Offshore investments
What is an offshore investment scheme?
These schemes come in many forms, but one characteristic runs through them all—the promoters want you to send money out of the country. Once a fraud artist has moved the money offshore, they may move it two, three or more times. Moving money over borders helps scam artists avoid easy detection.
How does it work?
Scheme promoters lure investors through seminars, advertising or word-of-mouth. The investment vehicle is often one that is getting a lot of attention in the media—mining properties, oil and gas wells, vacation properties, real estate investments, etc.
The company you send your money to could be a fake, or one that is set up merely to funnel investor funds to the fraud artists. After you send the money to the offshore company, the operators remove it and deposit it somewhere else—a holding company in Panama, for example.
While the offshore scam is running, you may receive some statements, get some money back, or get updates on the progress of the company. But, when it collapses, or the company goes broke, your money will be gone.
Investors in Canada should remember that offshore includes the United States. When people move money to another country, Canadian law does not protect their investments, and they may not have legal recourse in Canadian courts.
Tax-avoidance offshore investment schemes
Another characteristic of this scheme is an investment offer that will let you avoid or lower your taxes.
Tax-avoidance schemes usually require you to deposit money in an offshore account that you supposedly control. The promoters may tell you that money will flow in and out of the account, so you may see activity in the account. This might be money going to a feeder account, which is draining money out of your account.
If the promised tax savings are false, you may also be required to pay the Canadian government money in back taxes, interest, and penalties.
Watch out for one or more of these common characteristics:
- Promoters want you to wire money to another country
- The promoters are not registered with a securities regulator
- The company or investment does not have a prospectus that is filed with a securities regulator
- Offers of high returns, tax savings, and insider information
- The documentation doesn’t contain audited financial statements, or details about the investment or management, etc.
For more information, see out Investor Watch: BC securities regulator cautions investors about investment pitches
Research before you invest
Check our Fraud warning signs section to familiarize yourself with the language and techniques found in almost every investment scheme. There are also videos of people who talk about how they had their savings taken by a fraud artist.
Visit our Avoid investment fraud section to learn about techniques and tools you can use to protect yourself against fraudulent investment schemes and their promoters.
Report it and warn others
If you have been approached or know of an investment that fits the description above, contact your provincial securities regulator immediately.
In BC, contact BCSC Inquiries. You can also anonymously report suspicious activity through InvestRight’s Report a scam webpage.
Residents from other Canadian provinces can find contact information for their provincial securities regulator at
www.securities-administrators.ca.
If you know a person who has put money into, or is considering contributing, to an investment like the one described above, give or send them this information, and encourage them to do more research.