Academic journal article ABA Banking Journal

He Smiles. Shakes Your Hand Firmly. Looks You Right in the Eye. Is Your Bank about to Be Bilked?

Academic journal article ABA Banking Journal

He Smiles. Shakes Your Hand Firmly. Looks You Right in the Eye. Is Your Bank about to Be Bilked?

Article excerpt

Lenders come to private detective Randy Shain when something doesn't smell right about a loan deal.

"When people have conducted business, it leaves a paper trial," says Shain of BackTrack Reports, Inc., New York City. "Entrepreneurs tend to leave a trail of businesses."

Often, conclusive proof that a prospective borrower is a likely fraud can't be obtained when Shain looks into a case. But indicators found in the subject's background or story--or the lack of any records at all--may help the bank make the judgment call. Below, Shain presents common warning signs:

Red Flag 1. "This deal is top secret." You have attempted to confirm information about the applicant's project and can't. He insists that the deal is so confidential that no one but him can confirm its existence.

Prevention: Demand more information. Remember, he's coming to you for money.

Red Flag 2. "I already have the backing of three major banks, investment groups, etc." Clearly not every situation like this represents a potential swindle. However, this is often an off-shoot of the well-recognized Ponzi scheme. Essentially, the subject establishes credibility by initially paying loans faithfully, or providing exorbitant return rates to investors. Of course, he does so by taking the money from the new lenders/investors and giving it to the older ones.

Prevention: Confirm for yourself statements the subject is making. …

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