself and seek more information to put it all in context.

It’s a Big World Out There:

With an email address, web site, and fax machine, or fax-to-email account, you have half the tools
it takes to interact with a huge world of business opportunities. The rest of the tools are mental.
Confidence in what you are doing, believing in yourself and your deal, information, knowledge,
flexibility of thinking.

Smaller traders can compete with larger ones of what seems to be a more level playing field. But
the other half of the equation is harder to obtain. That is skill, procedural knowledge, a dose of
common sense, and extreme patience.

Glance around on the Internet and you will notice thousands of International trade portals and
forums. Within them several tens of thousands of people, perhaps close to a million individuals, all
attempt to buy, sell, trade, and seek to learn the ins and outs of making a fortune in International
Trade.

Today, through the revolution of the Internet, people are interconnected from country to
country as never before. This creates new opportunities for anyone with the will, learning, and
determination to try to conduct international trade. Importers, Exporters, Merchants, traders,
agents, intermediaries, brokers, and distributors all alike, exchange information, deals, and trade
products at never before seen volumes and speeds.

If you read and understand the information in this report you may stand a fighting chance of
winning in an industry that seems cutthroat and disreputable to most outsiders, but that is absolutely
indispensable.

We live in a wide interconnected world, 6 billion people, more than half of whom live in Asia
alone, and the opportunities for global business have never been wider.

Increasing globalization of the markets and the increasingly widespread role of the Internet has
created boundless opportunities. National boundaries have become fluid and permeable, exchange

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of new ideas, new opportunities, new trade, and new investments increase resulting in immense
investment and trade opportunities for millions of people.
Make no mistake, opportunities abound as never before in history, but so do dangers.

The very diversity in opportunities includes good as well as bad.

The world is out there for the taking for legitimate and licit opportunities, but an immense dark
side has risen, and indeed has always been there.

Just as borders are now more permeable to legitimate business, so too are they to illicit business.
Black markets and trade in illicit goods have always existed. Wherever there is a demand for a
product, the enterprising will rise to fill that demand. However such trade is not our concern here.
What is our concern, however, is the exact opposite of trade, licit or illicit. The opposite of trade is
theft. And Fraud is a type of theft by deception.

Fraudulent activities are ever on the rise. The legitimate opportunities out there are attractive
enough to make risks worth while, but the dangers must be understood if you want to have a chance
of making a fortune through International Trade and Investment.

Have you noticed that as you’ve searched Google and libraries, and looked high and low, finding
bits of information here and there, you encounter interesting phenomena: very little practical
information on the art and science of dealing in International trade as an independent trader exists in
any comprehensive way.

Certain practices, documents, and procedures: mysterious acronyms such as “NCND” or


“MPA” are thrown back and forth, badly corrupted model documents and forms may filter your
way, but the reality is that most attempted home based traders, brokers or more properly -
intermediaries - learn through highly expensive “trial and error”. Often re-inventing the wheel
each time, in that ever elusive search for a deal and knowledge on how to close that deal.

This work does not teach the fundamentals of trading – however Davide Papa, CEO of
Australia’s FTN Exporting, has a new book “The World Is Yours II: The Intermediary” that
does exactly that – set the record straight once and for all, on how to successfully do just that, trade
as a non corporate intermediary giving you the intellectual tools you need exactly to begin trading on
your own. Through a special affiliate arrangement, we can arrange for a special offer of “FYBR II”
for buyers of this work at a discount. Information is found at the end of this book.

Nothing destroys sincere aspirations and dreams of success more than being defrauded.

“Defrauded”. “Conned”. “Had”. “Scammed”. The terms are many but they mean the same
thing.

One thing most people encounter very quickly, in their forays into the world of trading, is
the character often scorned as “The Joker Broker”

Defined in the first instance as a bit of a time waster, the joker broker is an individual who
knowingly or unknowingly peddles and plies deals and products that, in the vast majority of
instances, are non-existent, or badly defined. Characterized by a tendency to bluff his way through

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transactions the Joker Broker is the one thing in your trading career that you do not want to
become. Plying deals often involving a string of brokers from one end of the planet to another, and
not a single one has verified the very existence of the goods at hand.

The String Contract, as it is often called, is a necessary aspect of International Business.


Today we are all interconnected as never before, creating new opportunities for anyone with the will,
learning, and determination to try to conduct international trade. Importers, Exporters, Merchants,
traders, agents, intermediaries, brokers, and distributors alike can trade information, deals, and
products at never before seen speeds. But the experience of the underground string of International
brokers trading meaningless offers and circumventing each other left and right illustrates well the
term “Joker Broker” and resembles, often, a Zoo full of monkeys.

Today, if you glance on the Internet and you see a huge marketplace, seemingly ripe for the
picking. Type in any term you desire into a search engine and you will find someone, somewhere,
who wants to buy or sell or trade that thing. Type in “crude oil buyer” or “sugar seller” ore even
“beanie baby supplier” and “presto”, you seek, and you find, you find thousands of trade leads,
thousands of links to people seemingly selling everything you could ever imagine. International trade
portals and forums, and in them tens of thousand people openly seek to trade, and learn the ins and
outs of how to make a fortune in International Trade.

The CEO of Australia’s FTN Exporting once estimated that world-wide close to a million
individuals are now, at this moment, trying to make it as brokers or more properly put trade
intermediaries.

Out that million people, perhaps no more than 1% has the training and skill needed to ever close
a deal. While this is a large number in itself, the percentages are dire, Hundreds of thousands of
people, the over whelming majority, are trading blindly, deals are collapsing, any chance of a well
trained Intermediary making it in this business grows smaller and smaller due to the efforts of their
lesser trained comrade.

As for the rest, they face nightmares of circumvention, getting cut out of deals, back stabbing,
being ignored and dismissed by arrogant principals, and more to the point, being defrauded –
sometimes massively.

As for the 99% out of the fore stated million traders... the stories are well known, circumvention,
getting cut out of deals, back stabbing, being dismissed by arrogant principals.

And for the most unlucky, a fate that ones fears most, a fear each of us harbors deep inside.

The fear of getting scammed, fleeced, and defrauded out of everything we own. Seduced by a
peddler of hot air and broken dreams.

Worse still, the real market for intermediaries, “middlemen” if you will, is collapsing rapidly.
Experienced traders estimated that the year 2000 was the last “good year” in many of their trading,
after 2000 the critical mass of brokers and traders who were ill informed and poorly trained, as well
as of fraudulently applied offers and scams, reached the point that real end-buyers manufacturers
and suppliers simply stopped responding except in exceptional cases.

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For these reasons, and a desire to advance the state of the industry, we wrote this admittedly
“quick and dirty” guide to fraud and its prevention. It is a short “Cliff Notes” introduction to a vast
subject to help raise the level of traders. There are Trillions of Dollars worth of goods traded and
the sincere and diligent aspirant – sincerity itself is not enough – deserves some guide.

Today access to global communications is cheap and abundant, and advice – good and bad, but
mostly bad - seems to just pour from every corner.

However the expansion of global business communications is not without a severe price.
Not so long ago the barrier to entering this world wide market was investment in a solid fax
machine, or even a telex machine, scores of phone bills, and hundreds of hours of research in the
local library.

A generation ago, even finding trade leads was a difficult and expensive process. It took a lot
of resources and expertise to be a trade intermediary. Contrary to some of what you may read on-
line, there is no quick buck in finding deals: it takes a good deal of training, immense patience, and
considerable skills to make it as an independent trader or middleman.

Old timers in the world of trading attest to the huge expenses involved in just sending out
inquiries to source goods, with fax bills sometimes running up to $5 per page. And apart from a few
books mainly for corporate traders, very little usable advice could be found anywhere.

Jeffrey P. Graham, in his critical essay “Evaluating Trade Leads” points out that a good deal
of due diligence on a trade lead is evaluating the company itself that posted the trade lead. Thirty
years ago, finding out how credible a company was a simple matter of checking the telex address and
obtaining some bank references on the company.

The cost of a telex line and machine itself was a barrier of entry to trading, and there were far
fewer companies doing business as traders and intermediaries. If a company used a telex service,
instead of its own telex machine, this in itself was a telltale sign.
In the mid 1980’s when the fax machine spread worldwide, it became easier for smaller companies
to communicate and compete on a global scale.

In the late 1980’s and early 1990’s a few on-line bulletin boards and department of commerce
trade publications published a few buying and selling trade leads. Traders benefited but the barrier to
market entry lowered considerably. The advantage, a more open playing field, the disadvantage
however lies in this.

By the mid 1990’s as the Internet and Usenet became more useful for business purposes, and with
the rise of the World Wide Web the Internet itself emerged as a marketplace itself, and the expense
of subscribing to trade leads became a thing of the past. These are staggering changes and the
process of evaluating a business opportunity posted online is considerably more difficult than it was
30 years ago.

Today, buying or selling leads from around the world can be solicited at low cost or practically
for free. Trade information proliferates, a few forums charge for access but the sheer amount of free
information is gigantic. But as with everything, you get what you pay for.

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The problem with on-line portals like Tradekey or Alibaba is that most on-line sources have
no time or interest in evaluating the strength of the trade leads they publish, rather they serve as
large bulletin boards. They are essentially neutral matchmaking services, like an on-line dating
website. People can come on and post what they are looking for, but the medium itself, the network,
can not evaluate these things.

Alibaba and similar portals have an application model in which one may subscribe for premium
access. Supposedly this weeds out the wheat from the chaff. Often it does not, a “premium buyer”
simply pays for “exclusive access” and gets few tangible benefits. There are several legitimate sellers
on Alibaba who choose not to buy “Trustkey” access because they feel it is not needed. There are
hundreds, at least, of verified and paying premium members on Alibaba who are outright scam
artists. Read its forums, and you will see hundreds of such complaints.

Moreover the expertise in recognizing a questionable trade lead or tender request from a strong one
is generally lacking through the Internet, there is no critical filtering of the leads you end up reading.
Anything that can be put out there, is put out there, from the genuine to the questionable, to the
fraudulent.

Moreover, the nature of the “broker network” is such that information is often passed about
with little critical filtering, lack of knowledge of proper trading procedures and the general tendency
of information to become corrupted as it trades hands leads to dangerous results.

While a few on-line educational resources are out there, chief of all is the experts question and
answer forum on which FTN Exporting CEO, David Papa, posts advice to International Trade
questions, besides this and a few books, getting proper knowledge of procedures for an enthusiastic
new broker is difficult, leading to burn-out and great disappointment. Moreover, fraud rears its ugly
head.

Few realize that the Internet is a minefield of traps for the unwary, the most innocent and
authentic seeming tender and offer could have, disguised in it, a veritable bomb waiting to go off in
the eager hands of the person unlucky enough to encounter it. Make no doubt, the Internet has
opened possibilities and made available to countless people business opportunities few would have
dreamed of just a decade ago.

We have all heard the stories, and we have the fear. Is an opportunity too good to be true? Or can
it be our ticket to success and fortune? Is this particular trade-lead authentic, or is it simply a veiled
scam, what about that one?

Good intentions rule the actions of most traders, but sometimes - the most unlucky – find
themselves in a situation that every intermediary fears – being sandwiched between one fraudster
and a victim, being used as a tool to further a crime, that one fear so many of us harbors deep inside.
Of not just getting scammed, fleeced, and defrauded ourselves, but unwittingly being used to scam
others. The lost of respect, the shame and fear, the potential reprisals from law enforcement who
may listen to our pleas and excuses with no sympathy. The real possibility of the real perpetrators
escaping and the punishment due them reaching you... insult upon injury.

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Few realize the degree to which the Internet really is a minefield of traps for the unwary, as
with most things being aware in itself is good medicine and can save you great headache,
heartache, and legal bills !

Fraud can cause you to loose everything you own. And the feeing of being seduced by a peddler
of hot air and broken dreams may be worse still. But it doesn’t have to be this way.

Fraud can cause you to loose your liberty. Another factor is that in many frauds, the end results
may cause the victim to be criminally liable as well as sharing civil liability. For example in 2005 a
certain John W. Worley was convicted in a Federal court for his involvement in a scam, in spite of
his claim that he was a "victim". Room mate and House leasing advance fee scams, in which a
scammer poses as a student needing lodging and mails a landlord a check for rent, frequently involve
the hapless victim cashing her check only to be arrested for passing bad checks when it fails to clear!
In many locations, mere possession of a forged financial instrument is illegal, much less than trying
to pass one.

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2. Fraud And The Conman: A History

Financial Fraud is nothing new; it has been the invisible silent sister of commerce and investment
from ages of old. For example, in 1720 the world’s first stock market bubble, the South Sea Bubble,
ruined an entire generation of British investors in 1720. The bubble was based around a series of
frauds that led to intense speculation on shares of the British South Sea Company, founded in 1711
to trade in the Americas.

The South Sea company was born in part to rescue the Crown from its debt. The company
purchased the government’s debt and refinanced it at a low rate and in turn was given numerous trading concessions,
including a monopoly on the slave trade. Initially the company’s performance was strong and the government refinanced
another round of its debt through the company.

The mania concerning South Sea shares initiated general conditions in which thousands of unstable
investment frauds and sketchy trades floated through the market with great ease, experienced investors placed their
capital in both sincerely ill conceived ventures (such as a firm designing a perpetual motion machine) as well as more
blatantly fraudulent schemes. Bad intent ruled high up, corruption was widespread in the South Sea Company’s
board, the South Sea Mania led to a stock market boom, numerous IPO’s exploded everywhere as hundreds of other
companies tried to profit from the stock boom.

The environment produced a general speculator frenzy, which griped English society as trading
companies emerged almost overnight, with all manners of hair-brained schemes. Diverse ventures
proliferated and flourished, as hungry investors snatched up their shares of firms like the
aforementioned perpetual motion machine company, companies formed to distill sunshine from
vegetables,. horse insurance companies, companies devoted to: “improving the art of making soap”, or
the “improving of gardens”, to the queer little company formed “for the transmutation of quicksilver
into a malleable fine metal” People lined up to invest in such venture. Was there an end to this
madness?

The all time classic (and remember, this was a publicly traded stock, dear reader) was a company
formed:

“For carrying on an undertaking of great advantage; but nobody to know what it is.”

One can’t help but think that the individuals who cooked up this company went laughing
all the way to the grave!

Overnight people became nobility as titles were bought. Many companies formed quickly, issued an IPO, made a lot of
money and vanished weeks later as their principals ostensibly ran to the Americas with their investor’s money, to
properly invest in overseas ventures, but in reality simply running away to the local pub a few towns down the road.

Some semi-legitimate companies claimed to, at least, hunt gold, or tobacco in the New World. We
are quite sure, however, that the principals of “the undertaking of great advantage” or the
makers of the perpetual motion machine were quite self conscious about their fraudulent intent.

Scammers can have refined senses of humor!

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Even Sir Isaac Newton’s scientific mind was caught up in the frenzy, but wisely realized the
instability of the bubble. Sir Newton liquidated his shares, for a handsome profit. But the bubble
seemed to endlessly expand the famous scientist reentered the market and bought more shares. This
mistake would later cost him 20,000 pounds, once it became known that the South Sea Company’s
management liquidated their shares utterly, and widespread panic ruled the market.

Alexander Pope, the famous poet, figured things out quickly and sold before the height of the panic,
earning himself an absolute fortune. Others, like the author of Gulliver’s Travels, Jonathan Swift,
lost a fortune himself. Swift’s novel was written in disgust as a satire about English society.

While the con men who formed the upper corporate management of the South Sea company fled
with their fortunes overseas, Many generations of Englishmen afterwards were affected by the ripple
effects of the first stock market crash in history. It took a century for the economy to fully recover,
and this disaster molded English society in particular lines that still reflect in Anglo-American
societies to this day.

This historical example displays all of the classic traits of the financial fraud, which we will outline
shortly. But for now remember not only its ludicrous excesses, but also its basic structure, very well.

Example 2
In the 19th century the Ottoman empire’s decline and fall was aided by ill conceived investments
peddled by International Business “men of mystery” such as Langrand-Dumonceau, an entrepreneur and speculator
with legitimate high level connections to high financiers and merchant banks, whose schemes earned him a 15 year
penal sentence in absentee from one European Country; men who, in their charisma, managed to convince sovereigns of
what was once one of the most powerful super-powers in the world to take out loans, at 60% interest, to invest in
unimaginably ill conceived public works projects whose failure resulted in the Ottoman state dedicating 2/3’s of its
gross revenue to servicing constantly rescheduled and re-financed debts, and eventually led to the fall of its government.

The most interesting thing about this example is that sovereign heads of state were convinced by
financial adventurers to contract out the building of a rail-road, a strategic undertaking, into the very
heart of their empire, to an enemy – Austria – who not only sat on their borders but actively
encouraged session in the provinces buffering turkey from Austria.

This being the case, still a railroad contracting concession was passed to Van der Elst and Cie, a
concession that was then bought out by Langrand Dumonceau, who helped negotiate the original
concession, who in turn passed it onto Baron Maurice de Hirsh, with whom Dumonceau was
partnered in several other ventures throughout Europe. Construction of the railroad was financed by
bond issue after bond issue, by debt rollback after debt rollback, all occurring as the concession (and
ownership of the debt) passed through hands like baseball cards, around a circle of more-or-less
related finance men.

By the time all was said and done, Baron de Hirsh could safely settle his accounts with the Turks,
and retire in wealth, passing on his role to Deutche Bank, while leaving the Turks with some
partially finished railways. Variants of this same basic scam continued through the close of Ottoman
civilization, the Mecca to Istanbul railway for example. The historical irony of the Turks being the
biggest con-Marks in history is given a somber cast by the events leading up to the First World War,
the ethnic violence, terrorism, and revolutionary movements in outlying Ottoman lands forcing their
Caliphs to cede greater and greater degrees of autonomy, increase taxes at home massively to pay off

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almost crippling interest payments, and finally collapsing. The sick man of Europe died of financial
flu, more or less.

A similar example can be found in the German’s case, after the First World War, and is
explored in Anthony Sutton’s “Wall Street and the Rise of Hitler.” The case of financial
improprieties in Wilson’s American administration, and in certain German Industrial and Banking
circles, is quite politically sensitive, very nuanced, and far too complex to explore here, but I do
recommend the book to the astute and historically trained reader. Dr. Sutton’s work is well
researched, rigorously argued, and shows the degree to which such financial scams can change the
destinies of entire continents.

Example 3.
The Match King

The name Ivar Kreuger rarely rang a bell nowadays, at least until the row regarding Bernie
Maddof’s manipulations hit the press. Kreuger, more than any other many, was responsible for the
creation of many of the sophisticated financial instruments and derivative contracts that we now
take for granted, a financial genius and entrepreneur, the tragic thing about his legacy today is that
the sole thing he is mostly known for is having perpetuated one of the greatest frauds in Wall Street
history.

The few sources that mention Kreuger generally class him as a clever market manipulator who
monopolized the match industry by fraud. The truth is far more complex.

Kreuger setup one of history’s most extensive ponzi schemes more or less, at first, by accident. Out of the necessity of
financing a legitimate company. A civil engineer by trading he became an entrepreneur on co-founding a construction
company. He groomed his self step by step to mastering the art of the financier.

In the process Kreuger invented and developed very innovative financial instruments (such as the derivative) and
through highly aggressive investments built his firm into a wooden match trade monopoly, and soon he held a global
financial empire, dominating the wooden match trade throughout Europe, Central, and South America. He came to
control two thirds of the world’s match production and was, by all accounts, "The Match King."

He was reportedly tutored in the inner workings of high finance by Oscar Rydbeck, a Swedish
banker who became a close associate and consulting financial advisor for him from 1912 until his
1932 Crash.

The 1930’s financial crisis of following the stock market crash exposed a very shaky ground
underlying his commercial empire, in offering fantastic profits to his investors he utilized a sort of
ponzi scheme similar to what Bernie Madoff, decades in the future, would also utilize.

Sadly in Krueger’s end he shot himself dead in March 1932.

Unlike Madoff, of course, Krueger actually produced tangible products, dominating the world in it.
But his enterprise was no where near as profitable as he represented to his investors, and he used
incoming capital from new investors to pay dividends to older ones. In a way similar to Madoff.

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In essence, Kreuger was robbing Peter to pay Paul. The initial impetus was innocent, but in order
to maintain the veneer of success for profit hungry shareholders he drove himself to great depths of
deception, and in the process invented some of the world’s most innovative financial instruments
even conceived.

Things don’t change that much. Legitimate Commerce, trade, and profit, always are tailed by
outliers - scammers who siphon off the hard work of legitimate hard working entrepreneurs and
investors. Our argument is that they are, indeed, statistical outliers to financial capitalism and free
enterprise, however they do have a role, affect history, sometimes massively, and affect our lives in
many ways.

And as always, unrealistic expectations of profit, and sheer greed, continue to destroy fortunes and
lives.

The Fraudster leaves, in his wake, misery and suffering. He is the ultimate “Economic Hit-man”.

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3. FRAUD AND THE VICTIM

Who is the Con-man? Fraudsters, Confidence men, Scammers – they are a certain breed of
highly intelligent, and highly motivated, criminals who operates by using their advanced knowledge
of psychology to lull their victim into a psychological haze, a comfortable feeling of trust and
confidence.

It is possible, and unwise, to underestimate the victim of such frauds. To dismiss them as
clueless idiots and ill informed fools. This is an unfair depiction. Studies reveal that victims of such
fraud tend to be financially knowledgeable and sophisticated, generally more optimistic about life
than other people – and hence less cynical, and often suffering from financial stress or ill health.

In other words, ordinary, otherwise happy, individuals who are often well educated, understand
money and investing, and who are put under some stress by life’s situations. They typically see an
opportunity to make handsome profits and gains, and relieve their distress. Even legitimate financial
advisors at times persuade their clients into investing into marginal investments. Remember, at all
times that the broker gets paid, or in gambling terms “the house always wins”. In the case of
sophisticated hedge funds, for example, the manager typically gets paid a percentage of the principle
assets, irrespective of the fund’s performance, as well as a performance bonus. In the case of
ordinary stock brokers, they get a commission off every transaction you execute. Millions of ethical
financial advisors worldwide do honor their advisory role, but never forget that it is your money
in question, and you have the primary responsibility in ensuring its growth. Some of the most
financially savvy individuals have been convinced to sink massive sums into some of the worst
investments.

It is important that you understand why victims are fooled. In this way you can objectively see
the psychological processes at work, and recognize these same processes at work when you are faced
with a fraudulent investment.

Experienced scammers are adept at using highly emotional sales pitches. Some are well trained in
the science of “NLP” – neuron-linguistic programming, a set of cognitive techniques developed by
Dr. Bandler et al., which have the ability to bypass certain aspects of a person’s critical perception.
Many salespeople are well trained in NLP, as well as many the smooth “player” and “pick-up artist”.
It is possible to manipulate an intelligent person linguistically by making reference to highly emotive
terms that short circuit a person’s ability to exercise critical thinking. In fact, some of these
techniques work better on highly intelligent and highly imaginative individuals.

Edward Bernays, the founder of the modern science of Public Relations as well as Propaganda was
a nephew of Sigmund Freud. The state of the art and science of psychology and the science of
persuasion have advanced greatly since the turn of the 20th century!

A successful sales pitch will contain certain emotional elements to secure a rapport with the
victim, gain credibility and trust, and invoke a sense of urgency. Most importantly, to invoke a sense
of greed' and desire. Indeed greed is the scammer’s greatest tool, and the greatest key to the victim’s
downfall. These emotional tools and suppress normal critical thinking abilities and skills, dull the
“hmm... now does this actually make any sense?” instinct.

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So We Speak of Types of Fraud: International frauds continue to grow as the years go by. The
predominate type of International fraud is a certain type of Advance Fee fraud, often called a “419
scam” and out of this “Prime Bank Instrument” fraud or “High Yield Investment” program fraud
stands as predominate. Other types of fraud involve trading opportunities in commodities, scrap.
Certain traits stand out in business opportunities that are actually disguised frauds, of course
legitimate opportunities may be marketed using similar traits and language, the buyer has to be astute
and really study what he is looking at, but seven common tell-tale signs of a fraud are:
1) Promises of unusually high returns. Doubling your money in six months is generally a
sign of fraud.
2) Claims that the investment is personally guaranteed, guaranteed, insured, or otherwise
has little or
no risk
3) The advisor places a good deal of pressure to invest immediately because of a deadline
or lack of openings
4) Encouraging you to borrow money from equity in your home to invest and
maximize your profits
5) Vague descriptions about how your money will be used, or what the company
actually does
6) Claims that other people close to you, in your church, workplace, or community,
have already checked
out the investment and are investing.
7) Claims that the investment involves some sort of special new technology that can
solve a problem that big companies in that industry cannot solve

Remember, the Absurd claims of the South Sea Bubble? Nothing really changes.

No one earns 200 – 400 % returns on their investment (ROI) in 4 weeks unless by some
astronomically lucky and unlikely fluke. Such flukes are historical in import and occur so rarely that
they are not worth mentioning.

Of course these signs do not absolutely mean that what you are looking at is a scam, but real
Trading Opportunities, Investment Opportunities, and Commerce Opportunities, typically are
phrased in more sober language and downplay the inevitability of “massive profits” in “incredible
opportunities” that won’t last long and that “guarantee big profits!”

Regard the words “Double your money in six months with no risk whatsoever!” as a code-
speak for “Give me your money now sucker.. please!” They really mean the same thing.

Real estate seems to be somewhat of an exception to the rule, we have seen astute real estate
investors and entrepreneurs receive 15 – 30% Returns on their investments rather quickly, we have
also seen them go into foreclosure and bankruptcy. Real Estate often tends to out perform the stock
market, but there is considerable evidence that the Real Estate boom in the USA and some
other parts of the world is simply a large disguised bubble. And we know now, that Bubbles =
Trouble.

A real precedent is the Asian financial bubble of the 1990’s which involved massive over-leveraging
of real estate, similar to the residential mortgage situation in the USA today. In fact, mortgage fraud

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was at all time highs around the turn of the millennium and many hot markets are now seeing
record, tragic, rates of home loan default.

As for export trading, any sort of wholesale trading is typically done on thin margins when one is
dealing with commodities. One makes one’s profits in volume, a thin profit margin in high volume.
2% - 10 % markups per metric ton add up quickly when one considers that the net weight of your
average 40’ shipping container is over 26,000 lbs. It doesn’t take many containers to reap a small
profit, and bulk carrier shipments of goods typically involve tens of thousands of metric tons.

Expecting a Return higher than 10% on an export shipping venture is highly unrealistic, unless
one is dealing with highly specialized manufactured goods such as types of machinery. The freight
component alone reduces profits immensely.

Fraudulent Trade Document References:


Let’s get this out of the way first. These will be controversial points, and I am sure to be “called
out” for making them, but honesty must rule. Certain documents have no accepted place in
International Trade, or are only used in certain niche industries as the custom of specific trades.
They have no wider bearing outside of those trades, being simply relics of earlier procedures that
still live on today, having no pertaining to the wider world of modern trade. Knowing which
documents are common in a particular trade can save you much time and headache. Ambiguous
documents create deal frustration, which is a specific matter often resulting from what is called, in
trade law, the battle of the forms..

While certain documents may have internal usage in a particular country’s trade, but have no
standard use in certain trades and industries, such as Sugar, Gold, Copper, etc., when you see
specific documents mentioned in a transaction, these are sure tip-offs that you are dealing with a
sketchy transaction and, likely, an inexperienced trader, or an outright fraudster. Seeing the terms
“BCL”, “MPA”, “MFPA”, “Paymaster”, “Seller’s Side / Buyer’s Side”, “NCND”, or the like,
in such an offer, is a tip-off that the offer as one sees it is not directly from a principal in that
industry but has been extended by an intermediary of sorts. Some of the most notorious “Joker
Broker Documents” are:

The Irrevocable Purchase Order/ IPO ICPO:


Sometimes known as the Irrevocable Corporate Purchase Order, such a document simply does
not exist. Or to put things more rudely, - the ICPO – is crap. There, we have said it, let the chips
fall. Sometimes the Letter of Intent (LOI) – a document frequently used in some countries and
some industries to establish corporate intent for some undertaking, such as to purchase real estate,
or to enter into some sort of deal, but with no standard usage in International Trade where the
LOI stands for Letter of Indemnity – is attached to the IPO or ICPO making a rather barbarous
sounding “LETTER OF INTENT / IRREVOCABLE PURCHASE ORDER”

The standard preamble usually goes like so: “We, (insert company) hereby state and represent that it
is our intention to purchase, and we hereby confirm that we are ready, willing and able to purchase
the following as per the specification and in the quantity as specified in the terms and conditions as
stated below. This representation is made with full corporate authority and responsibility of the
above…

The Fee Protection Agreement and NCND:

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In the first instance, internationally the Non Circumvention, Non Disclosure agreement isn’t worth
the paper it is written on. Notoriously hard to adjudicate against and enforce, the reference to them
is a sure sign that one is dealing with an ill-informed broker of some sorts and not a Seller or End-
Supplier.

As for Fee Protection agreements, the above is noted again. Matters of Commissions, consultancy
fees, or finder’s fees, lie outside the scope of this work. However suffice to say anyone claiming to
be a “Mandate” or actual seller who requests these documents isn’t what they claim to be. A
mandate fears no circumvention because her interests are protected by the one extending a mandate
to her. So by definition a mandate does not need fee protection, or circumvention protection. And
while an actual seller may be circumvented - with ease if he is incompetent - he will protect his
interests in other ways.

The problem is that the intermediary in this case may not be properly informed and one cannot be
quite sure that the offer itself is real unless the intermediary agrees to step back to her principal
supplier or seller, and expose the same.

“Catch-22”, at such a point the intermediary is technically circumvented, and sites in a supremely
vulnerable and exposed position. While honor and good business demands that a principal protect
that intermediary’s interests in good stead, and pay them an honest commission if a deal closes,
honor and good business practices do not always rule the day.

Once you are introduced to the real seller in question and can verify the goods are real. If you steal
the broker’s deal then you yourself have acted with fraudulent intent, of course, and performed
something quite stupid – that individual could perform further business services for you as an
independent agent, and you have tarnished your reputation, while further contributing to an
environment of fraud.

At some point you may discover there is no real product, however, or principal – just chain after
chain of deluded individuals offering products they thought were real – congratulations you just
exposed something important. You may find yourself led back to an actual principal whose terms
indicate that they are actually fraudulent and criminal – congratulations on your detective work, such
sleuthing would make Sherlock Holmes proud.

Scammers are the fat spiders sitting at the center of many an ill advised “Full Corporate
Offer.

The goal of the Scammer is to extract as much money from you, his victims, as quickly as possible.

Through multiple tactics, the scammer can often bypass the built-in abilities of even well
informed and careful individuals to detect deception. The victim, or “the mark” “the mugu” may
have considerable ability to detect and resist efforts at persuasion. But through considerable
charisma and seductiveness this haze is imposed, clouding the mind subtly. Victims often claim
afterwards "it caught me off-guard." "I don't even know what I was thinking.”

One report quotes a scammer as saying "My pitch put the victim in a haze of ether. I wanted to sell them as
soon and as often as I could before the ether wore off."

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A haze of ether? This phrase has more truth then you would think. It is easy to understand
why scammers commit their frauds, by stint of wits, charisma, and sheer bravado, and no other
skills, they can make easily unimaginably large sums of money. There is the “high”, the feeling of
elation coming after one “gets over” another, it comes to some people when they successfully pull
the wool over another’s eyes.

Fooling others, and stealing their wealth, is an ego affirmation to a scammer. It convinces him or her
that they are clever, sophisticated, smarter and someone “better” than the victim they whose trust
they abused and defrauded. The attitude is a corrupted sort of Darwinian thinking, the idea that
certain people are wolf, and others are sheep to feed the wolf, or to quote Boyd Rice:

“The strong eat the weak, the clever eat the strong.”

In the case of Prime Bank Investment frauds, or frauds involving trading BG’s and MTNs, the
fraudsters seem to belong to an informal body of a few hundred Europeans all known to Interpol
and the American FBI, many of whom are periodically caught and serve some jail time, and then are
able to retire off their loot before returning to the seductive thrill of the fraud.

In other cases, many scammers seem to emerge from Nigeria, and a few other African
countries. Many rationalize their criminal behavior by arguing that they are really engaged in a sort of
economic warfare, “getting back at:”, “getting even with” Westerners for the sins of their Colonial
forefathers who, they argue, stole their ancestors’ wealth and looted their home-lands. Of course the
people who benefit from these frauds don’t seem to “re-invest” their ill-gotten gains into their
homelands, rather they live “high off the hog” leaving their com-patriots to poverty and the ill
repute that their activities cast upon their country. Such rationalizations can be safely dismissed. It is
true that at a certain level, many developing countries have themselves been defrauded and exploited
in the past.

In other cases, some perpetrators seem to emerge from Eastern Europe, Israel, and China,
with connections to organized crime cartels in these countries. Many of the African scammers are
also connected to informal or formal organized crime groups in their countries of origins.

Some suspect the role of Intelligence agencies but while such a thing can’t be discounted, there
is no hard evidence pointing to this.

There are origins far more diverse, in general countries with poor white collar crime regulations,
or marginal enforcement, with large degrees of systemic corruption, seem to be havens for this type
of scammer.

Through the use, or rather abuse, of off-shore banking havens by abusing the confidentiality and
anonymity these centers offer to their patrons (confidentiality that is the right of every individual to
enjoy, we argue), the successful fraudster can enjoy a comfortable life out of the reach of their
victim’s ability to pursue.

So you see the temptation; make money, with few marketable skills other than a quick mind and
the ability to lie through one’s teeth, and get a powerful emotional kick once one fools another – it
is, in essence, a “power trip”. At the end of it all, retire to an offshore haven.

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Of frauds there are so many different types:
Prime Bank Instrument fraud, in short, involves trading in financial instruments whose
investment is purported to yield massive astronomically high yields to the investor. The instruments
invested in or the programs used to invest in such purported instruments are set up in a fraudulent
way as to ensure massive transfer of a would-be investor’s hard earned money into the coffers of the
fraudster. The mechanisms of this type of fraud are little known in spite of the massive
predominance of this type of fraud. Hundreds of millions of dollars each year are lost to the highly
motivated, enterprising, creative, and often quite ruthless scammers who develop these fraudulent
schemes.

Advance Fees: The term advance fee refers to any up-front payment paid in order to secure a
particular service or good. In this context advance-fees refer to sums paid by a would-be investor to
participate in an investment or businesses transaction in order to “smooth” the transaction along or
enable it to proceed. Generally an advance fee is required of the would-be investor in order to
enable him to participate in a much larger financial transaction that he believes will bring him greater
profits or result in credit being extended to him.

Stated reasons for these fees vary, bank fees, “baksheesh” or bribes, “gifts” for bank officials or
export officials, or often seen in African Gold Dust scams gifts for tribal leaders &tc., fees for
inspection agencies, fees for freight forwarders. As can be seen these are all plausible stated reasons.
In the vast majority of cases such reasons are bogus and the real reason for the fees being required is
the financial gain of the person requesting them.

In theory, not all advance fee’s are fraudulent, in general however any legitimate and well
structured opportunity will have a responsible escrow mechanism set in place to ensure up front fees
are protected. Again this is theoretical, in reality 9.5 times out of 10 such transactions tend to be
fraudulent anyway or at least display all the hallmark signs of a fraudulent transaction, as we shall see
later in the report.

An individual is contacted by a stranger and informed of a trade opportunity or investment


opportunity. They are presented with a program that seems well structured. In order to engage in
the opportunity certain fees are required. The actual larger transaction itself is bogus and the would-
be investor, or rather victim, never actually makes a profit.

Examples of Frauds Illustrated:


That old saying “In God we Trust, all others we verify!” is an understatement. Here are a few further
examples of banally typical financial frauds, in knowing what they are you may refine a “taste” and
“feel” for the same.

Underground Intermediary Networks and Financial Intermediary Fraud:


A basic High Yield investment fraud occurs in which an individual approaches you, informing you
about an “Underground Network” of high finance intermediaries, bankers, loan officers, agents,
facilitators, mediators, and the like, who trade various deals and financial instruments such as MTNs,
other types of Notes, Letters of Credit, and so on. One purchases from one who purchases from
another and so on.

These are examples of different types of Financial Intermediary Fraud solicitations. Read them,
study their features well, and notice any patterns that you see. Soon we will explore them in greater

Confidential Page 23
depth and reveal exactly what is wrong with them, but for the time being simply examine them
closely.

This is an example of a well done investor fraud. It is much less amateurish in nature than most
solicitations we receive. Its sophistication makes it all the more dangerous.

From Mr. Rob Edmunds (President)


Good Day SIR,
I write to you based on a request by an investor and his need for investment/funds Transfer.
My name is Rob Edmunds Esq. a Financial Consultant/Attorney based in London. I am a South
African who naturalized in Ireland.

My company most times represents the interests of very wealthy Investors/Individuals due to the sensitivity of
the position they hold in the society and the unstable investment environment of our country, they evacuate
majority of their funds into more stable economies and developed nations where they can get good yield for their money.

I was recently approached by a Reserved Client of mine, whom I had personally worked with a few years ago
when he was a Finance Minister and wants me to source for a reliable and trustworthy individual such as
yourself, who will be willing to receive money on his behalf abroad, and at the same time advise on what form
of investment that will be embarked with the funds when perfectly received.

The client has offered these terms:


1. 25% commission paid to you upon receipt of the funds through the original sum to be transferred. The
funds in question are $50Million US Dollars.
2. Your details will be used to have the funds evacuated and you will stand as the principle owner of the
funds and will deal directly with the Remittance institution without the involvement of the Investor.
If these terms are agreeable to you, kindly let me know and I will provide you with all necessary information
and procedures involved.
Sincerely yours,
Rob Edmunds ESQ (President)
E.A
EDMUNDS & Associates Limited.
PS*The client is willing to make available the fund to your possession and in your country within 3 days of
confirmation of your capabilities
We got a number of almost identical emails of this nature from different accounts with the subject
line “Investment Manager”. For its sophistication the criminals peddling it appear almost monkey
like in the repetitive nature of what they ply.

Here is another example of a similar, but a bit cruder fraud:


Subject: Investment Manager
From: Mr M**** N*****

Investment Manager [SBSA] Thanks for finding time to read this proposal. After thinking about this
transaction and the need to make contact with someone to assist me do it, I found it interesting and decided
to contact you for this business transaction. Be so kind to contact me at your earliest convenience for a possible
business deal involving money transfer of about $52,000,000.00. I am presently in South Africa working as an
Investment Manager with the below bank at their offshore department. With your sincere assistant and co-
operation, I am determined to work this deal out if we can do business. As at this moment, I am constrained to issue

Confidential Page 24
more details about this business until your response is received. If you are not familiar with the above information
which I believe is scanty for security purposes, please contact me for further details. We will start the first
transfer with thirty two [$32,000.000 USD] upon successful transaction without any disappointment from your
side, we shall re-apply for the payment of the remaining amount to your account. Warmest regards, Mr *******
Investment Manager, Dept.of Offshore Mortgage Services, Standard Bank, South Africa

Next, an even cruder example:

I Am Dr. Edmund Kofi Yeboah, a senior chartered Accountant, I work with International Commercial
Bank (Ghana) Limited. There was a foreign client who has Nine Million USDA ($9:000:000:00) in his
account with my Bank, who just die leavening the money without any next of kin.

So my dear that is why I need you as a foreigner to stand as his next of kin to claim this money. I promise
you, if you stand as the next of kin to this business man [our client] and receive this money in his behalf as his
next of kin, the sky will be our limit, and there is nothing to worry about.

Thanks and God bless you for appreciating and acknowledging this letter.Hope to hear from you.

Please if you are really interested about this business write to me with this email address below I will
tell you what to do, for us to get this money.

Dr, Edmund Kofi Yeboah.


Please reply to this my personal, email.
********@hotmail.com

We shall explore what the defining features of this fraud are. For now it may be hard to see the
danger in the proposal, we shall explore it in good time. Some things that are glaring are that in both
cases the buying principal is asked to do something questionable – that is to pretend to be someone
he is not to receive the funds into his account. As a foreigner are you really next of kin to the
unnamed foreigner who died with $9 mil in his account?

We thought not.

Do bank managers in charge of several millions of dollars routinely approach complete strangers
using throw-away free e-mail address accounts?

We think not.

Often such offers are heavily traded in underground broker networks full of quite sincere
individuals, which are often quite extensive and mirror similar Import/ Export intermediary
networks – For example Uncle Boutros in Cairo is contacted by someone who is selling MTNs or
BG’s – he contacts someone in Marrakesh who calls his cousin in Paris who calls his ex-roommate
who works for a financial brokerage house in Sweden who calls up Bob in Idaho and so on – this is
what is termed “a daisy chain." By the sixth intermediary the terms of the deal in question have been
so marked, sanitized, and redone, that even if a savvy trader was able to force everyone to step back
to their principal the whole affair just becomes an exercise in futility.

Confidential Page 25
At the end, anyway, such products are almost always fraudulent in nature. Offers involving types of
debentures can not be legally traded without a securities license in the USA and several countries. As
for pretending to be the dead relative of someone the morally sketchy nature of such a transaction is
apparent on its face.

The Medium Term Note


For the record- Intermediaries can not legally trade in Medium Term Notes, so-called “MTNs” in
the USA – without registration with the SEC.

I previously stated in a former edition that the “Entire MTN intermediary market worldwide is
fraudulent. Period.” This, of course, was a slight exaggeration. So slight, however, that I am
without embarrassment.

MTN’s – Medium Term Notes – do exist.

They represent a securitization of the debts of corporate, national, and even international entities. In
the USA registration of MTN’s was mandated in the early 1980s by the SEC’s adoption of Rule 415.
MTN’s exist from entities such as Sallie Mae to the World bank, securitizing obligations from the
housing market up to Eurobonds.

MTN’s – in the USA – are registered with the SEC, and are rated, just like corporate bonds, and a
real secondary market for them does exist. Similar instruments exist on the Eurobond market.

They are bought, and sold, by dealers, and an institutional trade in them does exist. The trade that
exists, however, is nothing like what is described by Internet based sellers, and the probability of you
actually getting access to a transaction involving hundreds of billions of dollars in MTN notes is
utterly improbable

Many will choose, of course, not to believe us, you are welcome to contact us privately for our
rationales for the statements above. Any legitimate investment advisor however will gladly inform
you that the Internet broker based market for MTN’s is entirely, or at least almost entirely,
fraudulent.

In the off rare chance that you actually do have access to the trade of a legitimate MTN, a once in a
million chance at best, then the procedures you would need to close such a deal – safely – without
circumvention of endangering your freedom, or life even, would proceed along lines similar to those
advised in David Papa’s “Follow the Yellow Brick Road: step by Step” (FYBR:SBS 1& 2)

And there, still, one would need to be an accredited investor to legally participate in a legitimate
private placement investment program, which are about as rare as a blue moon.

Another Fraud

This fraud is similar to the ones above but features a special clincher at the end:

FROM THE DESK OF MR RAHIM RAHMAN


MANAGER AUDIT AND ACCOUNTING DEPARTMENT

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BANK OF AFRICA( B.O.A )

I am Mr. Rahim rahman, Manager Audit Accounting Department BANK OF AFRICA( B.O.A )I
would like to know if this proposal will be worth while for your acceptance.
I have a Foreign Customer, Manfred Hoffman from Germany who is an Investor, Crude Oil Merchant
and Federal Government Contractor that was a victim with Concord Air Line, flight AF4590 killing 113
people crashed on 25 July 2000 near Paris leaving a closing balance of Twelve Million Eight Hundred Thousand
United States Dollars ($12.8m) in one of his Private US Dollar Account that is been managed by me as
the Customer's Account Officer.
Base on my security report, these funds can be claimed without any hitches as no one isaware of the funds
and its closing balance except me and the customer (Now Deceased) therefore, I can present you as the Next of
Kin and we will work out the modalities for the claiming of the funds in accordance with the law.
If you are interested, Please call me +22676642303 to discuss in further details and our sharing ratio will
be 60% for me and 30% for you.while 10% will be for the neccesary expenses that might occur along the line.
reply privately to (rahim_rahman001@yahoo.fr)
Thank you,
Sincerely
Rahim rahman.
N.B.In other for you to beleive me honestly try and go through this
(website)before you start with me.
Below is the website. (http://news.bbc.co.uk/1/hi/world/europe/859479.stm)

The clincher is the collateral information at the end. The link to a real news story of a real plane
crash whose tragic victims included some individuals of note. The reader may loose his sense of
discrimination and view this offer with a greater degree of legitimacy. This is a common and odious
psychological tactic of the fraudster. Also, nothing is accidental, the misspellings and bad grammar
are also purposeful, to convince the reader that they are dealing with someone from a different
culture who may be less sophisticated than they are.

Legitimate traders have stated that in some industries, namely Petroleum, from time to time such
networks of brokers are actually leaked faked offers emerging from major oil companies in order to
“test the market” in some manner. We have our suspicions of other industries as well

In the case of Precious Metals, particularly Gold, such daisy-chains of well meaning
intermediaries peddling fraudulent offers is notorious. Unless one is dealing with a brokerage or
merchant house of particular repute, one must apply the levels of due diligence and independent
research we discussed previously on a seller before jumping onto a transaction.

Learning as much as one can about metals markets and industries, or financial instruments, or
Petroleum markets, etc., is easier today than ever before because the Internet has billions of pages –
some fluff but much of it highly educational – on various markets and industries.

It becomes a question of diligence versus laziness, in many cases.

Research and gain a thorough understanding of every aspect of the product of interest, history,
value, trade and market routes, uses, noted sources, noted dealers, politics of the industry, and more.

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When the volumes being traded are substantial, so too are the risks and complications – seek
expert advice from reputed dealers, traders, and industry experts. A bit of politeness and tact and
sincere appreciation for advice given goes a long way.

Credit Program Example: A common example:


Someone requires a significant loan or credit extension. His bank is unable to provide this to
him, for whatever reason, lack of his creditworthiness (in the bank’s eyes) or due to specific terms.
The businessman is desperate and considers hard money lender but lacks the collateral to put down
as security.
One day while reading a business weekly or daily paper sees an advertisement for credit programs
of up to, say, USD $1Mil. Friendly terms and fast settlements are mentioned. This sounds perfect!
He calls the number in the newspaper and visits the website mentioned. He finds out that he
actually can qualify for a loan of $3 million but first must put down a loan origination fee, or an
arrangement fee, or something similar, of $25,000. The borrower has the cash available and needs
the loan so is willing to pay this initial fee. He fills out the application, submits the fee, and waits…
And waits..
And, of course, never receives the loan. He looses his money. A significant sum. The fraudster,
sitting in a boiler-room office space rented in a half vacant strip-mall in some small town in a
nameless country is repeating this same scam, over, and over, and growing $25,000 richer every
time.

Prime Bank Investment Example: OF course the variations on this theme are only limited by the
ingenuity of the scammer. They can be as simple or complicated as the scammer likes. A human
tendency to be easily impressed by convoluted and complicated programs and schemes can work in
a scammer’s favor. The example below comes from literature by an investigator at the Hong Kong
Bank and is based on an actual real fraudulent transaction:

A businessperson hears about a fabulous new investment program, normally


restricted for exclusive and high net worth individuals. However one individual has an insiders
access into this program. It is a program that gives one access to a secret clandestine secondary
market for financial instruments. This secondary market is usually known only to major
international banks and their officers, and the instruments they trade in are “Prime Bank
Guarantees”, or “Standby Letters of Credit”, or “Acceptances. By trading in such instruments it is
possible to make enormous profits in a short span of time, however in order to play such high level
financial games would-be investors must demonstrate their high net-worth and show that in this
market the victim is told he needs to demonstrate that he has available capital. HE is asked to
deposit some FUNDS into a bank account, at say, USD $1 million.

For safety he is told that he will be the only person who is a signatory to the account
and he has not been asked for any payment per se, so he feels he is not at risk. Meanwhile the
fraudster requests that the would-be investor make arrangements for his bank to issue a Blocked
Funds Letter, stating that the deposited $1 million is blocked in the account for a year and a day.
This is explained to the would-be investor as a further demonstration of financial capacity.

In the meantime this whole process is fairly meaningless to the bank but it issues the
letter to comply with its customer’s wishes, seeing no risk in the matter.

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At this point the game becomes very interesting: The fraudster uses this letter in
another Country, Country B, as collateral material to help persuade another group of would be
investors to join a scheme by placing a deposit on a fabrication plant being sold off at a fraction of its
value, which will eventually be shuttered and sold for scrap at a handsome margin.

At this point the fraudster has the actual funds of the would-be investors in Country B and
simply disappears with their money. Now, he turns around in Country A and persuades the would-
be investor there to tender USD $20,000 as an arrangement fee, which will allow him to start
trading in the Prime Bank Guarantees in earnest. Since the would-be investor, or rather victim at
this point, is still concentrating on protecting his USD $1 million he will gladly hand over a
relatively smaller sum. This time, however, the fraudster won’t simply run away, but he will claim to
the victim that he can’t begin trading due to a technical violation by the victim, resulting in the
victim’s arrangement fee being forfeited. The victim himself may be confused and unsure but will be
eventually convinced and he simply dismisses his loss to in-experience.

The only restraints are the greed of the fraudster, the intelligence and imagination of the fraudster,
and sadly the greed of the victim. In many cases, as we allude to above, it is the greed in the victim’s
heart that enables such absurd frauds to occur. That or the need and desperation of a victim, often
in dire financial straights.

All of these types of fraud will contain some sort of clincher to psychologically soften up the victim
and overcome her skepticism. For example a fraud may contain language like:
There is no risk at all as all the paperwork for this project will be done by my attorney and
with my position as the credit officer guarantees the successful execution of this project.

You should observe utmost confidentiality, and rest assured that this project would be
most profitable for both parties because I shall require your assistance to invest my share in
your country.

In other words “believe me and shut up, and I not only will you get your cut but there is a potential
for more of a cut as I use you to launder my ill gotten gains in your local economy…

We ourselves have lost money in such frauds. Often in moments of great financial need, and
feeling a general sense of optimism, that we have been exposed to some special and unique
opportunity that a benign universe brought our way. These people exploit this with ease: note in the
following example, the fraud involves warning you against a fraud.

Note well, in all of these examples, the bad grammar and deliberate misspellings. These are
deliberate, be not naïve on this point. Some examples of 419 frauds we have come across are not
only written in very good “King's English” – but their byzantine complexity displays a keen mind.
Trust us, these criminals are not illiterate. The adage “Know Thyself” comes into play at precisely,
this, point.

Deliberate misspellings are designed primarily to play into the almost unconscious stereotypes held
by many White Business-Class Westerners, Liberal or Conservative, who will generally have a certain
impression about the living situation and educational standards of third world individuals, in
particular Africans. There is no value judgment made here. We are not calling anyone racists, just
pointing out the blindingly obvious fact that we all have assumptions and presuppositions about

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other parts of the world and their denizens. I certainly do. These assumptions need not be examined
because the probability of needing to do so is infinitesimally small. I need not examine my
stereotypes of village life in Burma because the probability of my landing in Burma is rather small.

However, as a mark for a scammer, be aware that your scammer has educated himself on the typical
assumptions and mindsets of people in your part of the world. Many a Western businessmen will
feel more at ease thinking that he is dealing with a well intentioned, though somewhat un-
sophisticated, and perhaps a tad bit “backwards”, individual. Dare I say, a polite and nice “coolie”? All
the while, this backwards coolie is fleecing his victim – the quite sophisticated Western businessman
- of thousands to millions of dollars.

As stated previously, on the temple of Delphi, the ancient Hellenes inscribed a single phrase “Know
thyself!”

We continue.
Based on the findings of this investigation department, we wish to warn
you against some touts. We have been informed that some touts are
contacting you in respect of the collection of your fund in the total sum
of $35 Million U.S. Dollars that was long approved in your favour through
the WEMA BANK PLC.

As a matter of fact we have been on this investigation assignments for


some time unknown to no one but the Presidency and some top government
official who are in support of this investigation team to help stop
fraudulent activities in this country.

Although we have been able to come up with some good result about the
people that have extorted money from you illegallyand i wish to list some
of them so that you will personally indicate them by writing back to us
because we want to make your payment to you without any delay but we must
surely deal and bring this names to book if only you will indicate
correctly any of them.

The names of the touts that we want to arrest are as follows:


1) PROF CHARLES SOLUDO
2) CHIEF JOSEPH SANUSI

The movie “Layer Cake” , based on the novel by J. Connolly, has an interesting sub-plot. I
recommend it highly, a typical Guy Ritchie style British Gangster film, it mixes high brow and low
brow, and paints an amusing, though quite bloody, description of certain realities of business. The
main character’s boss, Jimmy, happens to have made a blundering error of front-financing a huge
sum of money to a government in Africa in return for some commodity concessions, however he
was a victim of a bit of a scam – the “government” in question was almost entirely bogus and he lost
everything in a coup. The character’s utter desperation to recover his losses, and the machinations
that ensue, set the desperate, murderous, though somewhat humorous, pace of the rest of the
movie’s plots. At the end of the movie the narrating character learns the truth about the art of good
business – which lies in being a connector, of sorts. Which, of course, is why you are reading this
work.

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Does fiction mirror life, or does life mirror fiction, or do the two subtly mold one another, in a
nuanced dance perceptible only to the discerning? The plot of the movie above is not far removed
from “real life”. The parties engaging in certain trade scams are far, let us say, heavier than you
would imagine.

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4. Letter of Credit and Export Commodity Trading Frauds

Example: Variations of the fraud above are not just linked to investment schemes, but also occur in
commodity trading, import / export schemes, and so on. Here is very real example affecting would-
be Oil Brokers or Traders, the Transneft Fee Scam:

Certain Russian organized crime networks have a scam, involving advance fee,
upfront payments, of Transneft fees by buyers who wish to source crude oil from these so-called
“sellers” or “seller's mandates”.

Such “sellers”, or “seller’s mandates”, advertise heavily on online International trade


portals like Alibaba &tc. In fact, such portals are, in fact, often like ship graveyards carrying dead
deals, fraudulent products, to absurd degrees. The fraudsters generate documentation and procedures
that seems realistic enough to bluff many inexperienced would be buyers or brokers. Documentation
often contains contact information that is cleverly massaged to generate no suspicions. Cell phone
numbers presented as an office phone. Fake bank account numbers and SWIFT codes, email
addresses, and contact to a fake bank officer who is generally an individual in on the scam. Thus
phone calls and email messages sent to the seller's bank are routed to the criminals working the
scam, and not to any real bank. Some front companies are properly registered shells, but some are
entirely fictitious and do not even legally exist.

This scam is so well organized that suspicious individuals requesting authentic Transneft
documentation such as invoices for verification are put in contact with supposed Transneft officials,
even the President of Transneft itself. Of course these individuals are not whom they claim to be and
are simply other criminals who are part of the scam. They will provide an invoice for payment, and
instructions for wire contacts to Alfa Bank on behalf of Transneft pipeline. The criminals actually
have well placed plants who work inside Alfa Bank itself to divert funds to them. They also have
individuals inside Russian Standard Bank and an account supposedly linked to a Transneft
Trustee, who is really just part of the scam as well.

The Benin Import Scam: This is a real example of an Advance Fee “419” import scam originating
in the African country of Benin; unfortunately it plays on the most unfortunate situation of all
peoples – the refugee.

A company known under many names, but mostly calling itself Realmark Investment Ltd., had placed
advertisements on a number of business to business trade web sites requesting suppliers to tender offers for
export goods to Benin. They also operated under the name: “West Africa Refugees Commission (WARC)”

They offered to by goods varying from food products such as Frozen Meat, Fish, and Canned Food, to
computers and computer parts, pharmaceuticals, clothing, and the like. Attractive payment terms, such as
“70% T/T IN ADVANCE AND 30% L/C” and the fact that in most cases the organizations
affiliate claim to be purchasing for humanitarian needs, for refuges, “butters up” the supplier and engenders a
willingness to suspend judgment.

The criminals involved registered a large number of domain names and websites to perpetuate the fraud,
Sellers
replying were referred to various fictitious Benin Government agencies such as “BAFDAC” or
“BEFDAC”,

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standing for “BENIN FOOD, DRUG AND COSMETIC CONTROL”, or “BENIN
ADMINISTRATIVE FOOD AND DRUGS AGENCY CONTROL”.

Of course no such ministries existed, for example (and seller due diligence would reveal this) food safety
is
regulated through Benin’s “Ministry of Agriculture (MAEP)” at: Postal Address 03 BP 2900
COTONOU –
BENIN and on the web at www.agriculture.gouv.bj

The fraudsters refer to a couple of websites: www.bafdac.such.info and www.befdacbenin.org and


www.bafdac-benin.ne1.net. Sellers further corresponding with the fraudsters are presented with various
government registration fees necessary to export their goods to Benin. Another website referred to the
“National Agency Benin Product Control Bureau” (BPCB), stated to have been established “by Decree No.
13 as amended by Food, Drugs and Related Products (Registration) Decree No. 19 of 1999 as a
Parastatal of the Ministry of Public Health,” All of this is fraudulent. A bewildering number of names,
aliases, email addresses, phone numbers, and individuals create a haze, an “ether” drugging the victim
enabling the spiders at the center of this very well organized scam to feast.

We READ a web forum in which an Italian Wine merchant confessed a transaction with a company in
Benin
wherein the Buyer requested a certificate the supplier had never heard of. The seller was asked to kindly
forward
a copy of her “CERTIFICATE OF HEALTH &AGRICULTURAL” as issued by the “Benin
Ministry of Health (BAFDAC)”

Upon the seller forwarding her copy of the BAFDAC Certificate via an email attachment the buyer
would present it to the BENIN AGENCY FOR FOOD AND DRUGS ADMINISTRATION
CONTROL (BAFDAC)”

The seller, of course, had no such certification on hand, so she requests clarification and is informed that
without
said certificate it would be impossible for her to ship the products to them.

If the seller did not have such a certificate already on file in the Benin Republic the buyer then offers to
give her
contact information for the BAFDAC, to enable the seller to contact the agency, and be issued the required
certificate, which will, of course, “enable our transaction to move smoothly without any problems”

Smoothly indeed!

Variations of the scam involved a group “Shepherd Aid Network” or SAN and procurement
director Dr. John Ndaba. SAN requests to purchase large quantities of canned food for refugees and
ask for advanced payment from the company for product registration with the “FDCA” – the
“Food and Drugs Control Agency” as well as fees for a local lawyer, or federal judge, who will
represent the supplier at the FDCA. The “West African Refugee Commission” (WARC) is another
made-up agency frequently offering to buy.

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Supplier due diligence would indicate with a cursory Google search that these two commissions
only seem to be mentioned in internet forum tenders and trade leads. This indicates, at least, a need
for further research. Checking online phone directories, for starters. For example the Benin phone
directory at http://www.beninphonebook.com/en/whitepages/

All classic advance fee frauds involve persons impersonating government officials, barristers,
customs agents, and etc. Such persons lend support to the main characters in the fraud, and assist
their suckering in a buyer or seller, by requesting fees for various official documents and permits.
When you send your money, it is simply stolen. Make no mistake, sometimes these individuals are
simply not impersonating the above – on some occasions, they are indeed the real thing. This of
course adds to the drama.

Here is an example of a Letter of Credit Scams, wrapped up with a Sugar Trade Fraud. It is
also an example of a Prime Investment Bank Scam and Commodity Export Trading scam, rolled up
in one:
A sugar seller approaches you and presents you with an investment scheme. You, the buyer, will
advise a SBLC, while the Seller will use the SBLC to invest in a High Yield Investment Program involving
the trade of “Fresh-cut MTNs” and by doing this so much money will be made that he can give you a
subsidy and sell the sugar for a highly special offer of USD $100 / MT “CIF ASWP”

In the case above greed and simple tragic ignorance may cause a victim to advise payment for
1000 MT of ICUMSA Sugar at the barging price of $100 / MT for supposed delivery CIF ASWP. A
tidy net loss.

Even Transactions involving Letters of Credit are not immune to fraud. Forged shipping
documents can, and are, presented for document presentation. Many a ripped-off buyer has
discovered – to her dismay – that International Banking regulations offer very little protection for
letter of credit fraud. UCP 600, for example, is quite explicit in Article 24: That Banks assume no
liability, and no responsibility, for issues regarding the form, sufficiency, accuracy, genuineness,
falsification or legal effect of any document nor are they responsible for description, quantity,
weight, condition, quality, delivery, value, or even the existence, of the goods, services, pr modes
of performance the Letter of Credit is to pay for.

That’s right, the Bank has no responsibility for even the very existence of the goods you are paying
for. The locus of that responsibility is on your shoulder, the buyer. In Article 17: Where original
documents are to be provided, the definition of “original” can vary significantly, suffice that any
document with the word “original” printed on it whose form seems to match the nature and form
of the document that the credit calls for, is considered an “original” document, or a document with
an “apparently” original signature on it.

In all cases realize this, Article 5: “Banks deal with documents and not with goods…” and under the
mandate of UCP 600 a bank is irrevocably bound to honor a credit presented to it, or bound to
negotiate a credit if its negotiation is required, whose document presentation, as stipulated in Article
15: is “complying”. Article 14: states that the banks sole criteria to determine if a document
presentation is complying lies in examination of the documents, literally based on how they appear
on “their face”. In other words, if documents appear to be genuine on their face then the bank
honors the credit, unless clear and unambiguous evidence exists and is presented demonstrating
fraud.

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Prudence dictates that a seller not allow the buyer to take possession of the goods, until he has
been paid under the terms of the L/C. If discrepancies arise in the documents this equates to a non-
complying presentation, which prevents the bank from payment of the L/C. If a buyer already
possesses the goods then he has no incentive to waive any discrepancies in the documents, allowing
the seller to fairly get paid.

Even though the bank may not pay the seller due to document discrepancy, the buyer is still under
a contractual obligation to pay for goods fairly purchased. However the sheer difficulty in further
collection gives the buyer negotiation leverage to force the price of the goods to drop substantially,
after all he already has them. The buyer may choose to not even pay at all and the seller is, thus,
defrauded. The legal and procedural costs of trying to collect payments in another country can be
costly.

More on Letter of Credit Fraud:

To reiterate, International banking rules regarding Letter of Credits only require the bank to
determine “on the face” that a transaction does not appear to be fraudulent. Even suspicion of fraud
on the part of a banker is not enough to prevent the honoring and payout of a L/C provided the
proper documentary conditions outlined in the credit are followed. The bank must irrevocably
honor the credit unless actual fraud can be proved.

Victims may be shocked when they discover they have no recourse whatsoever against the bank,
but the international banking system has very little protection against fraudulently advised
transactions. The onus of responsibility to determine if goods being paid for are authentic rests
squarely on the buyer.

Here are some examples of Letter of Credit fraud in the Sugar industry. This one found on a
Sugar Intermediary’s Website:
The Sugar Info Centre, London, Illustrates a similar fraud occurring in 1991, in which a
Bulgarian
buyer paid purchased 13,100 MT of Brazilian sugar through a DL/C for USD $3.8 million. Since,
according to UCP500, a DL/C payment will be released by an international bank on the strength
of the delivery documents presented to the bank, and these documents alone are what the bank uses
to determine the authenticity of the goods being paid for, the bank simply paid the fraudsters while
the Bulgarian buyer waited..
And waited for the arrival of the m.v. Giovanna loaded on 17th July, at Santos on the bound for
Varna, Bulgaria. Of course the sugar was non-existent and the m.v. Giovanna was renamed the m.v.
Styliani back in 1983… and scrapped in Pakistan in 1984… Simple due-diligence would have saved the
buyers. As it is, the scammers were never, ever, caught. What harmed the buyer, in the end, was greed.
The desire to pay an absurdly small below market price for his sugar was pure and simple greed.

A similar incident occurred in 1992 when a French bank paid out a USS $2.89 million DL/C from
a
Russian buyer, against delivery documents for 10,000 MT of white refined sugar loaded in Panama.
Of course, the documents were also very clever forgeries.
Issuance of a letter of credit involves an irrevocable legal undertaking on the behalf of a Bank,
at the buyer’s expense, but by the end buyer, to advise payment once the specified documentation

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requested by the Credit is provided for. This documentation "proves" to the bank the commodity
being traded actually exists and that title to it is being transferred to the Beneficiary of the Credit,
such commodities are assumed to be loaded on board some manner of carriage and/or actually in
transit to the buyer’s location.

These documents are the proof of delivery, and also pass title to the goods. However if the
documents have been forged then the “proof” itself is non existent in fact. The bank is in any case
irrevocably bound to pay out on the documents the fraudster forged unless clear proof on the face
of the documents can be found of fraud.

Note that it is the bank which gives an irrevocable the undertaking, the buyer in the hands of his
bank and the seller. Any amendments - alteration to the terms of a letter of credit - must be agreed
by all parties, so the buyer is powerless if he becomes suspicious but lacks proof of fraud.

Banks deal solely in documents, not the products or services the documents embody.

The UCP 500 and 600, the ICC’s Uniform Customs and Practice for Documentary Credits, protect
the bank. These international banking rules stipulate banks must honour a credit as long as the
specified documents are presented and are correct “on their face”.

Banks do not have the obligation nor even the incentive to question deeply such the documents.
Banks have more incentive to detect forged currency notes or checks and drafts in which they bear
the losses themselves. In a credit, each bank involved will demand reimbursement back to the
buyer’s bank which will, in turn, demand and coerce payment out of the buyer.

It is legally the burden of the buyer to make her independent research and investigation.
The bank will not do it for you. For example, in the sugar fraud case above the buyer would have
had to simply checked with Lloyds Register the existence of the m.v. Giovanna, and would have
learned that it was not at the port of Santos in July 1991, rather it had been renamed the m.v. Styliani
in 1983 and scrapped in Pakistan in 1984.

BLCO – Bonny Light Crude Oil Scams


This one is easy. The Nigerian NNPC is the state owned entity responsible for a good deal of
Nigerian Petroleum Trading. The NNPC has stated that under law, they will not do business with
non-registered firms. Intermediaries can in theory do business with them but this requires
registration, financial disclosures, and approval by the Nigerian Government. Moreover, as stated on
their Web Site: “NNPC DOES NOT CONDUCT CONTRACTUAL BUSINESS BY E-
MAIL OR TELEPHONE”

Under Crude oil Marketing, the NNPC Web site states:

REQUIREMENTS FOR MARKETING CRUDE OIL


Those who wish to buy and sell Nigerian crude oil must demonstrate their
commitment to the oil industry through allocation of adequate resources of capital,
equipment and manpower to the general business of prospecting, exploration and
production of crude oil....

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...who may PURCHASE NIGERIAN CRUDE OIL
A bona fide end user who owns a refinery and sales outlet.
An established and globally recognised large volume trader proof of its global
network, its operations and volumes of crude oil handled in the last three years.

Other Conditions
All applicants must have a minimum annual turnover of at least $100million and net
worth of not less than $40 million. Successful applicants must show commitment to
the development of the Nigerian economy by investing any number of opportunities
that abound either in the oil industry or gas sector. Successful companies will be required
to post a $1 million performance bond through a first class Nigerian bank in addition to
the regular crude oil contract provisions..”
Do you have the resources to place a $1 million performance bond?
If not then you can not, and will not, be able to buy/sell/trade Crude Oil directly from the NNPC –
period.

The second matter, however, is that the NNPC DOES NOT OPERATE the Bonny
Terminal. Bonny Terminal is operated by Royal Dutch Shell; the NNPC has nothing to with its
general operations, though NNPC has equity in the terminal and its products under license. Any
prominent mention of the NNPC in an offer or quote for BLCO places doubts on the offer at once.

The hard truth is: 99 times out of 100 anyone from Nigerian offering to sell you BLCO, or any
crude Oil, Jet Fuel, or any petroleum products, is a scam. And even then we would have doubts. It is
theoretically possible for an intermediary through connections to gain access to real supply, but
highly improbable and unlikely. The real allocations of such products are quickly marketed and
contracted out to fulfill existing real demand among Majors, this demand outweighs supply.

The easiest tip-off is that almost all solicitations for BLCO or any Nigerian Petroleum product
involves fantastic quantities, often more than the Monthly production of the whole country.

Another scam tip-off is Sulphur content or API, or other specific specifications of the Crude Oil
do not match Platts or other established indices. The specifications of BLCO are well known in the
industry, if the specifications on the offer you receive do not match (and it is YOU who must exert
due diligence to diligently verify such matters) then be sure it is a fake offer.

There is no company on the planet that will book a tanker for you as a private individual, for
loading at Nigeria's Bonny terminal. Scores of excited, optimistic, would be intermediaries find
themselves ever year wrapped up in silly BLCO fraud games. IF you are contacted with such an
offer you can verify it directly with the NNPC Group General Manager at +234 9 234 8237. There
is no official or easy entry to this market on a secondary level. In fact, it is so astronomically
impossible to enter this market as a non major firm on any level that you can safely regard any
BLCO offers as pure and simple myths.

Buyer's greed blinds them to doing simple due diligence, such as: what is the maximum quantity a
tanker can carry, what size tanker can the harbors in question even hold? Just these simple questions

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expose most BLCO scams. I will be frank, as an intermediary, you will not, will not, encounter real
BLCO. Period.

Failure to do due diligence may have criminal, and certainly civil, penalties.

EMOTIONS AND PURSUASION


The emotional tactics we allude to above need further elaboration. To know the scammer you
must know yourself. You must know the many methods and ways of persuasion. Typically we’ve
noticed men seem to be more apt to fall for certain types of emotional appeals, others seem to
appeal more to women. Know yourself and know your emotions., if you believe that someone is
starting to play with your emotions this is a clue to get out of the situation. Many emotional
persuasion tactics work brilliantly well because they tap into certain normal human tendencies that
usually serve us well in ordinary life and commerce. It is a painful fact to face, but we must be
honest: one common trait that fraud victims display is a degree of greed exceeding their caution.
Those who think that these thing scan never happen to them, make perfect victims due to their
complacency.

Typically, scammers with try to use seven, eight or even nine different persuasion tactics,
simultaneously in a given message or conversation. Many tactics are used in tandem, or creatively
interwoven back and forth across multiple communications.

The careful scammer is very patient, we have witnessed scammers taking months to try to get to
us, often dozens of emails, International phone calls, and faxes, will gradually build on the victim
and push things along.

Once you understand these tactics you will realize that even ethical and legitimate salespeople and
financial advisors resort to such tactics. The attempt to persuade a person to take a certain course is
not, in itself, unethical or criminal. You may have bought a fine car, or house, or some wonderful
hot performing investments, a s the result of persuasion and, yes, manipulation on the part of a
salesperson.

Here is the problem, salespeople and potential partners engaged in legitimate commerce
may bring legitimate opportunities to your attention and in their desire to win you over, may
resort to some of these persuasion tactics. Attempting to persuade someone in itself is not
an indication of bad intent.

Some degree of emotional manipulation is part and parcel of sales, polishing the apples at the front
of the cart to catch a buyer’s eyes. The same tactics legitimate salespeople use every day inform the
conman (ed. which says a great deal about sales itself!) the scammer. Government fraud investigators
actually train watching TV home shopping programs, to note and analyze similarities in the
persuasion tactics used.

Well-intentioned manipulation has as its inverse not-well intentioned manipulation. A scammer’s


first task is to win your trust and confidence. By establishing a rapport with you, and then feigning
friendship, or at least friendliness, pretending to have things in common with you, and asking you
more about yourself and your life.

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Scammers sometimes refer to putting people under ether, some state that their techniques create a
fog, a fuzziness, a certain virtual “ether. This fog is increased as the scammer asks personal questions
and shows a real interest in his victim’s life. Everyone likes to talk about their life, and their interests.
Often times quite valuable information about the scammer’s victim is offered by the tongue of the
victim themselves! As the scammer gets to know you better, they dig around trying to discover your
emotional hot buttons:

What is it that you covet?


What do you desire?
What seems to rule your worldview, and approach to finance and business?
This allows them to further craft a clever investment pitch.
Know Thyself. Business is the art and science of managing greed – yours and your
partner's.

First the victim is psychologically profiled, next follow-up messages to the initial communications
continuously refine the sales pitch, while emotional persuasion tactics are used to elicit further
information along the way, all the while continuing to build and reinforce the general message, at
some point the red hot button will manifest itself, then the hook is cast.

In some cases as attempts to gain rapport are made the victim's personal life is focused on,
commonality is found and discussed, likes and dislikes while actual business temporarily steps in the
background. Scammers have even resorted to blatant religious manipulation, even praying over the
phone with a victim who seems deeply religious. Again “What do you covet”, ask yourself this
question and know it well.

Friendly relationship: the scammer is typically very personable and friendly, the victim
begins to genuinely like
the scammer. Human nature dictates that we prefer to give our business to people we
perceive as nice.

Scarcity: An opportunity or product is made to seem in short supply, to seem rare. This
increases its perceived
value. The mentality invoked is one that sees a virtual clock ticking down. This phenomena
can be observed readily in auctions, even eBay.

Time limitation: Closely related to the Scarcity tactic. An artificial time limitation is placed
on the deal to put
pressure on the shoppers or victims.

An example: we were once telephoned by a Canadian scrap broker, whose Russian


scrap supplier
Demanded upfront SGS inspection fees to secure an in-rem inspection at the port
prior to loading. This
Buyer was ready to open a substantial Letter of Credit to pay for the goods at hand
but the supplier
Convinced Her that the scrap would be sold to another buyer tomorrow if she didn’t
come forth with

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USD $10,000 to pay SGS in 24 hours. The supplier had limited stocks, and the buyer
would loose out
Of some valuable HMS 1 Steel Scrap. She was unsure if this was a legitimate
procedure.

We pointed out that all she really had to do was *telephone* SGS America directly
and ask that
SGS Russia clarify the matter.
One simple phone call could prevent tens of thousands of dollars in losses.

Phantom fixation: What do you covet? What is the fixation in you that can be used as a hook? A
scammer will use a carrot dangled in front of the victim, from wealth, power, to sex appeal. A
fantasy will be dangled in front of you, and with the fog created by these tactics, even the sharpest of
people often can't think straight. The most common fixation is money.. . Money, and fear.

Money: Who doesn’t want more money? Who doesn’t need to pay bills, go to college,
travel, enjoy life, and retire with peace? Desire for anything can cloud our judgment and cause us to
disregard our common sense. We come to believe what we want to believe, which is the fantasy the
Scammer has presented to us..

Congruence: Cognitive dissonance is highly unpleasant to experience, people desire to


appear congruent with their stated or perceived intentions and words, it is possible to a take
advantage of a victim’s desire to appear congruent and consistent. If a scammer can cause a victim
to strategically agree with a certain term or condition, later if the victim has second thoughts the
scammer can innocently refer back to this.

Popularity or Social consensus: “Everyone’s doing it” A powerful motivator, when it


seems like everyone else is getting in on the opportunity or buying the product … but the victim
might not be able to.

Presuming the Sale: Refer to congruence above, if someone we trust assumes a certain
poise we may follow them. After a scammer presents his program and makes his pitch, after the net
is cast instead of asking the victim to buy in, the scammer may well presume a successful sale, this is
the famous presumptive close. “So do you want that Rolls
Royce Phantom in Silver or Black Sir?”
“So do you want to buy 1,000 shares or 5,000”
“So do you want 10 FCL of this valuable HMS 1 Steel, or 50 FCL?”

In essence the question of whether you should or would buy is presumed, and the specific terms of
your purchase or investment are asked. Often one will be presented with a larger quantity or more
severe terms, and once the victim objects a more reasonable, lower amount will be suggested –
something that seems more reasonable in the face of the earlier request.

Reciprocity: The scammer promises to do some small favor for the victim which, in turn,
puts pressure on her to return the favor by buying into the scammer’s pitch. Good-natured people
tend to like to return favors: A free tip, insider information, and something given for free may evoke
a quid pro quo reflex in a person where the victim has a perception that she is in debt – once this
occurs falling for his pitch seems like a natural favor in return.

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When dealing with a master of manipulation, someone who can winnow out the weak spots of
your character, and use them with a sincere looking smile and feigned interest to win you over, you
have to be on your sharpest mode.

Whichever tactic seems to have the most effect, will be resorted to the most once its time to sell the
deal.

Is it scarcity? Exclusivity? A private elite marketplace in bank instruments that few people are even
allowed to know about? Why is there such hunger for IPO’s and hedge funds ? Because of the
valuable and desirable aura of exclusivity?

Or is scarcity due to a supposed bargain price that may not last long?

Our agency encounters Sugar Buyers who are seduced by absurdly low prices offered
in various “FCOs” floating around on the Internet, some reflecting real market
prices from long ago, as the same offer is copied and copied by broker after broker
for decades even ! Give such a one a bargain price and greed will set in quickly.

If the victim is made to know that many others are all clamoring to get on-board a particular deal,
the scarcity factor may work well. This in itself evokes social consensus, popularity: it's comforting
to hear that an opportunity is popular

Again, know your reactions, your weak spots, and cultivate patience. Try to avoid making snap
decisions, some expert psychologists advise giving the self 24 hours to make a decision.

Our agency traders try to adopt an Iron Clad rule: “I have heard your proposal and it sounds
very good to me, I always give 24 hours to think over any major investment decision, contact
me after 24 hours.”

And honestly think it over, does it make sense? Is it logical? If the salesperson seems pushy and
refuses to honor your desire for 24 hours inform them that this is your personal code, and you do
not appreciate being hurried. Scammers are highly skilled liars and if you allow them to impose an
emotional cloud or sense of urgency on yourself they will weave a frighteningly convincing picture.

Scammers sound like they represent legitimate businesses, and to assume that you will know a
fraud when you hear it is folly. With practice and great boldness their answers are some of the most
believable one would imagine. Watch the movie “The Usual Suspects”, the central character “Verbal
Klint” is on the surface a prototypical bumbling stereotype of a quick witted and fast talking
con-,man, by the end of the movie we in the audience only just begin to realize how deep the
character’s deception truly ran.

“Hold onto your wallets… tight!”

You must learn to do Due Diligence.


What is Due Diligence? Exercising sufficient and prudent efforts to determine the authenticity of
an individual or opportunity. The essence of Due Diligence is research and prudence. One simple

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rule of thumb can keep the would-be investor, broker, or trader out of trouble. Check and Verify as
far as possible every aspect of the opportunity and those offering it.

Example: An African Gold trading firm offering Gold Dust for export. Gold frauds are some
of the most popular precious metals frauds. Gold frauds have been traditionally practiced, for
example, among some Nigerian fraudster families for several generations.

The forms of the Gold Scam are many, from fake gold mines for sale, to fake gold bullion,
hidden World War II Nazi gold, to gold hidden in the Philippines or Swiss vaults left over from the
Marcos regime, the Gold Dust scam is among the more popular.

Example of a very simple Gold Scam (or at least bad business.):


A London firm offers to buy Gold hallmarked bars. They will pay by non-transferrable
documentary letter of credit after the Seller posts a 2.0% Performance Bond.

Do you realise how easy it is to trigger the payout of a Performance Bond or


Performance Guarantee? Prior to the buyer paying you this is a supremely vulnerable
position – the buyer triggers the PB or PG, takes your money, and doesn't buy your Gold.

As they say in the States: “You've Been Had Buddy !”

Often it is claimed that unrefined Gold dust is available direct from mines located in Ghana, Mali, or
Nigeria. Strictly speaking, this is true. Gold Dust exists, and is traded, by certain individuals. The
question is – is the gold dust you are being offered legitimate ? Probably not, is our answer. Do you
have the capacity to pull off a Gold Dust deal safely?

Know Thyself. If you can't even do rigorous due diligence to verify your source, you will be fleeced.

I have heard, in unofficial capacity of course, direct from SGS inspectors mouths that in the last few
decades not a single inspector has ever seen a legitimate Gold Dust cargo come out of Mali
or Ghana. This came from a number of inspectors.

One feature of such frauds is that the fraudsters often request one to visit the country itself, to “see
with your own eyes” – sometimes to arrive at a bank with a suitcase full of cash money whereupon
isn't deposited, but is merely exchanged for the pure gold. Or the money is requested via T/T or
KTT or Western Union wires.

Money, without adequate escrow of course, is exchanged in advance of the release of the bullion
documents or the gold dust or ingots. This is the fatal mistake.

Sometimes, if one is lucky, one does get fake coated ingots or brass dust. Sometimes, one is killed
and one’s money taken.

Often scammers refer to the names of African or Arab princes and emirs, and/or their family names
are thrown about and referred to constantly, titles, affiliations all designed to inspire in the victim a
feeling of exclusivity and privilege in the target.

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Before entering into a Gold Dust or Gold Ingot transaction, one must address the following
questions:
-Who is the firm with whom you are dealing?
-Who are the principals of the firm?
-What are their corporate papers like? Are they registered to actually do business?
-Are they registered to export?
-Have you, we dare say, verified this? Not asking the firm itself politely, but
actually verified details from the government of the country involved of the facts of
their case?
-Do you have scans of their identity papers?
-Has an independent inspection agency inspected the goods? (Beware ! SGS from Geneva
itself informed the authors that they do not inspect and perform assay tests on Gold dust
originating in Mali. Not only that but the SGS rep who contacted up personally stated
that
in his 20 years of working at SGS he has never, ever, even once heard of an authentic
Gold
dust transaction originating in Mali. Are you so sure your “Sellers Mandate”
really is a “Sellers Mandate”?
-Does the “mandate” disclose his papers? His letter of mandateship or of agency?
-Do you ever accept a claim to mandateship or agency without seeing some documentary
proof.
-If so why in the world would you do such a thing to yourself?
-Have you personally contacted the appropriate agencies in that country and inquired as to
the export paperwork needed for the transaction and the appropriate fees? Have you
contacted your embassy in the country in question?

And even still at the end of the day, to quote a sadly departed late friend, a gold trader, and military
hardware trader,

“At the end of the day buddy, you still might just get a package full of brass filings
and dust.”

Sometimes you may find, at the end of the day, that all your documents are fake: from certificates
and documents of origin and authenticity, assayer reports, customs documents, insurance
documents, shipping documents, bank documents, storage receipts and documents, mine reports,
and you may find that all the government officials you called on a scammers payroll. Some papers
may have once been genuine a long time ago but greatly altered to fit the scam. Some people you
called may hold real offices, but moonlight under this scam.

Sometimes you may find that you travel to the country itself and constant attempts at incriminating
you in some way are performed, you may be persuaded to lie about the source of the “real” gold in
order to slip your shipments past restrictions. And you may find that this act now gives your
fraudster legal leverage over you to use and manipulate you later. You may find later that this
leverage itself is fake, after all the gold you smuggled didn’t exist, but the psychological pressure of it
call makes you vulnerable to more manipulation.

Example, you are given a prospectus and proposal for a private investment opportunity. Have you
thoroughly reviewed the Investment proposal?

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-Checked out the broker, or financial adviser proposing it?
- Check their credentials and disciplinary records with the Securities and Exchange Commission
(www.sec.gov)
- The NASD (www.nasd.org) and www.cfpboard.org
-State securities regulators (www.nasaa.org),
-Checked if their company is registered, in which state, to which principals?
-Checked the BBB concerning them?
-Researched Google, Northern Light, Ask.com and AltaVista for them?
-Asked questions on various web based due diligence and investment fraud bulletin boards on their names,
just to be safe?

You must keep yourself informed and know ABOUT THE SCAMS OUT THERE and learn
about how to avoid scams, after all, that’s what this work is for. You have to learn about what sort
of scams are currently out in the wild.

Example: Copper Cathode procurement from Africa. A seller’s mandate or agent of a mine
approaches you via email or fax offering Copper Cathode for sale. At very handsome prices. Can
you tell what is wrong with the picture, and research the matter to your satisfaction of knowing if
you have a real offer or not?

-What are the procedures and terms of sale ? Are they in line with standard procurement and
purchasing procedures, pro forma, quote, RFQ, full offer (not full corporate offer. Are you a
corporation? If not why are you issuing a so-called “full corporate offer”?)

- Are proper ICC backed procedures in place, procedures outlined in every international trade
textbook from “Export/Import Procedures and Documentation 4th edition” to Clive M.
Schmitthoff's Textbook on International Trade Law (the industry standard) or even his
Select Essays on International Trade, if you can source it from a University library?

-Is the offer and its procedures in some arcane broker-speak with cryptic references to
misspelled acronyms for documents no one is even sure are needed, or procedures that make no sense such as an
“LOI before BCL and POF and then ICPO” and such other mumbo-jumbo?
-What are the specs of the cathodes? Their purity, their dimensions? are these standard with what
the industry usually produces and quotes?
- What is the quantity is being offered by the Seller, and what country is the seller’s
refinery in?
-Have you actually Researched the production capacity of that country per
annum?
- On that note, is the quoted amount more than, say, entire regions could reasonably produce in three years
running, based on published official stats? Does the country in which the purported refinery reside even
produce copper?
-Is the quantity over 500MT? Is it over 1000MT? How high is it? Why would a supplier
Contract a very large purchase with an untested, unknown, buyer? Supply and production
is limited, any producer has known major clientele, there will be little remaining after their
procurement. Why would a producer risk alienating a known performing major buyer for
someone who faxes or emails them from the Internet?
- Back to the country of origin, is it quoted DRC? Does the Congo produce Copper? Does Tanzania? Does
Zambia? What is Konkola’s annual production anyway? Have you researched this?

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-KCM’s stated annual production is (reader fill in the blanks...) Metric Tonnes / year
(look it up on the web). -now, your seller offers you 500,000MT of Copper cathode from
DRC.
-KCM is the largest metals company in Zambia. Now that you know this you can see
the problem
with his quote. But did you do the legwork and research to find this out?

-What is the price of the copper? Is it discounted? Why? Why would new cathodes be discounted below
LME? What about the freight component of the copper?

-Is it sold FOB or CIF? See above. Is it normal in the copper market to sell at that particular term? What portion of
the price is a freight or insurance component?

-Is a Performance Bond advertised? Is a Performance Guarantee advertised? Do you know whether produces
in the copper industry, in this region, typically even advise PBs or PGs ?
Whether or not any real mine would advice one or the other, and if so which?
Just as with the example of the Gold Dust example above, which inspection agency is
quoted by the producer or seller as performing the inspection? Does this agency
actually perform inspections in the country of question? Have you
personally phoned, email, or post-written SGS, Veritas, &tc., to that effect?
-Is the broker or mandate making these offers to you able to competently or confidently answer the above questions, or
at least professionally say “I don’t know sir, let me check with my principal? Or are they bluffing their whole
way through?

On this level the brokers handling the deal may have absolute sincerity and good intent, though
they may be bluffing their way here and there, the problem is that they may be ignorant and relying
on what they believe to be a legitimate seller or representative of a seller?

And at the end of the long thin web, may stretch a string contract of 50 different brokers,
mandates, mandate’s mandate, sellers, suppliers, until you have a big, fat spider at the centre of the
web.

What do we mean by this?

The reality is that many of these offers have been orbiting the planet for almost two decades. Some
may have originally been authentic and reliable trade leads, just altered, mangled, sanitized, un-
sanitized, by every other broker whose hand it fell in, passed by fax, email, post, and fax again
through thousands of hands, uploaded to a BBS in 1992, posted on UseNet in 1995, saved to a hard
drive until one broker down on his luck dug it up and not understanding the time-sensitive nature of
any offer and quote, reposted it to Usenet and to a brand new web bulletin board in the desperate
attempt to find a buyer, then it was posted and downloaded again, and again, and again, and again.

The reality is that apart from these peripatetic travelers wandering the globe like ghost ships, there
is another, darker, more sinister traveler involved.. This type of offer is a scam offer, uploaded years
ago by a purported seller who was, in reality, a scammer.

And a patient one at that.

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And like a land mine that can explode and recharge itself and explode again, it bumps around
passed on by sincere souls until it finds the one in a thousand person or company willing to post
USD $500,000 on a shipment., and quickly like fire excitement buzzes through the broker network,
calls are made, NCND’s are signed, faxed, signed again, principal details are passed from hand to
hand and if the deal doesn’t collapse due to lack of knowledge and skill on the part of a particular
broker, or due to greed on the part of another, it makes its way home to its master, who ensures that
everyone is circumvented on his non existent product and he dines well that night on ill gotten gains
leaving scores of disillusioned intermediaries and buyers.

And all of this, simply further destroying the business of the private trade intermediary.

Every broker in that chain was a victim, and every broker in that chain was to blame on some
small level for the total failure of all. And the one who was defrauded, if only he had done his due
diligence and actually read up on the cooer industry or at least ask questions of people who should
know.

In short, always Investigate a matter before you invest in it, no matter who the seller or broker is.

If you are dealing with a “mandate” selling you copper or iron ore, what is their proof of their
official agency? If they have agency then they are employees of the mine, of the refinery, and should
not be afraid to disclose their status. If they are then they are playing the role of an ill informed
broker, intermediary, or seller and performing that role badly.

The reality is that in many industries brokers or independent intermediaries are simply not retained
to sell certain types of goods by major producers. Ever. A well informed intermediary can take on
the role of a legal Seller, and place himself in the middle as a trader and seller. FTN Exporting
publication “The World Is Yours” details this process quote well. In some quarters it is called “The
Triangle Trade” and very few people on the planet even know how to do it correctly.

It is possible to be an independent trader and seller of any commodity on the planet, short of some
which are tightly controlled by official price cartels for which there are only one or two producers in
the whole world, and everyone else buys through their mandated distributors.

Example: You are offered 100 MT of crude iodine FOB Michigan by someone who claims to
be a mandate of the largest US iodine producer. Do you know what is wrong with this picture?
-What states in the USA produce iodine?
-What is their annual production capacity?
-How many plants are involved?
-How many companies own production facilities?
-The person claims mandateship? In 30 seconds or less, can you name the one and only chemical
distributor mandated to distribute iodine for half of the USA’s iodine industry?
-Does this mandate represent that distributor?

By now you should be getting a good concrete idea of the mindset you need to cultivate and
inculcate if you wish to perform due diligence work successfully. Make no mistake about it, you
must cultivate this mindset and practice it.

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A good practice is simply trying to trade with a critical mind with other brokers – who knows, you
might get lucky and between the advice sources mentioned in this work and the references, and your
critical min, and a lot of research in trading procedures, you might end up able to nail a real deal,
sharp as the proverbial tack. Or perhaps not, but you will learn, and learn more.

Passing the buck of the scam: by now you should be seeing the problem with mandateship,
agency, and claims to agency. You must be familiar with the ICC’s rules of agency and the body of
Lex Mercantilis (mercantile law) governing agency.

That way, the next time that you are offered a commission to sell certain products by someone you
barely know, you will be able to investigate and investigate well, and determine if it is a real
legitimate opportunity, or a disaster waiting to happen, in which it is highly likely you would end up
participating in a scam.

“In God we Trust, with everyone else we verify, verify, verify”


Is the motto of a particular private Intelligence officer we once encountered. It is a useful mindset,
irrespective of one’s religious affiliations.

To quote TV’s Fox Moulder on the X-Files, “Trust No-one”.

The world of International commerce is full of quite legitimate companies that are small and
obscure. Quite successful, legitimate, high volume Import/Export firms are run out of home
basements and bedrooms even.

In the USA almost every state has an online website allowing one to lookup business and corporate
registrations. Many fraudulent companies use legitimately registered corporate fronts of course,
some limited companies and corporations may be owned by others, which are owned by others,
which are owned by nominees and mandates of the real owners and registered in numerous
locations. Some of these companies are legitimate businesses doing simple, intelligent, asset
protection. Many are fronts for scammers of course. Try to trace the trail of ownership as far as
possible.

Many countries have such websites as well, for example Australia has a website with every single
corporate business registration in the company registered and accessible via a query. Of course many
legitimate businesses are sole practitioner types of firms without a corporate entity.

You should dig through newspapers on microfiche or business magazines, and of course
Google, AltaVista, and ask.com are your friends. So are Usenet archives such as dejanews (now
accessible through Google).

One can check American companies at the Better businesses Bureau (BBB) but be aware that the
BBB only collects complaints. They make no stance in itself. The BBB can not and will not say
“This company is bad, but this company is good” their only business is to collect complaints against
a company. And legitimate companies may well acquire complains in the normal course of business.

Consulting a lawyer is not sufficient in itself, many lawyers are poorly trained in the real world of
trade, finance, and investments. They know the theory and the law, but this in itself is not enough –
it is however highly important for you to have in its own right. A lawyer may vet a contract’s terms

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or affirm their acceptability – on paper – however she may have no real grasp for how money flows
through the structure of the opportunity itself. Contacting other sources is necessary.

If possible to visit a salesperson or partner’s locality, do so with care. Don’t inform them however,
a quiet side trip and investigation under their nose suffices. Some variants of African 419 scams
involve persuading a victim to visit the country, get to know their would-be partners, once arrived
the poor victim is kidnapped, held for ransom, and sometimes cut into small pieces and stuffed into
luggage – BUYER BEWARE !

Some scammers will object to you visiting their local personally to investigate, tender payment, or
inspect goods. This is a red flag. Other scammers will welcome it because, of course, they plan to
ransom you and chop you up for the fishies.

Remember: The scammer wants to collect your money first, not sell you products, or buy products
from you – for that matter legitimate sellers wants to get your money first to offset the risk that you
may be a scammer yourself! The DL/C helps buyers and sellers by imposing a escrow function
mandated by worldwide International trade bodies and law.

One clever trick with up-front fees for Transneft, or inspection services, or gold refining services,
&tc., is that once you tender a small fee the scammers will insist that there is some sort of quota on
the product and that you need to send them more deals before they can accept your LC.

Some buyers may insist on getting their would be partner or seller to sign a promissory note to
return the fees in case of non-performance, but what good will this do you? How will you collect
that legally binding Note that the scammer just signed?

BUYER BEWARE !

Remember, Verify, verify, verify.

It is possible to make due-diligence work fun and enjoyable, it becomes like a detective game
instead of a chore. Though the slimy aftertaste of realizing the depths humanity can sink to never
full leaves one’s mouth.

Always, always, contact the embassy of the country your partners claim to hail from, enquire into
the individual, their company, normal modes of doing business in that country, and business normal
fees. Of course an embassy will want to protect the confidentiality of their legitimate citizens, but
responsible embassy and consulate officers should help you if they see obvious fraud occur.

Learn to contact YOUR OWN COUNTRY’S embassy in the foreign country and ask the above
questions, and request assistance in performing due diligence. Your country’s embassy is there to
serve your needs and your country people’s needs. They are often glad to help and asset to protect
their citizens from fraud, and assist them in doing business.

You can request your embassy in the foreign country to recommend local barristers and lawyers to
review contracts, paperwork, documents &tc. IF you choose to travel to that country, contact this
lawyer and enlist his services, make you’re your embassy and your lawyer know where you are.

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Quid pro quo, something valuable is given for something valuable in return. Buyer wants funds?
The pre-advised letter of credit is a brilliant escrow tool. It lets you put money on the table, tender
legal consideration and show you are serious, while at the same time requiring some performance of
your partner, your seller, to access the funds advised. You put money on the table, to get to it the
seller advises proof of their interest in the product or proof of the product’s existence and the
seller’s legal interest in its trade and legal authority to trade it.

The misleading term POP is sometimes improperly used here, trade expert David Papa points
out that the proper legal term is PPI, as reflected in the Insurance industry’s use of the term, policy
proof of interest in the product.

If possible a supplier’s legitimate performance guarantee advised through proper financial


instruments ties them into a situation in which they must perform. PG’s are not as often used as
they once were, and the rise of smaller container shipments make them impractical. Many legitimate
suppliers and sellers will not advice a PG. This in itself is not proof of bad intent, it is a company’s
policy to advise a PG or not. You have to decide yourself if a transaction is important enough to
require or not require a PG, or PB (we dislike using performance bonds in the case of
intermediaries. There are legitimate uses for the PB but in general intermediaries should shy away
from them).

Know as much as you can about your partner’s or seller’s bank. Often scams extend quite high, for
example in Nigeria and Russia, a certain degree of corruption extends into the financial sector and
some banks in their entirety are owned by criminals. Verify the reputation of the bank with your
country’s embassy in that country and with reliable local lawyers referred by your country’s embassy.

Call people. Call the bank. Call the embassy. Some information is just a phone call away and yet
people seem to neglect this.

Serious business has serious considerations, a rule in all trade is “money first, unless you are
credit worthy” but that money can be, and should be, legitimately escrowed irrespective of whether
or not you are an end buyer, or a middleman, or an end suppliers selling to a buyer you suspect. The
Letter of Credit is a time honored instrument to do this.

A financial instrument molded by centuries of evolution and use, the ancient Chinese funded
some trade using primitive versions of the Letter of Credit, the Christian Knights Templars learned
about letters of credit from Muslim Arab traders in the medieval crusades. In fact the Hawlala
traders in many Asian neighborhoods today still use ancestors of the same instruments, and in spite
of the ill repute recent political events cast on the Hawala The Chinese, Indian, and Arabic forms
of modern Hawala banking are some of the fastest, most reliable, and least error prone
methods to transfer obligations and funds in the world.

Italian merchant princes used letters of credit in the same way their ancient Roman forbearers
did. The rise of the great merchant banks of the 18th and 19th centuries were often connected to
issuing Bankers Acceptances, and Jewish bankers in the Near East, Greece, and Turkey, evolved the
art to a high level, whilst their cousins in Europe, the ancestors of the Great Banking Hoses of
Warburg and Rothschild, as well as the Barings in England and other venerable firms in The City, all
molded this instrument into something of unparalleled flexibility and utility, sufficient to handle the
trade of the world’s most far flung empire.

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These are the venerable ancestors of the modern documentary letter of credit – the L/C is a
financial instrument refined by over 2000 years of use in International Trade – Learn all you can
about them. Of letters of credit, The ICC’s regulations UCP 500 and the newly adopted UCP 600
contain some of the safest procedures for Letter of Credit usage humanity has ever seen.

Due diligence is not talking to other brokers or investors, posting on a due diligence bulletin
board (though quite valuable information can often be found on these forums), or even knowing
well the person pitching the opportunity, nor visiting the salesperson’s offices in person, none of
this proves anything. You must be diligent, not simply accept tips passed in the broker network or
even by people close to you, and never let yourself feel pressured to make a decision. Do due
diligence as outlined above. It takes patience and legwork but you can break down the process into a
procedure with clear outlined check-list style steps.

Scammers have a field day with buyers who


- Look For The Cheapest Price – Cheap prices, you get what you pay for: Why are
they cheap?

-Know current real world prices - that’s what Google is for, that’s what the Newspaper
in front of you is for !

-This is what your competitors are for – ask them even. Be clever, get a business school
student to call asking for advice prices and market conditions. You are capable of subtlty
here…

Again we have the greed factor rearing its ugly head. Mistake one is Greed.

-Who are convinced into to Paying BY A STANDBY LETTER OF CREDIT.


Note of course that some legitimate suppliers do accept or require the SBLC as an
instrument of payment, Some Sibneft contracts, for example, may detail certain
procedures requiring it in lieu of cash in advance by T/T, we have examined some
authentic Aramco contracts which also stipulate it as a backup, risk mitigation method,
in case a buyer defaults on a monthly payment and requires credit from the Seller. These
sort of deals are not for intermediaries, they are principal to principal deals, in which the
seller is the supplier, OR the seller is a middleman selling product they’ve sourced from
other Suppliers in their league - Aramco, Sibneft, Mitsui, even Shell, may all at times at as
intermediaries and trade materials produced by other suppliers, in this case they are
legally the seller and not the supplier. They have financial weight beyond normal
reckoning, paying them with a SBLC is STILL DANGEROUS – legitimate suppliers
have without a doubt behaved in a fraudulent manner before.

-Who Pays By A "Prime Bank Guarantee"


– Just don’t do it.

It is trivial in some cases for a Scammer to pretend to have product, get a BG payment
Documents against cash from you, advised to a small third-rate village bank (these are
real examples that have occurred) and convince highly provincial Bank Clerks to simply
release the funds without showing documents, or by showing obviously forged

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documents. It happens.. Often, this is a horror story we heard from a highly
experienced International Banker and expert on Letters of Credit.

- Who Issues A Letter Of Credit Before Seller’s Performance Guarantee or Performance


Bond is advised.
The Performance Bond is not used much in today’s world of trade, while the
Performance Guarantee, especially as advised through a Standby Letter of Credit, has
increased over the last 30 years. Even while Performance Bonds are still used in some
trades in some countries, this is by no means universal. Indeed, note well that today,
many, suppliers no longer even offer PGs in the real world of trade, especially for
Smaller FCL container purchases. The importance of the PG as a risk mitigation tool is
unquestionable, some degree of intelligence is called for. If you are purchasing from
Mitsui or Petrobras and they refuse to advise a PG, no amount of your prodding is going
to make them. If your seller is sourcing from Mitsui, of course the seller will not advise a
PG either. If you are buying 5 FCL from a Sugar merchant and you insist on a PG the
merchant may insult you, if you are buying millions of dollars in a 100,000 MT bulk deal
however, a PG is to be expected.

-Who don’t seek advice from trade professionals.


International Traders and Authors of trade books, lawyers, bankers and freight
forwarders, all are experts of sorts. By seeking multiple opinions and asking intelligent
questions you diminish your chances of being defrauded. No one knows it all. No one.

Example of a Scam:
Buyer offers to buy your sugar. She offers to pay you, a legitimate sugar merchant, by nontransferable DLC,
issued revolving, after SGS at discharge port.

What is wrong with this picture? Easy. The buyer states that the letter of credit will be paid after
SGS inspects the sugar at the discharge port, defining to mean that not only has document delivery
taken place but shipment has been effected, the supplier has sent the goods into the buyer’s hands
who will pay for it.. after he has had SGS

Conclusion: Either a scam or the height of stupidity. Either way, best avoided.

General Tips for the careful:


Only play with money you can afford to lose, as a general rule. If the opportunity blows up in
your face can you afford to loose every dime? How are you financing your deal? If it blows up can
you carry the debt? If the investment is fraudulent and you loose can you afford this? Did you
mortgage or re-finance your own house, or over-leverage yourself from sources you cannot afford to
“burn”? Be careful, ever if something goes wrong it will be seen as your fault, there are some
relationships that you can’t afford to burn, no ROI is worth a certain price.

As time goes by one’s sense for such matters will become more acute. Unfortunately there is one
main way to become highly familiar with International fraud, and that’s by being exposed to it’s
seedy underside, and the worse way for this to occur is by being had oneself. Or learn from other
people’s experience and seek out professionals in this matter.

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Someone who has had a lot of exposure to will have a good feeling as to what might be fraudulent,
and they will always do due diligence and attempt to confirm or deny their feelings. Laziness is no
excuse and is a fatal vice.
.
Remember always, greed is a killer: An investment that sounds too good to be true usually
is.
Learn to listen to your instincts, especially when they tell you to run.

Due diligence is so very important, often times well meaning and sincere people unwittingly
become dupes of the scam, and pass it on themselves in the sincere belief it is of value! A few
meanings, or a couple of enthusiastic seminars, and the victim is sincerely convinced, invests her
money, and goes out “preaching the gospel” persuading her friends to jump on board. Many Ponzi
schemes spread rapidly through networks stemming from church and neighborhood connections.
One investor thinks he or she has found a good thing and honestly wants to spread something good.

By putting the scammers in contact with new recruits they unwittingly dig themselves deeper into
the scam and when it explodes, can be caught “holding the bag” since by this time the scammer has
sufficient funds to easily elude attempts to capture him and has in front of him a buffer of
enthusiastic and convinced followers !

Suffice to say one should never enter contract where payment is by irrevocable 'SLC' “SBLC” or
'PBG' Period. Baring the unusual circumstances previously mentioned in principal to principal direct
transactions in which a few large suppliers may mandate contractual performance by a SBLC – a rare
situation that is highly fraught with danger anyway, don’t do it. Intermediaries should never, ever,
pay with a SLC or PBG.

In industries in which a PB or PG is customary, having the seller lodge a Performance guarantee


or Performance Bond prior to delivery and collections on the buyer’s payment, is a good risk
mitigation tool. Be well aware, however, that many, many legitimate suppliers are simply not issuing
PG’s anymore. Contractual stipulations for Late Delivery should exist in this case. Asinine insistence
on out-moded business practices indicates exploitable naïveté. If your Brazilian Sugar mill will not
give you a PG for your tiny 40 MT container purchase, then you must deal with the reality of the
marketplace

Prior to collections the Seller should provide verifiable proof of their interest in the product, proof
of the product’s allocation, existence, etc. In the case of a major seller or supplier asking for some
warranty proof of interest may receive scorn, a smaller seller should willingly provide it to your bank
with verifiable details after his interests have been assured, such as your money in escrow.

IF you are not experienced with contracts of course your attorney should check everything before
you sign.

Another factor of due diligence is price advice, having dealt with some truly stupid or greedy buyers
who want to buy, for example, sugar for 200% less than average world costs, I can say: “You get
what you pay for”.

Always be informed as to current world prices, exchange futures prices roughly reflect real physical
trading with, of course, added seller’s margins and shipping costs. But your price should be +/- 5%

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or 10% of current prices for products FOB. If you are buying something FOB $150 less than global
FAS prices then you have only yourself to blame for your greed and stupidity if you are massively
ripped off. Simply reading the newspaper’s commodity sections, then calling a few dealers, suffices.

So here are more general tips:


Never, ever pay an unprotected or non-escrowed upfront fee to an untested
commercial partner, mandate, investor, &tc., without employing some sort of secure
escrow procedure and facility.

The only reasonably secure type of escrow procedure for large funds in the payment
of goods and services we are aware of is the irrevocable documentary letter of credit,
backed by proper procedures and documentation.

Payment by Documents against Collections can provide a bit of security but no where
near the security of a DLC. Only the DLC is perfect for intermediary use, intermediaries
should not use any other payment method.

Some international banks, such as Barclays, may offer escrow services, as do title agencies and
some attorneys, it is possible to create a reasonable escrow through the use of trusted attorneys and
escrow services, however the most reliable method of escrowing funds in a manner in which they
can only be released upon proven performance is the DL/C.

Even here: BEWARE ! It is possible, as we shall see, and in some cases almost trivial to trigger the
release of a DLC by presenting fraudulent documents. In such cases the fault is often with the
victim for some procedural lapse, however it can happen. For this reason you must apply due
diligence, common sense.
A recent example – In December 2006 Hong Kong authorities arrested a couple for
swindling over $360 Million dollars out of nine separate Hong Kong banks, by the
presentation of forged delivery documents for Raw Paper materials. The scale again? $360 million
dollars, in 158 separate Letter of Credit transactions with 9 different banks.

The couple were sentenced to 40 and 48 months in jail respectively.

UCP 500 and UCP 600 mandates irrevocable release of funds on a L/C as long as there are no
obvious signs of fraud. The product you thought you ordered may not exist but if you can not prove
to a bank beyond a shadow of a doubt that it was fraudulently advised, that bank will pay out the
L/C.

A clever scammer can abuse even such a safe instrument as the L/C and leave you powerless to
prevent their collecting your funds, and example is given

In general one will be safe enough if one simply refuses to accept any procedure where you have to
pay large upfront sum to get the deal started.

There are fraudsters, and then there are fraudsters. There are a garden variety of sloppy common
criminal whose schemes are easily penetrated with impunity, then there are the master forgers of
refinery and government documents with a mastery of human psychology. One Better Business
Bureau president, Julie Wheeler, states that: ”Fraudulent businesses quickly close shop, discard their

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cell telephones, abandon the 1-800 numbers, and move to another address to avoid law enforcement
detection,“

This is “The Boiler Room.” Telemarketers, sales people, scammers, all trying to close fraudulent
deals, practiced tried and true delivery pitches.

As you can see, the most innocent and authentic seeming tender or offer could have, disguised in
it, a veritable bomb waiting to go off in the eager hands of the person unlucky enough to encounter
it. As we stated before, the Internet has opened huge possibilities but it is a huge uncharted ocean
upon which all manner of flotsam and jetsam may surface. The medium is indiscriminate, it is the
human mind that must discriminate !

And discrimination is what is needed: Scammers, Fraudsters, by any name they are given,
are highly creative and often highly intelligent. They have many ways to get a hold of your
money...

The world is a place of great opportunity. We constantly look for opportunities and we seek
success. The Scammer seeks the same, but through deceit, lies, and fraud. The difference is that we
seek to share opportunities and to honestly exchange like for like, quid pro quo, to derive an
advantage – I have something, you have something, an opportunity exists for us to advantage by its
exchange.

The Scammer’s opportunity, lies in your impoverishment and his enrichment at your expense.

Once your trust is gained obtaining your money – the ultimate end of a fraud – is accomplished
through a bewildering array of forged documents - from banks, from governments in the form of
fake identity papers, on-line in the form of fake Internet sites pretending to be end-buyers, which
will receive the Offers and Pro Forma Invoices of legitimate suppliers and exporters. This gives
them, often, the bank and shipping account information of such suppliers, logos, letterheads, from
which they can perform identity theft of the Company, using its stolen identity in further
perpetuating other frauds, and fake websites to accept information from legitimate end-buyers or
traders, to steal their identities for future criminal use while, at the same time, milking the same of
their money here and now.

Make no mistake about it, the modern scammer is a seasoned professional, the learning curve may
be steep but once on the road to fraud the intelligent and creative mind improvises, tries new tactics
– as the Arabic saying attributed to Islam’s prophet goes “If you have no shame, you may do
whatever you like!”

Shame is the internal deterrent holding us back, the criminal without shame but who is highly
motivated may try many, many, tactics of which some will fail, but some will succeed – it is a
numbers game. Seasoned professionals can make millions of dollars a year in fraud.

In many cases we suspect actual cartels operating, perhaps even with State support in some
areas, and it is likely that millions are made by these groups preying on the good trust of a sincere
person who honestly believes they are dealing with a real buyer or seller.

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Learning the ways and psychology of persuasion is a key to learning how to resist the
Scammer’s tactics. By knowing the ways of persuasion, and the ways in which your emotions can be
manipulated and played with, you can avoid committing to a bad or fraudulent business opportunity
or investments.

Warren Buffett’s advice - ”Understand the companies and products you invest in." is germane
here, in more ways than one. Understanding the industry and trade you which to participate in, its
norms, its customs, understanding the company you wish to invest in or trade with, its principals, its
history, its market.

Control of your emotions is an absolute must: you must avoid snap decisions and being pressured.
One experienced trader states that his rule is " I won't make a decision until 24 hours after hearing
the sales pitch," 24 hours to think and let the emotions subside.

Our agency’s traders more often than not do not reply to solicitations, or take considerable
time to do so – allowing the “ether” to fade and time taken to truly examine the matter at hand.

The victims are in the majority of cases individuals and small businesses. Sometimes banks are
involved as well in such a way to intertwine specific bankers and principals together in a web of
fraud, when the “ether” rises everyone realized that all have been compromised. The psychology of
the fraud ensures that in the aftermath it becomes very difficult to persuade victims that they have
been defrauded. If a bank or two is involved, its credibility becomes at stake becomes now a major
financial institution has underwritten a fraud.

Businesspeople often find it difficult to believe that their judgment was faulty, that their bad
choices caused them to be fooled into losing money. While it is a form of pride and shame, this
embarrassment is a major factor in enabling the fraudster to escape, such victims are often reluctant
to report to authorities.

A network of banks, private victims, insurance companies, and other types of institutions, may
cleverly be weaved together, one fraud serving as the foundation for another fraud, one legitimate
small transaction as the foundation for two other frauds, the web of financial crimes may extend to
wholesale laundering of profits from other smaller frauds, and then a larger fraud perpetuated with
the same institution. Sorting out the mess and the damaged human emotions involved, becomes a
trial of great difficulty.

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5. Bid Bond and Performance Guarantee Scams:

As stated before, most international fraud transactions today fit the “419” advance-fee category of
scams. Named after the particular section of the Nigerian penile code covering advance fee frauds
and bait & Switch games, these frauds involve a criminal pretending to be a businessman of some
sort of trying to attract a foreign investor or trader into participating in a legitimate, or illegitimate,
business opportunity in his home country. In this transaction the foreign investor or businessperson
is required to pay up-front various transaction fees, all of which are involved with moving the
product into or out of that home country.

Among the permutations of this type of fraud the Bid Bond fraud is a nasty example – and one we
have almost fell victim to ourselves. The very nature of bidding in a foreign tendering process often
involves upfront payments to the agency issuing the tender of certain fees serving as bonds. While
these fees are escrowed through the tender process, and usually returned, they are often substantial.
A wag may question the nature of even legitimate government tender procedures, we confine
ourselves to the observation that such procedures tend to rigidly ensure the seriousness of anyone
engaging in the business at hand by extracting from them enough cash to command their
performance.

In this sense, a bid bond is essentially a risk mitigation tool hedging the buyer against risks of the
seller’s non-performance.. at the seller’s expense.

A clever fraudster, able to adopt the marks of confidence needed to gain the trust of a foreign
investor can fool them into thinking that they are engaged in a real business transaction, that the
business at hand requires a cost of entry to weed out the serious players from the jokers, and in this
sort of business – the tendering process – an advance fee of sorts is one of the legitimate
requirements. By submitting a well prepared bid tender and posting a bond the victim becomes at
this point psychologically committed to the transaction.

Some fraudsters obtain copies of real government or private tenders, alter them, and re-post them
in various forums with their contact information – the opportunity to do millions of dollars of
business with a government generates some great excitement – the victim, the “mark”, is convinced
that in order that the transaction close there’s the need to tender a fee and give up some money fore
the privilege of, in reality, being supremely scammed.

The difference between this scam and other advance fee frauds, is that often times the advance
fee is stated to help the transaction go smooth in line with local customs, or needs of officials to be
compensated, in other words the victim is informed in many cases that in order to do legitimate
business they need to address corruption issues. So the victim knowingly aids the process of
corruption and becomes psychologically committed to committing a necessary offensive act – thus
when the scam is revealed their guilt may be doubled.

In the bid bond scam, such fees are not by nature and custom considered corrupt, the tendering
process is fairly universal from the Americas to Africa to Europe to Asia. The bid bond is
universally known and the process universally respected.

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Variations of the bid bond include posting a performance bond or performance guarantee upon
being rewarded a successfully obtained contract.

Example: A lumber merchant in Idaho is approached by fax or email from a stranger inviting her to
participate
in a tender from the government of Serbia requesting procurement bids for 10,000 stout pine telephone poles.
The tender is transmitted to them, she recognizes the immense opportunity for her small family owned mill,
and
hires a local International Business college student to assist them in typing up and preparing a proper bid.
They
submit it and are informed that a bid bond needs to be posted in the form of a “SLC” to “H.R. Livingston
Tender
Acceptance Company Ltd., Belgrade”

Due Diligence that is rightfully due: Contacting the embassy of Serbia, with the tender –
emphasizing that her company wants to and is willing to invest in their country and do business, but
wants to ask if this is a legitimate opportunity with the particular government department.

Typing the name: “H.R. Livingston Tender Acceptance Company Ltd.,” into Google and seeing
what comes up.
Finding the department in Serbia responsible for Corporate and Limited Company registrations and
filings, and requesting details on “H.R. Livingston Tender Acceptance Company Ltd., Belgrade”

In any case, in our example the victim does not do this and upon posting the SLC “H.R.
Livingston Tender Acceptance Company Ltd., Belgrade” rejects her bid as non-conforming,
requests their bank to pay out on the SLC, which they do because the Stand By Letter of Credit was
opened as an irrevocable undertaking of the bank and, as mentioned prior, without solid evidence of
fraud the bank’s mandate requires payout.

If you do business with the city government of Wichita, their bidding process will require a bid
bond as part of the cost of doing business. In this case, verifying details is easier for the businessman
in Kansas than verifying details for the city of Nairobi’s public works commission for that same
businessman.

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6. More on Due Diligence

Previously we spoke of Due Diligence. The essence of Due Diligence is to exercise effort to
pierce illusion. The very phrase Due Diligence implies diligence, that is to say effort. Effort that is
due and fitting for the undertaking at hand, in this case – leaving no stone un-turned in your search.
Ever.

Given an email address, web site, and fax to email account you have the tools it takes to interact
with a wide world. This applies to honest traders and fraudsters as well. With an email replacing the
fax contacting companies at rapid speed to trade products and commodities is simple, Anyone with
an Internet account can communicate with anyone around the world, and in is far more easy than
ever before to conduct research on products and companies, on a much wider scale accessing trade
directories worldwide.

Anyone can pretend to be anyone on the Internet. A well designed web site and only pennies a week
the smallest company can present a captivating impression to the world. The ability to conduct
diligence on who you are dealing with is easier due to global access to information but harder in that
the number of players has increased a thousand fold.

Due Diligence lies in applying deductive and inductive reasoning, one’s own “gut” sense for
things and intuition, as well honed over multiple transactions, and all the tools one’s creative
imagination makes available to one, in Public and University Libraries, on the phone, on the
Internet, to ascertain as far as possible the likely probability that a business opportunity’s details are
as the one presenting the opportunity says they are.

In many cases learning the truth is simply a matter of asking the right questions.

In some cases a legitimate business partner may be unable to disclose certain information in
fear of being circumvented – if we are selling you Bio Diesel as an independent trader and you
request a current SGS report on the product as a “Proof of Product” that you can verify, this
information may disclose the refinery I am purchasing my product from to resell. My legitimate right
is to request you to post - quid pro quo – something of equal value to obtain value, you need to
know certain things, we need to ensure that you do not fraudulently circumvent us as legitimate
merchants by going to our source.

“ABA Computers” in Miami is run by my friend Mr. Fernandez, a computer value added
reseller – when Institutional customers order in bulk care is taken to cut all shipping labels
off the cartons once received that would identify the wholesaler or distributor that sold ABA
Computers its computers. The customer is not in the business of reselling computers, ABA
Computer is in the business of offering various services as well as selling computers. ABA
Computers assumes risks in sourcing a product at competitive prices and has a right not to be
Circumvented – if the customer is so lazy, and we choose our words well, they should spend the
Effort developing relationships with wholesale distributors that ABA Computers has.

“Naser Deen & Khoja Fuel Oils” is a Bunker Fuel seller, selling heavy fuel oil to ship carriers
And owners. “Naser Deen & Khoja Fuel Oils” purchases bunker fuel from a refinery and flips the

Confidential Page 60
Purchased fuel to its customers. “Naser Deen & Khoja Fuel Oils” has a right to require confidentiality
Of its deals and the principals therein as well as its sources.

Due Diligence properly speaking can be applied in a away respecting the rights of the merchant
and the buyer alike. Trust in business is important, as is discretion. Undue circumvention may get a
buyer slightly cheaper products, though a well experienced merchant may be able to negotiate a
better deal than even a large end-buyer, so the end-buyer by circumventing the merchant may only
get a marginally better deal in some cases and rob themselves of the valuable sourcing function an
experienced merchant or trader offers.

Forgery and fraud is rampant, and every day it destroys millions of legitimate business
opportunities and makes the world-wide circle of trust smaller. The broker trying to make, what are
in reality scraps of, commission trying her best to zero in on real products or services to trader and
honesty trying to earn a living needs to learn the arts of due diligence and also needs to learn in the
first instance how to trade.

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7. The Honest Wind down

You have put up with our polite sarcasm, and pedantry, so far. Congratulations. I can
promise you that if you understand all of this you will be more fitting to trade than
thousands of your peers.

Here I will recommend some resources for further research. I do not receive financial
benefit from these recommendations, I am not affiliates of these authors works.

Author Richard Fagnani’s The Petroleum Broker’s Notebook. The author has been very helpful
to me in understanding aspects of the Petroleum Industry and his book details the experiences trials
and victory’s of a legitimate, bona fide, Petroleum Intermediary. I do not receive a commission from
his sales, but recommend the book as a professional courtesy. The author really does know what he
is talking about and knows more about Petroleum Scams than many people alive. His book is only
$61.00 and available directly from the author. Google his name and it will lead you directly to him

2. As of June 2007, UCP600 Letter of Credit rules started to rapidly change the rules of
International Trade, so as to make it easier than ever before for traders to be circumvented. That
small 1% of traders who are successfully trading may find themselves in hot water under UCP600
unless they update their trading knowledge. As for the other 99%, they now stand no chance of
successfully independently trading.

I highly recommend obtaining UCP600 directly from the ICC Bookstore on-line, if not then do
contact the Letter of Credit desk of your bank and ask to purchase it from them, most will have a
copy available.

3. I recommend reading David L. Boccagna's


"Inside the World of Investment Fraud, Scams and Deceptive Practices" and
"Mastering the World of Investment Fraud, Scams and Deceptive Practices"

and also Bruce Johnson's "The Hedge Fund Fraud Casebook"

4. I recommend the advice of David Papa, the CEO of FTN Exporting and an experienced
trader, in particular his work “FYBR: Follow The Yellow Brick Road, Step by Step” It comes in
modules some pertaining to general matters others to oil and energy markets.

David Papa’s book, FYBR: Step by Step distills the latest trading procedures, rules, and processes
used by the largest merchant banks and corporate traders into an easy to understand application for
Intermediaries.

There is no other book out there shows the Export Trading Company, the Trading House, or
the Independent Trade Intermediary, how to successfully trade in today’s environment.

David Papa started off as a self-educated trader, he went through all of the pitfalls of the “joker
broker” however he never stopped learning, never gave up after his initial failures, attended college
trade courses, studied in depth the books of the greatest minds in modern trade law and procedures,
and eventually evolved into something much greater.

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Mr. Papa is now one of the world’s experts in trade procedures, in particular as they pertain to
intermediaries. He is someone actively closing real deals today, FCL Wine deals, bulk sugar deals,
with real products in real quantities. He is a man sourcing products directly from suppliers for resale
to end buyers, not someone claiming to be selling 50 billion barrels of REBCO every month. FTN
Exporting is well known on the internet, its Experts Online advice column, if printed out, is almost
300 pages of free trading advice, and his course FYBR gives you the most up-to-date trading
information.

With the training and knowledge needed you too can earn a living trading products worldwide,
from a corporate office and cubicle or even from your bedroom home office. It is not a quick
business, it is only for the patient, but the possibility of earning thousands or even millions on a
single deal are still out there, if you understand this material you will see how hard it is to find
legitimate opportunities. However when that one legitimate lifetime bulk deal lands on your lap, if
you know how to close it you may be able to now.

You may no longer be one of the legions of stories of circumvention and fraud – learn how to
trade and you can be one of the few able to net tens of thousands of dollars profits on a single deal.
Again, it will not happen over-night, it may take months or even years, but real deals our out there –
whales exist for the savvy harpooner.

Knowledge, Common Sense, and Intellect separate the intelligent intermediary from the hapless
“joker broker” – be of the former category, not of the later.

Invest in your education and your modest investment will pay you a hundred fold. As for this
work, it is a work in progress and will be continually refined and revised – subscribers will receive,
gratis, such updates from time to time as they are available.

Sincere regards, and good fortune,


K. J. Southall, February 2010

Confidential Page 63
Useful Further Resources:

1. Davide S. Papa’s “The World Is Yours II 2007”


2. Davide S. Papa’s “FYBR: Follow The Yellow Brick Road” 2009 Edition
3. “Distribution of Products” Allexpertss.com
4. Richard Fagnani’s “A Petroleum Broker’s Notebook”
5. T.O. Lee Consultants Columns (some articles require premium subscriptions -
http://www.tolee.com/)
6. Jeffrey P. Graham’s valuable essay “Evaluating Trade Leads”
7. Clive M. Schmitthoff ‘s ”The Export Trade: The Law and Practice of International Trade”
9th Ed. Stevens & Sons London
(for a historical perspective, earlier editions of Schmitthoff’s Export Trade going
back to 1948 are also recommended)
8. The VRI Message Forum
9. The Due Diligence Message Forum: p066.ezboard.com
10. Joe Wein’s site www.joewein.net/419/benin-import-scam.htm
11. Scam Victims United: www.scamvictimsunited.com
12. Letter of Credit Forum – I spent months examining this site and am now convinced of its great
utility to the trader. It is frequented by bankers, some of whom are actually among the top L/C
experts in the banking industry. www.letterofcreditforum.com
13. The Tranche Forum, as useful as the Letter of Credit Forum, but more nicely formatted.

Useful Agencies
Nigerian NAFDAC http://www.nafdacnigeria.org/tariffs.html

Nigerian Economic and Financial Crimes Commission (EFCC) www.efccnigeria.org will assist non-
Nigerians in recovering money lost to scams.

Nigeria's NNPC Fraud Advice http://www.nnpcgroup.com/news/scamalert.htm

Agencies registering companies, or able to verify company registrations.

Duns & Bradstreet:


www.dnb.com

Most useful for USA and Canada firms, Duns & Bradstreet also list a vast number of
international firms, particularly European. There are fees required to view certain reports
but the information there is priceless.

Australia Securities and Investments Commission – ARBN/ Business Registration Number


Lookup”
http://www.search.asic.gov.au/gns001.html

Benin Chamber of Commerce (listing all registered enterprises)


http://www.ccib.bj/index.php?
option=com_docman&task=cat_view&gid=29&Itemid=74&lang=fr

Confidential Page 64
Canada: Prince Edward Island: Corporate Business Names Registry
www.gov.pe.ca/corporations/index.ph

Denmark – Registered Danish Companies


www.cvr.dk (the website is in Danish, limited English instructions are available. Basic registration
information, and whether the company is involved in a lawsuit, are available.)

France
http://www.infogreffe.fr/infogreffe/switchLocale.do?lang=en&cty=GB
Request a company’s RCS number (SIREN) number, you can verify the company’s existence with
this number at this website. Also request that your company send you their "extrait Kbis" or "Kbis".
This document proves the company’s current registration.

Finland: Company registration and enterprise type


http://www.ytj.fi/english/yrityshaku.aspx?path=1704;1736;2052&kielikoodi=3

A commercial service in Finnish only provides some free information, such as financial
histories, with more advanced reports and credit checks available.
www.inoa.fi

Italy: Registro Imprese. A privately owned management company providing basic


information on any Italian company.
www.infocamere.it

Malaysia: Companies Commission of Malaysia


https://product.ssm-einfo.com.my/uni/findrob.php

Netherlands: Handelsnaam agency


www.kvk.nl

United Kingdom: Companies House : WebCHeck


wck2.companieshouse.gov.uk/

There is a separate Companies House for Wales and for Scotland. Scottish company numbers
should have the term “SC” prefixed.

see also
www.direct.gov.uk/en/Dl1/Directories/index.htm
To access all local and national governments in the UK to find the local government for the busi-
ness address in question and inquire with them concerning licenses and permits the business has.
Any serious company should be on record with the local government within their area.

Additional EU advice, many European firms are required to have a VAT ID number. One
can request that number for verification at

Confidential Page 65
http://ec.europa.eu/taxation_customs/vies/en/vieshome.htm. All EU firms doing business over
EURO 50,000 / £54,000 annually are required to have a sales tax VAT ID number.

USA: Securities and Exchange commission EDGAR Database Corporate Financial


Information – For information on publically traded firms only.
www.sec.gov/edgar.shtml

USA: Sate of California secretary of State Business Filings:


www.sos.ca.gov/business/

USA: Missouri Secretary of State: Business Filings

www.sos.mo.gov/BusinessEntity

USA: New Hampshire Corporate filings


www.sos.nh.gov/corporate/soskb/

USA: State of Washington:


http://www.secstate.wa.gov/corps/search.aspx

USA: State of Wisconsin Dept. Of Financial Institutions


http://www.wdfi.org/apps/CorpSearch/Search.aspx?

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