Some of the guarantees, ranging from tens to hundreds of millions of dollars, were offered as collateral for various deals whilst others were for the benefit of named individuals. All the documents were found to contain numerous inconsistencies and ‘red flag’ terms that rendered them invalid.
In many of the recent cases, parties referred to on guarantees had previously been brought to the Bureau’s attention in relation to suspicious bank guarantees or involvement in other attempted financial instrument fraud. In the cases where the parties were unknown to the FIB, enquiries indicated that the companies or financial institutions named did not exist or were unregulated. In some cases, the company names bore similarity to those of genuine organisations.
In one case, a financial intermediary, in a transaction involving the purchase of shares in a company, offered two bank guarantees purportedly issued by well-known financial institutions as collateral. Both guarantees turned out to be false.
FIB Director Pottengal Mukundan commented: “We have seen a number of fairly audacious attempts to extrapolate funds from members of the legitimate financial community. These attempts vary in quality but all serve to show the lengths that would-be fraudsters will go to in order to deceive victims out of many millions of dollars.”
A number of these guarantees have been put forward as collateral for large real estate deals, a sign that victims affected by the current economic climate may be tempted by offers of hard to come by credit from the fraudsters.
Mr Mukundan continued: “These cases are a means by which fraudsters test banks to see if they have robust measures in place and, ultimately, expose their vulnerabilities. Those that are found wanting can be assured of more attacks in the future, some of which may be successful.”
FIB advises banks to be aware of the increased risks posed by false financial instruments and other documents, and to increase KYC and due diligence procedures accordingly. Some banks have taken the step of routinely having all documents above a certain value checked by third-party specialists.