Prime bank fraud is a type of investment scheme that promises extremely high yields over a short period of time. Individuals claim that they have access to secret financial products which they can buy at a discount and sell at a premium. In reality, these financial products are fictitious. Individuals attempt to make these products seem legitimate by associating them with top world banks or secret government banking systems for the elite. Individuals seek to mislead investors into believing that well-regarded financial institutions are associated with these financial products.
Investors should be skeptical of anyone promising excessive returns with little or no risk. Investors should be skeptical of promoters who claim that the product they are offering is typically only available to elite, sophisticated investors, or that the product is too complex for the investor to understand and scrutinize. Investors should not let promoters allay their concerns by claiming that the fictitious product is associated with or approved by an institution such as the World Bank, the U.S. Department of the Treasury, or the International Monetary Fund, as this is a hallmark of a prime bank scheme. Investors should ask for client references and proceed with caution if a promoter is unwilling to provide them.
For more information, see:
- Securities and Exchange Commission (SEC): http://www.sec.gov/divisions/enforce/primebank/howtheywork.shtml
- The SEC describes how “prime bank” fraud works and offers signs of banking-related investment fraud.
- The SEC provides a warning to all investors about “Prime Bank” and other Banking-Related Investment Schemes.
- U.S. Department of the Treasury: https://oig.treasury.gov/Scams/Prime-Bank-Investment-Fraud
- The Treasury Department briefly describes prime bank fraud and provides a list of warning signs.
- Treasury Direct: https://www.treasurydirect.gov/laws-and-regulations/fraud/prime-bank-fraud/
[Last updated in June of 2023 by the Wex Definitions Team]