Advance Fee Loan Fraud

Advance Fee Loan Fraud

In these cases, a fraudster poses as a lender or financial institution and contacts a small business owner offering a loan with favourable terms, such as a low interest rate, flexible repayment terms, or a high loan amount. The fraudster may have obtained the business owner's contact information through public records, social media, or online directories.

The fraudster informs the business owner that they need to pay an application fee, processing fee, or some other type of upfront fee in order to secure the loan. They may also ask for personal or financial information such as bank account numbers, Social Security numbers, or credit card details.

Once the fee is paid and the information is provided, the fraudster often disappears, and the loan is never provided. The business owner may attempt to contact the lender, but their phone calls and emails go unanswered, and they are left with a significant financial loss.

In some cases, the fraudster may use the personal or financial information provided by the business owner to commit identity theft or other types of fraud, further compounding the victim's losses.

Case Study 1

In 2018, the US Federal Trade Commission (FTC) settled a case against a group of companies and individuals including Kevin Guice, Roy Eliasson, William Wilson, and others who operated a fraudulent lending scheme that targeted small business owners. The defendants were based in California and Arizona, and operated under various business names, including Prime Loans, Go Prime Loans, Qualification Processing Center, Prime Credit, and Prime Marketing.

The scheme involved cold-calling business owners and offering them loans with favourable terms but requiring upfront fees ranging from $5,000 to $15,000 to process the loans. The fraudsters claimed that the fees were necessary for credit checks, appraisals, and other services, but the loans were never provided, and the victims lost millions of dollars.

The defendants were charged with violating the FTC Act and the Telemarketing Sales Rule and were ordered to pay a total of $9.8 million in restitution to the victims. In addition, the defendants were permanently banned from telemarketing, financial services, and debt relief services.

Case Study 2

In 2016, Paramjit Singh from India was arrested and charged with running a fraudulent lending scheme that targeted small business owners. The man and his co-conspirators used fake business names and websites including Express Business Loans, Pacific Business Funding, and Global Finance to pose as legitimate lenders and offered loans with favourable terms.

They required upfront fees ranging from $5,000 to $35,000 for things like insurance, application fees, and security deposits, but the loans were never provided, and the victims lost a total of $2 million.

Singh pleaded guilty to charges of wire fraud and conspiracy to commit wire fraud. He was sentenced to 147 months in prison and ordered to pay restitution to the victims.

Here are some steps businesses can take to protect themselves against advance fee loan frauds:

1.??????Research potential lenders: Before engaging with any lender, businesses should do their research to ensure the lender is legitimate. This can include checking the lender's reputation with the Better Business Bureau, looking up their business registration with the state, and searching for any online reviews or complaints. It's also a good idea to ask for references and speak to other businesses who have worked with the lender.

2.??????Avoid unsolicited offers: Businesses should be cautious of unsolicited loan offers, especially those that come through phone calls, emails, or social media messages. Legitimate lenders typically do not engage in cold calling or unsolicited offers.

3.??????Review loan terms and conditions: Businesses should carefully review all loan terms and conditions before signing any agreements. They should also be wary of lenders who pressure them to sign quickly or who use confusing or vague language in their agreements.

4.??????Never pay upfront fees: Legitimate lenders typically do not require upfront fees for loan processing, application fees, or any other costs associated with obtaining a loan. Businesses should be wary of any lender that asks for payment before the loan is disbursed.

5.??????Protect personal and financial information: Businesses should be cautious about sharing personal or financial information with lenders they do not know or trust. They should also be vigilant about monitoring their credit reports and bank accounts for any unauthorized activity.

6.??????Report suspicious activity: If a business suspects it has been targeted by an advance fee loan fraud, it should report the activity to the appropriate authorities, such as the Federal Trade Commission or the local police department. This can help prevent the fraudsters from targeting other businesses and may help in recovering any lost funds.

Like many of the frauds we see, these deals are often too good to be true. The fraudsters prey on business owners who usually see only the upside of a loan and are not thinking of the potential traps in front of them.

For more information on this type of fraud, or any other similar issues email us at [email protected] of visit our website www.aegisinteraktifasia.com