Virtual banking has been offered on the Internet since 1995. Along with banking, a host of other commercial ventures including online forex trading, PayPal and e-bay have offered great opportunities for people to send and receive money for a variety of business and personal reasons.

Banking is one of the businesses that have benefited considerably from the cyberspace evolution, and some foreign banks now offer offshore banking. While a number of reputable banks offer their services online, a surprising number of these online offshore “banks” are really nothing more than rip-offs and scams.

What is Offshore Banking?

Many offshore banks are located on islands and they generally offer both secrecy and high interest rates. Sometimes these rates seem excessively high, and they often serve to lure in greedy people to open offshore banking accounts.

Offshore banking scams frequently rely on the greed of the individuals they take advantage of. When it comes to offshore accounts, this tends to target those who wish to avoid disclosing their financial accounts to creditors or tax authorities from their particular countries.

Offshore Banking Pitfalls

Since you would potentially be committing the crime of tax evasion by opening an offshore banking account, you would then have no legal recourse if the institution is a scam and decides to keep your money. Often, the offshore “bank” will be set up like a Ponzi scheme, paying out the high interest, but withholding the principal amount on deposit.

Eventually the “bank” will simply disappear taking all of their client’s money. Another major drawback is that the offshore institution might not only keep your initial deposit, but may even attempt to extort additional funds from you in exchange for not revealing the fact that you have committed tax evasion.  This is certainly a losing proposition.

Preventing Offshore Banking Fraud

Basically, most of the offshore banks are registered in small countries which have set up their laws to encourage foreigners to open this type of account. Nevertheless, regulators in those countries will in many instances be in on the scam and even collude with the banks.

The best way to avoid these types of scams is to not get involved in the first place. If you are banking online, make sure that any institution you choose is not on any of the watch lists put out by the FDIC. Also make sure that the financial institution is chartered and regulated.

Many online banks can be verified by a “SightCertain” seal which is an electronic watermark or a digital certification offered by the American Bankers Association. By clicking on this logo, the customer is directed to a secure online database that will verify the legitimacy of the financial institution.

Clearly “caveat emptor” or buyers beware applies when it comes to online offshore banking. Remember, if things look to good to be true, they most often are.

There is a lot of fraud from boiler rooms that are telling there clients to make the check payable to a offshore FCM or in many cases a Bahamas FCM. THERE ARE NO BAHAMIAN FCM’s that I am aware of PERIOD, with the exception of major World Banks. The Bahamas are the country of choice for fraud and to steal your money because the Bahamas are a half hour from South Florida (Miami, Fort Lauderdale and West Palm Beach) and one and one half hours by private boat. 100% of the money you invest in Forex in the Bahamas will be stolen and will NEVER be placed into ANY trade. If you have been victimized in this manner of fraud or contacted to invest in Forex in the Bahamas call the FBI in Miami at 305-944-9101.

Please keep in mind that most of the law enforcement agencies and regulatory agencies are fully aware of who is perpetrating investment and Forex fraud and where they are located. Due to the great burden and lack of funding placed on Law Enforcement and the Regulatory Agencies action is only taken when there is pressure from the public. Only by contacting EVERYONE that you can will get results. The paperwork you signed when opening your account means nothing in a Court of Law when there is fraud involved on the part of the broker.

In recent years there has been a sharp rise in commodity, foreign currency – Forex trading fraud and scams. Consumers should be alert to investment fraud, scams and companies that sell Forex currencies and commodity brokers based on sales pitches claiming that customers can make a lot of money with little risk. Sales solicitations appearing in newspapers, telemarketing, radio or television promotions, or attractive Internet websites, touting high-return, low-risk investment opportunities in foreign currency trading more often than not are fraud or a scam. If it sounds to good to be true it probably is.

The United States Commodity Futures Trading Commission (CFTC) is the federal agency that regulates the trading of Forex currency, commodity futures and options contracts in the United States and takes action against firms suspected of illegally or fraudulently selling Forex currency, commodity futures and options. The CFTC has jurisdiction to investigate and prosecute Forex currency fraud and scams and commodity fraud and scams occurring in its registered Forex and commodity firms and their affiliates. Off-exchange trading of Forex, foreign currency futures and options contracts with retail customers by a counterparty that is not a regulated financial entity as set forth in the CFMA is unlawful and may be a fraud or scam.

Although Forex and commodity dealers who are regulated by NFA must disclose their charges to retail customers, there are no rules about how a dealer charges a customer for the services the dealer provides or that limit how much the dealer can charge. Before opening a Forex, currency trading or commodity account, you should check with several dealers and compare their charges as well as their services. Some firms charge a per trade commission, while other firms charge a mark-up by widening the spread between the bid and ask prices they give their customers. Some Forex and currency firms may charge both a commission and a mark-up. In my opinion any firm selling Forex, commodities or foreign currency charging more than $50 is either a scam or fraud. For the rest of the article click here