“ALL THAT GLITTERS IS NOT GOLD: AVOIDING GOLD SCAMS.”
Over the past five years, our law firm has been contacted by law firms in Europe and Asia seeking to hire our firm to track down money lost to fraudsters who sold gold to their clients. Upon reviewing the documentation, a pattern emerges that is becoming standard for such deceitful transactions.
First and foremost, it is challenging to blame the victims, as their intention to buy gold is always well-intentioned. Gold is one of the best ways to preserve wealth and has been sought after for centuries. However, this demand has created a platform for scams that prey on individuals intending to purchase gold (and other minerals).
Recovering money lost to gold scammers is very difficult. Our firm has been instructed to conduct investigations, and 90% of the money lost is not recoverable. However, we have used these investigations to gain the knowledge to understand the patterns of these gold scams. Here are some key features we have noted.
1. John Doe is not real
The first indicator of a scam is the use of false identities. The individuals involved in these scams are real people, but the names and identification documents they use are often fabricated. This makes it extremely difficult to track them down, and even when they are identified, linking them to their fraudulent activities can be a legal challenge.
2. Corporations
The second warning sign is the involvement of companies or entities in these transactions. These companies may be officially registered and appear legitimate in government databases, but this is often a deliberate tactic to deceive victims. Our investigations have revealed that the same fake names used by individuals involved in the scam are often found in the company's documentation.
3. Sampling is the rabbit hole
In many instances, the gold scammers will take the client to a sampling stage. They provide a gold sample, which is typically real, and it undergoes testing and passes. However, this is merely a sampling process. The victim, through various means, ends up receiving fake gold. Sometimes, this occurs because the victim has agreed to receive the gold at a different location, where it is then switched.
4. The deposit
After the sampling stage, the scammers will demand a deposit, and this is where the money transfer occurs. Our observations indicate that these deposits are the scammers' primary objective. They will inform the victim that the deposit is necessary to cover taxes and export licenses, which are often substantial, especially for large orders. However, once this payment is made, complications inevitably arise.
5. Politics and the Suits
Our investigations have frequently found that documents related to these scams often include the names of influential people. Sometimes, these individuals are unaware of the scam and their names are used without their consent. In other cases, the scammers involve professionals like lawyers or even impersonate them, using fake law firm names to create a facade of legitimacy.
Remember, all of this can be prevented. It's crucial to acknowledge that there's a significant amount of gold in Africa, particularly in Uganda. There are licensed gold miners and legitimate gold traders. Like any industry, some individuals buy and sell gold for profit. Therefore, it's incorrect to assume that the entire gold trade is fraudulent. Numerous legitimate gold transactions occur daily.
The key to avoiding gold scams is to hire a professional to perform due diligence at every step of the transaction. While it's important to trust those you're dealing with, verification is even more critical. For instance, our firm has saved clients over $15 million in the past 5 years through verification. We've been able to research and stop transactions that appeared suspicious. Our investigations are conducted carefully and discreetly to ensure that our client has sufficient information at each stage of the transaction without jeopardizing the business relationship.
One thing is certain: it's cheaper to verify than to try to recover lost funds.