FBI Warns of Fraud Actors Scamming Investors Through Fictitious Standby Letters of Credit

The Internet Crime Complaint Center (IC3) has received complaints indicating fraud actors are fabricating business and financial industry connections, and access to international commodities markets in order to sell fictitious Standby Letters of Credit (SBLCs), which have resulted in significant financial loss to victims. Fraud actors claim they have connections to SBLCs at legitimate banks and use their purported business and ease of access to large sums of money to demonstrate legitimacy and draw in investors.

• An SBLC is a financial instrument issued by a bank on behalf of bank customers that serves as a guarantee for borrowing money and is treated as if it were a loan. The SBLC can be used to obtain financing and must be backed up with 100 percent collateral, allowing the bank to foreclose on the entire amount in the event the SBLC is not paid back. SBLCs are typically used in commercial settings and for international commodities. While SBLCs are sometimes used to assure repayment of investments, they are not themselves investment vehicles, and they are not traded or bought and sold.

Fraud actors also utilize counterfeit Society for Worldwide Interbank Financial Telecommunications (SWIFT) messages or documents, such as “MT 799” or “MT 760,” to legitimize their SBLC scam and further deceive investors. SWIFT is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes. Fraud actors format their SWIFT messages and documents to provide an authentic presentation to lure their victims into a false sense of security while perpetuating their schemes. Furthermore, due to the technical nature of SWIFT messages and SBLC transactions, fraud actors are able to exploit the victims’ lack of knowledge.

SCAM COMMONALTIES:

• Offering returns or loans that are disproportionate to the risk involved
• Mimicking of legitimate financial instruments like SBLCs
• “Non-recourse” or “forgivable loans,” where investors do not have to repay the loaned funds
• “Blocking of funds” or “proof of funds,” typically with the use of a SWIFT MT 799 or MT 760
• Being asked to pay an advanced fee prior to funding or to initiate the loan or investment
• Transfering funds overseas or using foreign banks
• Improper references to legitimate financial institutions without their knowledge or consent
• Unnecessary secrecy or the signing of a non-disclosure agreement
• Intricate explanations and excuses as to why the promised funds or returns have failed to materialize
• The use of escrow accounts, including attorney escrow accounts
• The term “monetize”

While all of these elements may not appear in any one scam, it is common for several of them to occur. The defining characteristic, however, is the promise of a disproportionate return or loan without risk from a source, which is obscure or unable to be accurately verified. All of the other features serve either to add credibility to the investment or loan, or to entice or distract investors from asking the penetrating questions they should.

TIPS TO PROTECT YOURSELF:

• If an opportunity appears too good to be true, it probably is.
• Do not attempt to purchase or invest in an SBLC. Such investments do not exist.
• Independently verify the terms of any investment or purchase you intend to make, including all parties involved (i.e., the bank the funds are originating from).

VICTIM REPORTING:

If you believe you have been a victim of this scam, regardless of dollar amount, reach out to your local FBI field office and file a complaint with the IC3 at www.ic3.gov. The more often fraud and scams are reported, the better equipped law enforcement can be to address the issues.