Prime bank
What is a prime bank scheme?
The common offer in this scheme is the purchase of debt obligations (for example, loans, bonds or debentures) guaranteed by the world’s top banks, so-called prime banks, which are usually offshore. This scam goes in and out of vogue. Common terms promoters use to describe these schemes are bank-secured trading programs, high-yield investment programs, standby letters of credit
, prime-bank notes, bank-issued debentures or bank guarantees.
How does it work?
Scam artists lead investors to believe that they are participating in a secret trading regime with the world's major banks. They often tell investors that this type of investment is usually reserved for rich, powerful individuals or corporations. Dropping the names of the rich and famous is common in these schemes.
Investors might be required to sign non-disclosure agreements that prevent them from disclosing the identity of the parties involved and the terms of the transactions. The promoters may say these agreements are necessary to preserve the exclusive, secret nature of scheme. However, it’s just a technique used in many investment schemes that buy the fraud artist time to move money offshore before the ruse is up.
The promised returns in these schemes are usually very high—annual returns from 20% to 200%, or more. The returns investors receive usually come from other investors’ money. Payments eventually stop because the promoters take the money offshore or squander it all on themselves.
Watch out for one or more of these common characteristics:
- Assurances the investment is guaranteed by the World Bank, International Monetary Fund (IMF), an international central bank, etc.
- Characterized as a secret, exclusive investment that requires you to sign an agreement not to talk about it
- Vague, complex terminology used to describe how the investment works, and promoters may claim they are too complex for most people to understand
- Promises of high returns that you will receive in payments over time
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.
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.