Saturday, July 6, 2013


Charles Ponzi

I note that a bank in the Carolinas has been named as a party defendant in yet another effort to recover money from victims of Ponzi schemes. It behooves compliance officers, and senior executives, at US banks, to be vigilant for possible Ponzi schemes among their customers.

Look regularly for clients who show more than one of these red flags:

(1) Rapid, unexplained success in their business.
(2) Large balances, with minimal outlays for expenses.
(3) Transfers overseas of funds, where the customer appears to have no international business.
(4) Repeated payments to company insiders that do not appear to be salaries.
(5) Customer seems to be extremely active in the social scene.
(6) Financial success that inconsistent with the customer's industry, or that enjoyed by his competition.

I am not saying that you need to be suspicious of customer success; just watch bank clients who seems to be on the fast-track a bit more carefully than others. Should you have any suspicions, consult with outside bank counsel immediately, for your lawyers will want to initiate an investigation after seeing your evidence.

The sooner you exit a suspicious client, the lower your risk of involvement as a defendant in a subsequent Ponzi scheme recovery action.

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