Advance fee fraud: How to avoid being a victim

March 18, 2011 In an advance fee fraud, the victim is persuaded to pay money up front in order to take advantage of an offer promising significantly more in return. The catch is that the fraud artist takes the money and the victim never hears from them again.

“These schemes are common in situations where investors have lost money in risky securities,” says Greg Gard, Manager, Enforcement. “The fraud artist may say they will buy or exchange the securities at a substantial profit to the investor, but the investor must first pay a fee. If the investor sends more money, they’ll lose that, too.”

What to watch for
Be wary if you receive unsolicited and persistent phone calls or e-mails offering to help you recover losses on an earlier investment. You may be asked to pay a “refundable” deposit, taxes, transaction fee or other fee.

To convince you that the offer is real, the fraud artist may direct you to a website that looks legitimate, or give you a toll-free number or an address in the financial district. However, the information on the website may be fake. The toll-free number may go right back to the fraud artist, and the address may be nothing more than a post office box.

You should be concerned if the only information you can find about the company is on its website. If you send them money, it may be difficult to trace and impossible to recover.

How to protect yourself
If it sounds too good to be true, it probably is. Ask yourself if the offer makes sense given the fee you have to pay. Get a second opinion from a registered financial adviser. 

Check registration to find out if the individual or company offering to recover your money is registered to sell securities or offer investment advice in Ontario. Deal only with investment firms that are properly registered.

Find out if the company is on the OSC Warning List or the subject of an OSC Investor Alert. See if the individual or company has been named in an OSC Proceeding. Search the CSA Disciplined Persons List to find out if the individual has been sanctioned by a Canadian regulator. Be cautious about dealing with any individual or company that appears on these lists.

If you are suspicious about an investment opportunity, contact the OSC for assistance. To learn more, read the brochure Protect your money: Avoiding frauds and scams.