Investment fraud

International investment frauds may be broadly divided into four categories: container investment, Nigerian oil cartels, Nigerian investment and phantom cargoes. An advance-fee is the most common feature of financial frauds. A conman, posing as a agent for a bank, oil money etc, offers a business loan on favourable terms for an up-front fee. The victim may be offered low-interest loans or high-interest investments in return for payment of the advance fee. Once the fee is paid, the loan or investment disappears. In the case of a container investment, investors might be persuaded to invest large sums in a container leasing scheme when many of the containers never existed whilst others had been sold several times; the scheme would then collapse with large debts. Frauds emanating from Nigeria are considered endemic and are generally based on a mass-mailed letter of solicitation.

Investment fraud, especially internationally, has become increasingly common. Between 1989 and 1990 it has been estimated that the amount lost in investment frauds ranged from £121.5 million to £150.7 million. Not more than 1 or 2% of the crimes are successfully prosecuted, partly because of the cost of international investigations as well as the lack of cooperation between national police forces. Swindles involving financial instruments known as prime bank notes or prime bank letters of credit resulted in losses of US$30 million for the government of Nauru and US$8.8 million for the Salvation Army of the UK. In 1992 it was estimated that fraudsters had endeavoured to swindle nearly £1 billion from financial institutions in London in 1991, twice the amount for the previous year.

In 1998 Albania suffered a national crisis brought on by the collapse of fraudulent investment schemes. Westerners wise in the ways of the market were bemused by the naivete of the Albanians who fell for "investment" schemes promising returns as high as 25 percent a month with no real business activity behind them. Using the classic pyramid scam, the perpetrators used money from new investors to pay the promised returns to earlier investors. The result was a national speculative frenzy. Farmers sold their flocks and urban dwellers their apartments to share in the promised bonanza of effortless wealth. The inevitable collapse sparked widespread riots, arson, and looting when the Albanian government failed to make up the losses.