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 Missouri, advance fee frauds are considered illegal and are covered under various state and federal laws. These schemes, which require an upfront payment with the promise of a future return or service, often do not result in the promised outcome and are a form of financial fraud. Missouri's Merchandising Practices Act (MPA), RSMo §§ 407.010 to 407.130, prohibits deceptive and fraudulent business practices, which would include advance fee schemes. Additionally, the Missouri Securities Act of 2003, RSMo §§ 409.1-101 to 409.6-604, regulates securities and protects investors from fraudulent activities, including those involving advance fee frauds. At the federal level, the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) also combat these types of frauds. Victims of advance fee frauds in Missouri can report the fraud to the Missouri Attorney General's Office, the Missouri Secretary of State's Securities Division, or federal agencies such as the SEC or FTC. It is advisable for individuals approached with such offers to seek guidance from an attorney before proceeding with any payment or investment.