Financial crimes and frauds are becoming rampant all over the world today. People who engage in such financial crimes have given birth to a new kind of terror known as financial terrorism. People all over the world are taking all the possible efforts to fight this new brand of terrorists. But the more they fight, the greater is the level of fraud that they discover. The Bernard Madoff scam has told the world that no one can be exempted when it comes to becoming a prey to such frauds. Both the rich and the poor are being subjected to the atrocities of these financial terrorists.
The Wall Street Journal everyday carries news about some new financial scam or fraud which has been recently unearthed. The Ponzi plot of Bernard Madoff and his feeders is one scam, which was very widely publicized. Though it will take many years to estimate the actual damage, which has been caused by this fraudster, the current estimate lies at around 60 billion. Allen Stanford, a financier from Texas had embezzled 50000 investors for an amount of $8 billion with the help of fixed rate CDs. Stanford and his CFO James Davis had a black box where most of these funds were stashed away. Any finance manager uses the black box to convince his customers that their money is safe with him and they should place their unwavering trust in him. The latest financial scandal reported by the Wall street journal states that hedge fund managers Paul Greenwood and Stephen Walsh are guilty of misusing $550 million of investors funds and financing their frivolous and extravagant lifestyles.
The concept of easy money and risk free investments does not exist in Wall Street. There are certain which sound very unrealistic and too good for reality and this will probably be the case. According to the CFA institute, one of the warning signs of the Madoff scam was that the results were always positive. Many financial scams have also taken place through the Internet and these have been done with the help of very safe prime bank financial instruments from some of the largest banks in the world. People should always remember that there is no reward without a single element of risk. People should have become suspicious when they found that the person who came to sell them the investment also had all the details of the accounts. The website gave all the information about the way the financial instruments would be traded but no details were given as to how the assets of the client would be handled. People who belong to the field of financial services do not pay fines without asking any questions. Many regulating agencies had filed different complaints against them. People found it difficult to gain access to their accounts since they had been tampered with and it was not possible for an outside agency to check them.
Any financial advisor would strongly advise against conducting any transaction with someone who does not distinguish between the advisory aspect and the broker’s custody aspect. Make sure that you find out exactly what are the financial assets being bought by the advisor on your behalf. Many financial advisors do not disclose such details and they follow the black box model, which banks on secrecy. This is one of the reasons why people are hesitant about investing in hedge funds.
Make sure that you visit the website of every regulatory authority which can question the business of your advisor. People who are investing their money should make it a point to visit the websites of FINRA and SEC where they can get details about the firm and their financial advisor. The method of investment should also be understood. Do not buy anything regarding which you have a doubt. Certain investments can be very risky and they should be studied properly. Some people purchase certain investments only because they sound complicated.
Certain investment schemes will be too attractive and unrealistic. The results in the Madoff scheme were too good and too regular. It is not possible for any investment to have such good results all the time. The returns on every investment will be different during different times. The returns should be proportional to the risks. CDs have a low quantum of risk attached to them. Proper financial advisors do not assure you of any high returns. Financial scams are meant only to attract a certain group of people.
