Advance fee frauds ask investors to pay a fee up front—in advance of receiving any proceeds, money, stock, or warrants—in order for the deal to go through. The advance payment may be described as a fee, tax, commission, or incidental expense that will be repaid later.

Some advance fee schemes target investors who already purchased underperforming securities and will offer to sell those securities if an advance fee is paid—or target investors who have already lost money in investment schemes. Fraudsters often direct investors to wire advance fees to escrow agents or lawyers to give investors comfort and to lend an air of legitimacy to their schemes. Fraudsters may also try to fool investors with official-sounding websites and e-mail addresses.

Advance fee frauds may involve the sale of products or services, the offering of investments, lottery winnings, found money, or many other so-called opportunities. Fraudsters carrying out advance fee schemes may:

• Offer common financial instruments such as bank guarantees, old government or corporate bonds, medium or long term notes, stand-by letters of credit, blocked funds programs, fresh cut or seasoned paper, and proofs of funds;

• Offer to find financing arrangements for clients who pay a finder’s fee in advance; or

• Pose as legitimate U.S. brokers or firms and offer to help investors recover their stock market losses by exchanging worthless stock—but requiring investors to pay an upfront security deposit or post an insurance or performance bond.

In Alabama, advance fee frauds are illegal and are considered a form of white-collar crime. These schemes violate both state and federal laws, particularly when they involve securities fraud or wire fraud. Under Alabama law, the Alabama Securities Commission is responsible for enforcing securities regulations, which include actions against advance fee schemes involving investment opportunities. Perpetrators can be prosecuted under the Alabama Securities Act, which prohibits fraudulent practices in the offer, sale, or purchase of securities. At the federal level, the Securities and Exchange Commission (SEC) may also take action against such frauds, and individuals may face charges under the federal wire fraud statute. Victims of advance fee frauds in Alabama are encouraged to report these incidents to the Alabama Securities Commission or the SEC. Additionally, the Federal Trade Commission (FTC) provides resources for consumers to identify and avoid advance fee scams. It's important for investors to be wary of any request for upfront payments and to conduct thorough due diligence before engaging in any financial transactions that seem suspicious.