Proof of Funds, Identifying Real and Fake Assets

In today’s private placement world, there are tons of “brokers” out there who will take any proof of funds they can get.  Happy to finally find an “investor”, these inexperienced brokers promise the world, all for a shot to get rich quick. This leaves the investor and the other brokers thinking a deal is in the works, when there is nothing backing their claims.  The reality is, most assets can NOT work in private placement.  Unfortunately, due to the ignorance of the many in the business, hundreds of worthless compliance packages are “accepted” every single day!

 

Though wasting your time on deals that never close is frustrating, going to jail is far worse.   You might ask, “What does jail have to do with introducing an investor’s application to a private placement program”?  Well, what if these assets are fraudulent, connected to criminals, or part of an identity theft operation?  The fact is, you are implicated in the crime by “transmitting fraudulent documents”.  Believe it or not, I can’t even count how many times I have encountered fake proof of funds over the course of seven years.   Though our intentions are not to scare you, this is a problem that has grown in recent years.  Since we care about our readers, we will uncover details that will set you apart from the rest, and protect you from situations just like this.

 

In this article, we will provide tips on how to determine if a proof of funds is real, while covering important tools for analyzing the investor. As you have learned from the beginning of the article, screening investors properly can be the difference between success and imprisonment. Scroll down and take a look below!

5 Tips to Legitimize Proof of Funds

1.  Any Personal Knowledge:  Do you know this investor personally? Can anyone you trust vouch for their money for a fact? Has anyone met this investor face to face?  These are a few questions that are quite important to know.  If the answer to all of these is NO, you should take a VERY close look at all of the documentation provided.  The last thing you want to do is get so excited you have documents, that you forward it to the trader before analyzing it in detail.

 

2. Temperament of Investor:  When screening an investor looking for private placement investments, they should have a certain demeanour to them.  If they seem reserved and don’t have a ton of questions, this could be a sign that something disingenuous is present.  If you can, ask DIRECT questions and see what type of response you get.  In short, use your instinct to analyze the investor’s personality, approach, confidence, questions, and tone.  Once you get good at that, it becomes easy to screen from there on.

 

3.  Recent Account Statement:  When an investor is entering a private placement program, the proof of funds must be presented with the compliance package. For cash accounts, the investor must either submit a recent bank account statement, or a letter signed by two bank officers attesting to the amount present.  Once you get either of those documents, take a close look for little errors or inconsistencies.  Real bank statements NEVER have errors and are ALWAYS the same. If the investor has a debt note, such as a MTN, BG, CD, SBLC etc., they must submit a copy of the front and back of the note.  If they claim the note is “on Euroclear”, or can’t produce it, steer clear because you are wasting your time.

 

4.  Letter from Bank Officer:  After you get the proof of funds, and it is confirmed by the trader you work with, many trade platforms still require a bank confirmation letter. This is a letter from the bank stating that they will cooperate with the account holder’s requests when needed.  In many cases, this is a letter from the investor’s bank confirming they will send a MT 760 upon the request of the client.  Without this letter, most real platforms won’t even entertain the investor.  The reason is, no matter how much money is in the account, if the banks don’t cooperate, NOTHING will ever get done.

 

5.  Professionalism of Compliance Package:  As silly as it sounds, all of the real investors I have met over the years have submitted VERY well-organized packages.   If the package you receive looks aesthetically perfect, all of the documents are there, and the pictures are crystal clear, then you may have a good investor. On the other hand, if the package comes in several emails, it looks average, and there are incomplete sections, 99% of the time you will get nowhere.

If you do have an investor that passes through the screening tips we have provided above, it still isn’t time to celebrate. The fact is, if their asset is on the list below, the whole deal is likely to fail!  Scroll down, and take a look.

 

5 “Proof of Funds” that Waste your Time

 

1.  SKR’s:  Safe keeping receipts are nothing more than what they sound like, a “receipt”.  Though they can be backed by cash, in most cases an SKR serves as a proof of hard assets.  If you get an SKR from an “investor”, ask them what it is for, or what it is backed by.  If it is an asset your trader accepts ask for the supporting documents, because an SKR is really worth nothing by itself.

 

2. Junk Bonds:  These are all over the private placement business, and are completely worthless in most cases. Examples of “junk bonds” are Venezuelan Bonds, Brazilian Bonds, Corporate Bonds, Japanese Bonds, and other similar assets.  In most cases, you should steer clear of investors with these assets, because usually they never even existed.

 

3.  Hard Assets:  If you find an investor with Billions in precious stones, metals, real estate, or other illiquid assets, don’t think it’s that easy.  The easy part is finding someone with hard assets looking for private placement. The hard part is finding a REAL program that will hypothecate and trade the asset at a LTV (Loan to Value).  For more information on hard asset investing, click on the article “Using Hard Assets for Private Placement Investments”.

 

4.  Promissory Notes:  These notes have flooded the private placement business, and in all honesty, it is rather humorous.  A promissory note is just what it sounds like, a promise to pay someone at a later date.  This is really no different than an “IOU”, but is printed in fancy paper to make people feel more secure.  If you come across these notes, don’t even waste a moment of your time on them.

 

5.  Irrevocable Trust Receipts (ITR’s):  By definition, ITR’s are receipts showing funds available within a trust. The problem with this is, private placement traders can only work with funds which can be proven on deposit at a top bank.  If a client with an ITR can move funds to a large bank, then the deal might be resurrected, otherwise good luck!

 

Though there are a lot of people with assets looking for private placement, very few of them have liquid assets, and even fewer are willing to invest.  Let’s face it, the odds are stacked against you, but if you can properly screen an investor’s proof of funds, your odds of success are far greater.

After reading this article, DON’T be like the thousands of other brokers pushing deals that don’t exist. Take the extra time to qualify your investors with the information we have provided, and by promoting “reality”, you will find far more success in  the end…

FOR EDUCATION PURPOSES ONLY

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