Offshore investments sold through Internet can wash your savings away

The phrase "offshore banking" may conjure up images of tropical islands and suave James Bond-type gentlemen discretely discussing multi-million dollar deals.

But in the Internet age, the picture of offshore banking is more likely to include sleazy con men trying to pry every last dollar from trusting investors.

"Con men have set up shop in lightly regulated areas throughout the world and they're using the Internet to troll the globe for victims," said Doug Hyndman, chair of the Canadian Securities Administrators, an umbrella organization of Canada's 13 provincial and territorial securities regulators.

Several provinces are currently investigating scams where the Internet was used to promote so-called offshore investment opportunities. In some communities, the RCMP is also investigating.

How prevalent is the problem?

Use any Internet search engine and type in the phrase "High yield offshore investments." The search engine will return a lengthy list of web sites all designed to separate an innocent investor from their money. Many of these sites originate in the Caribbean, South Pacific or Latin America.

Some of these sites promote "investment clubs" where an initial investment of several thousand dollars is required to get into "the club." Some of these sites also offer to pay "referral fees" if you convince others to invest as well.

Other sites claim to represent "international banks" with offers of investment opportunities providing astronomical returns -- often as much as 200 per cent.

Hyndman warns that these websites have one thing in common: they never explicitly tell you how the investment works. Instead they cloak their offer with complicated language about international banking, prime bank instruments and a secret world of banking operations only available to the very rich.

When you see these kinds of offers, alarm bells should start ringing. Most of these sites are scams, designed to suck as much money from you as possible.

Many of these websites are designed to appeal to people who distrust government. The sites play up the idea that you can make huge returns and avoid paying taxes by moving your money to an offshore account.

Legally, Canadians can send their money off shore as long as taxes are paid on the money and any interest earned. By encouraging you to invest to avoid taxes, these sites are encouraging you to break Canadian laws.

"Anyone selling offshore investments in any Canadian province or territory still needs to be registered with that province or territory's securities commission," Hyndman said.

"In most cases, the people using the Internet to sell offshore investments to you are not registered. They are violating Canadian securities regulations."

That means you're taking a huge risk if you choose to put your money into an offshore investment promoted through the Internet.

Do a reality check: if a newspaper ad offered a brand new Porsche Boxster for $1,000, would you pay the money without investigating? Most people would take the car for a test drive and have it checked by a mechanic. Most importantly, they would ask why it's being sold for so little.

So why be tempted to send thousands of dollars to someone you've never met? Someone whom can only be contacted through Internet?

In these instances, the slogan: "Investigate before you invest" was never more accurate.

For more information, contact your local securities regulator at (regional contact information to be added by CCNA).