The most frequent financial fraud is the so-called “pyramid fraud” in recent years. The best-known pyramid fraud is the Madoff case, which has affected many people and entities from different parts of the world. Nasdaq’s former president, Bernard Madoff, scammed for 40 years many wealthy and entities at an interest rate of 12% a year. Although this is not a pyramid fraud, the case of the receipts of Nueva Rumasa, which the Ruiz Mateos family has just sold, can be considered a dangerous product by avoiding the inspection of regulatory bodies such as the CNMV (National Securities Market Commission) and the Bank of Spain. In the Spanish State, the most recent cases have been the Philatelic and Afinsa Forum cases. They have also affected thousands of Basque savers. Both entities offered to invest in highly profitable philately stamps, ranging from 6% to 12% per year.

But the nearest pyramid fraud is the one that has affected – and continues to affect – some thirty families in Durango. It came to light in November last year. The average amount invested was EUR 300,000, which were granted 15% interest, despite 4% of the contract. Even though they pledged to return the capital in one year, they didn't. Last March, the judge kidnapped the property of the two suspected persons responsible for the fraud in the Biscay village. They're both missing, of course.

Measures to avoid the trap

In this context, a number of measures should be taken to avoid falling into the loop, to avoid falling into this type of fraud and other similar measures. The catalog of investment products not controlled by the Authority is wide and full of claims. The lack of supervision makes it a nursery of fraud or non-transparent activities.

The first suspicious feature is to “guarantee” high profitability. That's the main bait to attract customers. Almost all of these investments have a return well above the other market offers. Secondly, care must be taken with “apparent hooks”. These products are often marketed as a single option. Presenting as a hose means hiring too quickly. The strategy is very clear. Less haste, less reflection and, finally, an aggressive purchase that does not measure risks.

Thirdly, we are suspicious from mouth to mouth. Some of the frauds that use the loopholes of the rules are structured in the form of pyramids. They're called pyramid schemes. That is, the first investors are at the top, and the rest, as they come in, are set to the base. For the former to derive the agreed benefits, the entry of new customers is essential, and it is therefore in their interest to promote the so-called effect. Thus, customer uptake is, in part, the responsibility of investors. The virtues of the product will spread in the nearest environment.

Fourth, be careful with the offers of stamps, coins, jewelry, etc. Most of the products that escape inspection by regulators are intended for the trafficking of tangible goods. Shares, bonds and investment funds act on the stock market and, therefore, the CNMV controls abuses that may affect them. Deposits and other financial offers are controlled by central banks. The success of investments in these areas cannot be assured, but regulators close many doors to fraudsters.

Get information

Finally, the most relevant measure to respond to an investment proposal is to collect as much information as possible. Know the characteristics of the product, know exactly what it is, clarify the meaning of the small letter. Verify the existence of the intermediary undertaking offering the investment and know its situation. It is appropriate to go to the commercial register and check the company’s annual balance sheets. And finally, distrust appearances, because, as the saying goes, “all blacks are not coal.”