What is an advance fee scheme?

| Sep 13, 2020 | Investment Fraud

Many investors know the crushing reality of investing money into something with hope and optimism only to find out that the investment was a mistake. In some cases, it may be your own mistake. You may not have analyzed the situation properly.

In other cases, however, it could be financial fraud at pay. Knowing the warning signs of investor fraud can protect you. Advance fee schemes are common, but the FBI has tips to help protect against investor fraud.

What is an advance fee scheme?

An advance fee scheme is one that happens when an investor pays money to another person or business with the assurance that he or she will receive something of value. This could be a loan, contract or in this case, an investment. They require you to sign a contract and pay a fee and later, you find out that there was never anything to invest in.

How can you protect against an advance fee scheme?

Follow the rule that if a deal sounds too good to be true that it probably is. Find out everything that you can about the company or business that you want to work with. Look into names, business locations and check the Better Business Bureau. Even if you have few suspicions, it does not hurt to consult with the bank or even law enforcement.

Never trust a business that has no street address or a direct phone line. If you call and no one is in the office and they only ever return your calls, this is suspicious behavior. Sometimes, con artists in advance fee schemes will use nondisclosure or non-circumvention agreements to threaten victims with a lawsuit.