CAVEAT EMPTOR ET CAVEAT VENDOR
The rules of protecting yourself in the international money game are simple. All that needs to be done is to make sure they are always applied and that you doesn't allow your enthusiasm for a particular deal to carry one away.
International business is just like any other business. It is a community built upon trust. When that trust is violated, the violation makes news because everyone is interested in the reputations of other people that they may someday have to deal with.
Offshore business is the business of reputation. Most of the financial institution and brokers in the offshore world are selling little other than their reputations for honesty and service. Experienced investors know who has established a history of trustworthy operations; they also know who are the real crooks that fleece investors and institutions alike. One of the first things that you need to learn when doing business in the offshore world is how to judge the credentials of those you deal with.
The first rule of the potential investor is to know who he is dealing with. If he's not met this person before, he must check the person out and must not allow himself to be deceived by an outward display of success. This can be faked. Get references, check them out and require that independent references be provided. Check on the reputation of the person or institution with other people that he knows and take his time in the investigation. There are many deals available in the world - and there will be just as many available tomorrow. Many familiar institutions in the offshore world will be able to assist such an investigation. Every prime bank in the United States has a Caribbean subsidiary. All of the normal credit rating services exist in the international realm.
The investor must use the same tools to establish the bona fides of potential clients that he would use at home. He does not have to avoid dealing with strangers - after all, when he first enters the international investment community, everyone will be a stranger to him. All that is needed is to make sure proper security has been obtained when dealing with strangers.
Any deal, no matter how bizarre, can be transformed into a rock-solid business proposition by good collateral. In fact, it is an old joke among lenders that, if someone comes to them asking for an impossible rate on a loan, they may say, "Fine, we'll give you an 8 percent loan but we'll need a compensating balance of 110 percent of the principal deposited in one of our accounts paying 6 percent." However, use this approach only when a customer is refusing to answer important questions about the offered deal.
A good approach is to pick the people that one wants to deal with instead of giving into someone else's sales pitch. Be the initiator of the relationship. Choose instead of waiting to be chosen. The investor knows best what he wants.
The second rule is for the investor to know what he is getting into before he commits himself. He should not commit resources to investments that he does not understand. If he is not sure just what is being done with his money, he is not in a position to protect it. There are many good, simple investments in the domestic and the international financial worlds. If a person is not willing or able to follow a complex series of financial manoeuvres, then he must leave his investments in simpler forms. One doesn't have to be a genius to be a successful international investor, but one must be willing to take some time to familiarise oneself with what one is getting into.
Many con games are based on confusing complexity. The operators of these frauds are counting on the laziness of their intended victims. It is easy to lull some people to sleep with large amounts of impressive detail. The reader mustn't let himself become one of these victims. It may be best to approach someone selling a particular investment, rather than the other way around. If the potential investor finds that he knows more about the investment than the person he approached, perhaps he doesn't need him. The salesman's money is not at stake after all; the investor's is. Perhaps one should only invest when one knows more than the person selling the investment.
The third rule is to know the other party's motives. The investor should ask himself, why am I being offered this deal? What's in it for the other party? Know the classic sign of fraud - someone offering something for nothing. When one walks down the street, one sometimes finds money just lying there to be picked up. Unless one has assumed the burdens of public employment, one has to work to earn the money one wants.
If someone is offering a deal that seems to good too be true, check it out very closely - It probably is. If someone seems to be selling something on impossibly thin profit margins it may be that he sees his profit in the substance of the victim's investment funds. If the deal being offered is so fantastic, why isn't the sales company or the salesman just buying it himself instead of sweating to sell it to a third party? Why is the borrower with the fabulous collateral coming to the offshore banker for a loan instead of going to a major lender?
The con artist hopes that a person's greed will overcome his caution. Don't go through with a deal until all questions have been answered. A good solid deal will stand close examination and the balance of benefit between the seller and the buyer will be clear. The price will also be in line with similar investments or other investments of similar risk. The highly competitive nature of the world financial community guarantees that. If something is way out of line, avoid it. There are plenty of investment opportunities to choose from. With proper care, any investor will never have to experience the pain of having been taken.
The fourth rule is for the businessman to know himself and to be aware of his strengths and weaknesses. In this way, he won't get in over his head. If he knows that he has low sales resistance, for example, then he should not expose himself to high-pressure sales tactics. He should do his investing or other business transactions by mail. An unsophisticated investor should stick to simple transactions until he increases his understanding. If he is timid about asking tough questions and making sure that the answers are provided, then he should probably not be in the international money game at all.
This document was excerpted, modified & otherwise prepared by the 'Lectric Law Library ('LLL) from materials supplied by Baltic Banking Group - www.BalticBankingGroup.com Copyright 1998 - 2002 'LLL & BBG, all rights reserved.