Actori incumbit onus probandi. The burden of proof is on him who makes the claim.
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A person looking for money to borrow may notice the ads offering quick financing at competitive rates. The ads imply that even people with shaky balance sheets can be helped. Unfortunately, the ad will turn out to be a front money scam in which the operator hopes to bilk the victim out of a "loan origination fee" for a loan that never materialises. The ads are aimed at the financially strapped who have given up on conventional financing. Those who place the ads hope that desperation will blind potential borrowers to the risk of loss.
The technique works like this. A person or organisation is offered a loan of say, US$100 million, at substantially below the going rate. Why the low cost? "Because it is Arab money and a good Moslem cannot accept an interest rate beyond a certain limit." Or, "It's Nazi money and we're getting it out and cannot disclose the source." Or, "It's Mafia money and has to stay under wraps."
Well, to back up a bit, approximately 99 percent of all Saudi funds are either in certificates of deposit at prime banks or in US government securities. Nazi money was handled during the war by the Swiss banks and still is. And as far as the Mafia goes, it's a well-known fact that Meyer Lansky's trustee on Paradise Island in Nassau was a prominent prime Canadian bank. The conclusion is obvious - all of these sources deal with only prime lending institutions. They own their own banks in many cases and have controlling interests in commercial banks around the world. In short, they don't need you.
What will always come up sooner or later in the scam scheme is the question of front money. This can be in the form of cash requested to supposedly pay off a go-between or to smooth the way with a bank official who will be finalising the arrangements. With amounts like US$ 100 million at stake, a US$ 5,000 front fee might not seem unreasonable - until the con artist has skipped town with it.
The victim may, on the other hand, be told that the deal is all set to go but that the agent must first fly to Zurich, (first class of course), to make sure that all banking arrangements are in order. The cost of the ticket and first-class hotel accommodations comes to US$5,000, which is to be advanced by you. If this same story is told to 40 gullible souls, the amount in question is not trifling by any means - US$195,000 tax free. The ticket to Zurich is again nothing but front money.
Perhaps the largest area of scam operation in the financial area are the front-fee scams which are a bit more disguised than simply a trip to Europe. Many years ago, the schemes were primarily the bailiwick of loan sharks, gamblers, and other Mafia types. Clients were told that they would receive their loans, but that they first had to put up a few thousand to be able to approach and pay off the well-known and formidable lenders so the funds would be expedited. Of course, the front fee would disappear along with the so-called go-between, and the legitimate businessman or businesswoman was so mortified by having thought he or she could get the funds from such a source to begin with, that they would not even bother to report the fraud to the authorities.
Another variation of the same scheme is telling the client that his money will be coming from XYZ Saving Loan, and that because of the amount and nature of the loan involved, a certain amount has to be advanced to pay off someone on the local committee to finalize the arrangements. Again the money is advanced, but when the loan itself does not materialize, the client cannot report it because he has already been implicated in an attempted illegal act. Prosecution rarely follows in a scam such as this.
Whereas in the past these scams were hidden in the nether world of the Mafia and fairly obvious illegal channels, they have now become much more sophisticated and complex. As a result, some of the largest banks in the world have been stung, along with some of the largest borrowers in the world. It seems to be partly a result of how dismal things have been getting financially in the last 10 years, along with how sophisticated scam artists have become. Those with a criminal bent have used the complexity of the international banking world to develop all sorts of plans that have the appearance of legality, but are so complex that many fairly sophisticated souls do not fully understand them and can't judge their legitimacy or fraudulence.
Perhaps the longest lasting front money scam is the one that has provided the livelihood of a Belgium family for generations. The scheme involves offering loans that are designed to not be approved. The client is presented with a complicated loan application package. Buried in the paperwork is a provision that allows the lender to demand a prime bank guarantee of principal and interest.
On Friday afternoon at 2:00, the lender then tells the prospective borrower that his US$5 million loan has been approved and will be funded as soon as he can provide all the documentation required by the loan application. The lender adds that there will be a blockage fee of one percent (1%) payable immediately, because the loan funds are being set aside over the weekend. The lender then collects the US$ 50,000 fee. On Monday, of course, the lender says, "Where is the prime bank guarantee." If the borrower could get a prime bank guarantee, he could have borrowed the money from the prime bank in the first place at a lower rate of interest. The lender has just made US$50,000 for a few hours work. This scam has been worked over and over again.
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.