March is Fraud Prevention Month
ORILLIA, Ontario, March 12, 2010 /Canada NewsWire/ - Many people seek out alternative investment products that are not recognized or supplied by accredited investment brokers. The Ontario Provincial Police (OPP) Anti Rackets Branch reminds you to be wary of investment schemes that may defraud you of your investment money. Investors should always exercise caution and carry out due diligence before making investment decisions.
There are many different investment schemes operating in Ontario - often with international connections. Many of these schemes lure victims by promising high rates of return. The perpetrators are usually vague about the details of where the money is invested. They may tell the potential investor that providing too much information may result in getting under-cut and loss of the investment opportunity. In fact, the investor's money is usually not invested, but moved to offshore banks that don't honour our banking regulations or procedures. Usually, the money invested in these schemes is not recoverable.
A prevalent example of a fraudulent investment scheme is called a "Ponzi". Primary investors are paid exceptional dividends as "interest cheques" or sometimes cash. These unbelievably high returns are not, in fact, actual dividends, but come from the deposits of new investors as they come on board.
The perpetrators of Ponzi schemes can keep them going through a variety of ruses, such as:
- paying "dividends" to the early investors. The initial investors become the best promoters of these schemes as they tell friends about the fantastic returns they are getting;
- providing names of investors, who have received dividends, to lend the scheme credibility and keep it going;
- giving the investors a receipt or promissory note on a regular basis, claiming that the investment has grown;
- providing a copy of a prospectus, or business profile, that exaggerates the success of the investment company, and;
- telling investors that their capital is guaranteed by collateral, such as a life insurance policy, when no such guarantee exists.
This self-propelled scheme attracts others and keeps going until the perpetrator has either accumulated his target amount and flees with the profits, has lost the investors' money in other business ventures, or is incarcerated for similar crimes. These types of schemes can go on for several years before the investors realize that they have been defrauded.
If someone is offering you more than the bank is willing to pay, then there is always a risk. The greater the dividend promised, the greater the risk. "If someone is offering you an investment opportunity that sounds too good to be true, then it probably is" says OPP Detective Inspector Bernie Murphy, Officer in Charge of Anti-Rackets Branch. "No one is immune to fraud. Common sense is your best protection. Always do your research, talk to others and never be rushed into making an investment decision" added Murphy.
For more information on schemes involved with Investment Fraud, log in to the Ministry of Government Services website www.ontario.ca/consumerprotection.
FRAUD...Recognize it...Report it...Stop it.
www.opp.ca
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