Getting Clued In to Schemes

So-called prime bank scams are making a comeback, according to law enforcement officials. Here are some clues to help investors spot these cons:

* Secrecy. Nearly all prime bank pitches involve bogus “secret trading” markets. The more sophisticated con artists provide official-looking circulars, many of which admonish the investor to keep the information secret from law enforcement authorities.

* High returns. In the mid-’90s, con artists said these deals would produce triple-digit annual returns. Now, the promised returns are lower but still considerably higher than expected returns on Treasury bonds and other legitimate investments.

* “Risk free.” Most guarantee to protect the investors’ principal either by placing the funds in an escrow account or by providing a bond. Investor funds supposedly won’t be tapped unless there is a deal, at which point they would be released from escrow. In reality, there are no escrow accounts, no bonds and no legitimate guarantees.

* Official connections. Nine government organizations have posted warnings about prime bank scams on their Web sites, largely because con artists frequently tell investors that these programs are backed by some official body, such as the World Bank, the International Monetary Fund or the Federal Reserve. They’re not.

In general, keep in mind this adage: If an investment opportunity appears to be too good to be true, it is.

If you think you have been victimized by a prime bank scam, report it to the FBI corporate fraud hotline at (888) 622-0117.